#8 TOY INDUSTRY POLL: The Effect Of Inflation On Consumer Demand For Toys In 2022 So Far...

#8 TOY INDUSTRY POLL: THE EFFECT OF INFLATION ON CONSUMER DEMAND FOR TOYS

Before we get into today’s topics, the eagle eyed among you will notice that this is the 8th of these newsletters in this series. If you haven’t read the previous instalments you can find the previous 7 newsletters here:?https://www.dhirubhai.net/newsletters/toy-industry-journal-6910540635838013441/

Moving onto today’s topic - I recently ran a poll on Linked In. The question wording was as follows:

“Has high inflation reduced consumer demand for toys & games in 2022 so far”?

The potential answers were:

1. Yes definitely

2. Yes a little

3. Not that much

4. Not at all

?The results of the survey are now in, & I can reveal that 47% of respondents answered ‘Yes definitely’, and 32% answered ‘Yes, a little’. So in total 79% of respondents agreed that inflation was having at least somewhat of an impact on consumer demand for toys & games in 2022 at the half way point in the year.

(N.B. You might have noticed that the percentages here only add up to 99%, over to Linked In to explain that one, I just asked the questions!

Before we look at the implications of these findings I should just add some caveats to explain the considerable limitations of this poll. Firstly, this type survey is by definition self-selecting i.e. I put the poll out there & gave anyone among my 12,000+ Linked In contacts who were interested and/or with time to click on it the chance to vote. By definition this will tend to exclude some industry executives who would consider themselves too busy to do this type of thing. Having said that this poll is literally a click once type of thing, so it was hardly taxing to take part! The second caveat here is sample size. At the time of writing this poll has 127 votes, which is not a huge number. However, if I remember way back to my training in quantitative research, and to the module on sampling theory, roughly speaking anything over 100 responses is to be taken seriously, and while 1,000 would be more robust than 127, nevertheless we do appear to have a statistically significant sample here. Thirdly, the Linked In poll format doesn’t allow me as pollster to get details on respondents i.e. which country or job roles they are in, and so as such the survey could be skued towards anomalies when viewed from a global perspective, but I can say that I am primarily connected on Linked In with toy & game people from all across the world.

Now, having got the caveats out of the way – this survey seems to very clearly indicate that there is a significant impact on consumer demand in the current high inflation market. There is plenty of evidence now pointing in this direction. As I outlined in Newsletter #7 in this series, there is potentially a serious threat to short term demand for toys & games - here’s the link back to #7 if you missed it: https://www.dhirubhai.net/pulse/7-global-toy-industry-starting-feel-pinch-high-inflation-steve-reece/?trackingId=NX119K61TqOR%2BT0Y%2BGU8Ow%3D%3D )

REASONS TO BE CHEERFUL?

As we start to look towards the back end of 2022, there are clearly some challenges ahead, with headwinds swirling around us. The good news I guess though is that there are some underpinning fundamentals which are likely to assist the toy & game business heading into the back end of the year versus other industries which are feeling a much harder pinch right now:

1. The movie slate for 2022 is epic!?I genuinely can’t remember a year with more big movies in recent times. Coming out of the pandemic and all those delayed movie release dates,?2022 sees instalments of various toyetic movie franchises, including the timeless Batman series, as well as a Jurassic franchise movie & the latest instalment of Chris Hemsworth’s muscular portrayal of Thor. Traditionally a strong movie slate has increased overall toy market sales, so even if the inflationary pressures are strong this year, a family oriented cinematic slate with heavy weight and $billions spent in global marketing across the movie biz could counteract inflationary pressures on disposable spending.

2. Consumers may see toys & games as optional purchases in Spring-Summer, but history suggests that they still spend on toys & games in Q4 – many of you reading this will have lived and worked through the global financial crisis of the mid to late noughties. Times were tough all around, but to be fair, the toy business performed better than most product categories, because parents still spent on giving their kids the traditional holiday experience in Q4. Their spending habits may change of course – for instance I would ascribe the current strength of the Collectables category to a major change in thinking from big toy companies during and after the global financial crisis. Many big companies didn’t bother with $3-5 items before then, thinking that you had to sell too many to make the numbers add up, but that changed as companies realised that they needed product offerings at these lower priced points during these tough times. I would also point out Hasbro’s very significant success with Furby 2.0 as the financial crisis gripped. Experienced toy biz watchers raised eyebrows at Furby’s ‘monstrous’ pricepoint of $50+ at the time, but yet Furby was a top seller during that time.

The bottom line is that parents tend to spend on their kids even during tough times, the question is to what extent will this still apply when inflation erodes disposable spending and every day essentials are costing a larger percentage of household income - if you have to choose between keeping your children warm and fed over toys, we all know what the result would be…but I see a reasonably strong Q4 as still very likely, even if that’s not the usual ‘given’, and even if demand is not quite so strong as we would like.

3. The toy & games business is coming out of some of the best performing years in living memory – we should also bear in mind the growth in spending on toys & games through the Covid-19 pandemic. If the toy market goes back to 2019 levels, or even a few points lower than that, it can hardly be seen as a catastrophe. Again, if we look back on the resilience of our toy business, a bit of a market size reduction will not be a disaster. I have friends who run (in-person) Events or who are airline pilots - their industries were effectively closed for two years while we made hay! The toy industry comes into what looks like tough times with a lot of positive balance sheets, strong product development slates and with a lot of forward momentum across so many brands, franchises and media platforms.

So, it looks like a tough market out there, and it is unclear when the situation with inflation is going to improve. But there are some reasons for us toy & game folks to be positive, we have more silver linings in the clouds around us than many industries, and if you look at previous tough times, some of the most vibrant toy markets have come about following these dips in macro-economic climate.

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https://playingatbusiness.libsyn.com/ep-78-consumer-playtesting-the-secret-weapon-of-successful-toy-games-companies?

Full PLAYING AT BUSINESS podcast episode list: https://playingatbusiness.libsyn.com?

AND FINALLY…

I run a Consultancy business helping toy & games companies get ahead. For more information, check out www.KidsBrandInsight.com/services

We also run a Strategic Sourcing Consultancy advising toy & game companies around the world on their Sourcing strategies, reviewing their vendor base & suggesting improvements. To date our Sourcing services have saved our clients $tens of millions. For more information on how we can help, just go to: www.ToyTeamAsia.com