It’s been a good year to be in the business of selling toys, a fact demonstrated by Mattel’s recent earnings release showing a surprising jump in quarterly sales, with hope for more to come as the annual holiday shopping season is revving up.
As it turns out, kids locked down and attending virtual school from their bedrooms are looking for ways to fill their time — which in turn has led to a return to toy buying among parents.
It is a return, because for the last several years toys sales have been slumping. In fact, 2020 opened with retail reports decrying the great toy sales slump, citing the 4 percent fall-off in toy sales, the rather tepid holiday sales season reported between 2018 and 2019 and the fact that toy sales came up short during last year’s holiday season. Much of that was attributed to the closure of Toy R Us, the nation’s largest toy brand which declared bankruptcy in 2017. It is worth noting, however, that among factors contributing to the fall of Toy R Us were toys sales already declining.
That decline, for the time being at least, looks to have not only stopped, but actually reversed course. Mattel reported a 10 percent jump in Q3 sales — the biggest increase the company has seen in a decade. And that surge in demand, Mattel Chief Executive Officer Ynon Kreiz said, shows no signs of abating. In fact, he told investors, demand is so great that the company is now somewhat unsure of being able to meet it.
The expectation, the CEO noted, is that parents who can’t purchase an exotic family vacation this year will likely splurge on toys during the holiday season.
“Based on … the low retail inventories and the early start of the holiday shopping season, we expect net sales to grow in the fourth quarter,” Kreiz said.
That expectation seems to be growing across the industry as toys of all kinds are exploding.
Lego sales jumped 14 percent in the first half of 2020 compared to the same period last year, while the company’s operating profit increased 11 percent to $622 million. Nintendo’s operating profit surged 428 percent in its most recent quarter, built on surging sales of the Switch and Switch Lite consoles and the “Animal Crossing” game. Barbie gross sales rose 29 percent in Q3, to $532.2 million, the brand’s biggest quarterly sales since 2003; while board game and puzzle sales worldwide have surged by triple digits since lockdowns started going into effect worldwide in March.
Consumers are even rushing to buy used toys — sometimes driven by necessity, as OfferUp CEO Nick Huzar told Karen Webster in a conversation last spring. As things like swing sets and swimming pools became totally unavailable online this year, parents are turning to resale markets like OfferUp in droves looking to buy what has disappeared off of stores shelves.
“What we saw was a huge influx of demand pretty quickly because you can’t get things right now, the stores are closed down,” Huzar said.
And though stores are now back open, even Mattel’s CEO is worried that supply chain constraints could negatively affect his firm’s ability to respond to surging demand.
Jim Silver, CEO and editor-in-chief of the toy industry review site Toys, Tots, Pets & More told CNN demand is likely to be even more intense than analysts are forecasting at this point — just because of how difficult a year 2020 has been overall for families. Parents can’t fix the pandemic, he noted, but they can sure try to buy toys for their tots to make up for it.
“When it comes to the holidays, parents will cut back on themselves, but they won’t cut back on their kids to make things as normal as possible,” he said.
And toy sales have an unusual and unexpected champion in 2020, in the form of social media platform TikTok driving interest into the segment.
According to recent reports, as TikTok becomes an increasingly popular entertainment channel for children and tweens, it is becoming an effective means of generating buzz among kids.
Moreover influencers playing with and interacting with toys has a big impact on purchases, as consumers tend to treat those recommendation like those coming from a friend or family member as opposed to an advertiser.
Toy company Zuru told CNBC that 20 million to 25 million TikTok video views featuring its “5 Surprise Mini Brands” drove an increase in sales.
“A combination of fan-generated and TikTok influencer videos ignited the craze,” said Renee Lee, vice president of global marketing at Zuru.
Going into the holiday 2020 season, there are 32 million children in the U.S. under the age of 14. And while those kids had been buying fewer toys in the last few holiday seasons, it seems 2020 will be the year that trend changes, and in a big way.