It's looking ugly for holiday toy sales, thanks to tighter wallets in a gloomy economy.
The National Retail Federation predicts holiday sales will rise just 2.2% from 2007, to $470.4 billion. It's the least growth since 2002, when sales grew 1.3%. While toy sales typically prove more recession-resilient, expert Chris "The Toy Guy" Byrne says people will buy fewer toys — and expect more for their money.
"You're going to see revenue flat or slightly up, but you may see a decline in units sold," says Byrne, an editor at toy industry magazine Time to Play. "What you are going to see lost is that incremental sale, that last toy to have something else to put under the tree."
The toy buzzword this year: value. Retailers and toymakers are using everything from discounts to freebies with purchase to added features to try to spur sales. While Elmo Live is $60, up from $39.99 last year, the toy boasts an expanded repertoire (he can sit, stand, cross his legs and move his arms) and mouth movements better synced to what he's saying.
"Santa's going to fly, but consumers are looking for value," Byrne says. "Value really comes down to what am I going to pay and what's the play value. Parents … may spend $60 for Elmo Live, but it's worth the money."
Other value propositions:
•Bundled deals. As Microsoft tries to grow sales beyond traditional gamers, its new Xbox 360 console has a family-friendlier price of $199 (vs. $249), and starting on Nov. 19, it will offer the Xbox Experience — holiday bundles of content including up to 11 free games.
"It's a great value in terms of what you can do with the new Xbox," spokeswoman Charlotte Stuyvenberg says. "In the economy we are looking at right now, it's a great message."
•With-purchase freebies. The 80 pages of Toys R Us' 2008 Big Toy Book catalog has more discounts and incentives, including a $10 gift card with $75 purchase, a $25 iTunes gift card for buying an Apple iPod Touch, and a life-size Barbie dress, valued at $20, with a Barbie Doll purchase.
"We know that customers are concerned about the economy," says Jerry Storch, CEO of Toys R Us. "All you have to do is watch the TV or read a newspaper, and you're bound to be worried. We want to make sure we provide the most options for consumers no matter what their budget."
•Build-on toys. Some of the hottest toys this year are predicted to be toy "systems" — modestly priced base products to which more pieces or characters can be added.
Bakugan, a planetary battle game by Spin Master using cards and balls that transform shape, is on track to sell 10 million units this year and be one of the top-selling toys. Anton Rabie, CEO of Spin Master, says that's partly because the game starter pack and additional balls and cards, accessories and figures are affordable, at prices from $5 to $20.
"When times are tough, it's (an inexpensive) opportunity to keep a smile on a kid's face," he says.
•$10 toys. Wal-Mart launched a price war last month with 10 top toys — including some Barbie, Hot Wheels and Bakugan items — at $10. Target and KB Toys followed with $10 offers.
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