Last Updated on December 26, 2019 by Danielle
Experts says it is hard to predict which toy will be hot.
It happens every holiday season – there’s a must-have toy – like this year’s Hatchimals or Tickle Me Elmo – that kids yearn for and parents frantically scramble to find in time for Christmas. When a toy is scarce parents and gift-givers have to either stand in line for hours or shell out hundreds to scalpers. It really begs the question: Why can’t toy companies make more?
A hit toy can be critical to the $25 billion toy industry. Some companies can achieve 40 percent or more of their annual sales in the last 2 months of the year. But guessing the next hit is very difficult.
Toy makers are nervous about over-producing toys that become flops so they produce them in short supply. Ramping up production is not easy due to the complexities of the global supply chain. And the result is a holiday hype cycle where demand creates buzz, fueling even more demand for the toy.
So it’s no surprise that toy companies often find themselves sprinting after the breakaway hit. Bear in mind, the interest for hot toys for Christmas generally lasts 12-18 months so companies need to act swiftly.
It is very much like the fashion business since most toys come and go. 2016’s blockbuster toys included Hatchimals and NES Classic Edition.
ToysRUs caught onto the Hatchimals craze when they launched and ordered more from Spin Master. But expanding production of electronic toys like these can be tricky. Spin Master ramped up production after the huge initial demand. Several retailers eventually received stock but rapidly sold out. Sellers on eBay were selling Hatchimals for as high as $1,200 for a toy retailing for $60 – $80.
Because they made a decision earlier rather than later they were able to produce more units verses delaying the decision.
Similarly, Nintendo ramped up production on the NES Classic after the huge initial response. Nintendo sold almost 200,000 units in the first month. Interestingly, this outperformed sales of the modern console, the Wii U. Nintendo did not have a clear understanding of its potential in the market. The NES Classic delivers more than nostalgia. You get a great retro system, own a piece of Nintendo history, and get a great value in the form of being able to play 30 top hits for the system.
Both manufacturers and retailers benefit from parents’ frenzied search for the hottest toys of the season. Some retailers sell through the little stock they have to lure shoppers into stores. And some toy manufacturers hold away inventory to raise attention and drive a potential sales boost. Sometimes there is artificial scarcity while other times there is real scarcity.
In 2010 Googly Bands was a hit. In 2014, a Frozen microphone was a surprise hit.
Even experts say it is impossible to accurately predict what the next must-have toy will be.
You need to catch the wave early because it could make or break your company for the year. When the wave is over, it is over.