Battleships at the ready as stores' toy story begins

Retailers are fighting a price war on children’s toys in the final days before Christmas as consumers demand bigger and better discount deals.

More than a third of consumers are planning to spend less on Christmas presents for children this year than in 2011, according to research shown exclusively to Marketing Week.

Lightspeed Research surveyed an online panel of 1,000 people in the UK, who will be buying Christmas gifts for children aged under 18. The vast majority of respondents (93 per cent) expect stores that stock gifts for children to start discounting in the run-up to Christmas. Half of those people (49 per cent) will wait for sales before buying some gifts, the research shows.

Ralph Risk, marketing director for EMEA at Lightspeed, says consumers’ increasingly frugal outlook is indicative of the rising pressure on people’s budgets, as well as their expectation that retailers should offer discounts and promotions. “People have been educated to look for special offers; you see it in food shopping and clothes, right through to presents. They often expect to get sales before they even start buying things across the whole spectrum of goods and services. Christmas presents are no exception.”

The research shows that 32 per cent of respondents buy Christmas gifts for children as a result of special offers - the most popular reason ahead of buying an item the child actually likes, which 31 per cent of people give as a reason.

Stuart Grant, buying director at toy retailer The Entertainer, confirms that the demand for discount deals is even greater this year than last. “We’re finding that if an item isn’t price promoted, then there is no demand,” he says.

“It’s now all about discounting or having a promotion to drive volume. That could be down to one of two things: either the consumer is waiting [for a special offer] or there are so many deals out there that if you’re not offering a particular deal, people will buy from another store. It’s a very competitive market - we’ve never known it to be so competitive.”

The rise of ecommerce in recent years, as well as increasing competition from supermarket chains, have also increased the pressure on specialist toy retailers to cut their prices. Grant says The Entertainer, which has more than 60 stores in the UK, has had “a great year in a very tough climate”, though he expresses concern for the toy market as a whole.

“We’re getting ourselves into a very unhealthy place as an industry and we’re not alone,” he says. “How many people pay full price for a sofa? Who’s buying clothes before Christmas now? Everybody has acclimatised to the way that retailers choose to promote business. Even if the economy does recover, I can’t see that we’re going to be able to suddenly become less promotionally driven as a retail sector.”

The research suggests that gift shoppers are heavily influenced by this discount culture. When asked for their anticipated average spend per child on Christmas gifts this year, 34 per cent of people say they plan to spend £20 or less. That compares with just 8 per cent who expect to splurge more than £100 per child.

Alan Simpson, chairman of the Toy Retailers Association (TRA), says the demand for expensive, big ticket Christmas toys has declined. “As retailers we’ve got to appreciate that there is less money around today,” he says. “Three or four years ago, a £100 toy was normal but now the £50 or £60 toy is the top-line spend for the majority. We have got to react to the marketplace we’re in, otherwise we’ll be left wondering why our goods are not selling.”

The Lightspeed report also shows the buying habits that UK consumers have adopted in order to save money further. For example, 27 per cent have saved shopping points and vouchers for children’s gifts this Christmas, while 23 per cent say they have been buying throughout the year when items have been on sale.

Toys n Tuck, a small chain based in Essex, has sought to appeal to such shoppers with a range of promotions geared towards Christmas. It includes a Christmas club, in which people can pay a deposit on a toy ahead of the festive season and then make payments over a period of time. “It guarantees that people get the products they want,” explains company director Alan Dadswell.

“The idea has worked well. We’ve got around 10 per cent more people joining the club compared to last year. It’s just another way of offering people a different option. Invariably, from a small chain point of view, we’ve got to offer something that others cannot.”

While toy retailers will try to stand out from the competition regardless of their size, the toys they stock are usually the same. Both The Entertainer and Toys n Tuck report that Furby is the most popular toy this Christmas - so much so that they are struggling to get the product as supply fails to keep up with demand.

Furby, the furry, interactive robot toy, was released in 1998 and sold 40 million units in the first three years of its original production. Its manufacturer Hasbro is aiming to recapture that sales magic this year by relaunching the product with a host of new functions and features, including LED eyes and an iPhone app that allows the creature to be fed remotely.

The TRA has predicted that Furby will be among the biggest sellers this Christmas, with other old favourites like Lego and Nerf also making up its Dream Toys list for 2012. Simpson argues that such products appeal to parents who might have played with the toys when they were children. He suggests that their enduring popularity is a cause for optimism in the toy industry, reflecting its ability to adapt and move with the times.

Simpson says: “The Furby came out 15 years ago but the technology from that time has moved on. The Furby of this year reflects that. So we have toys that have been reinvented and brought up to date.

“Today’s Lego sets aren’t the same products that would have been around 15 years ago either: they have moved on, bought in licences and diversified their product range. But at the same time, it’s still just little bricks that allow children to build and use their imagination.”

Top 13 predicted bestsellers this Christmas (alphabetical order)

1. Cabbage Patch Kids, JAKKS Pacific
2. Furby, Hasbro
3. InnoTab 2, VTech
4. Jake and the Neverland Pirates - Pirate Ship Bucky, Mattel
5. LeapPad 2, Leapfrog Toys
6. LEGO Friends: Olivia’s House, Lego
7. LEGO The Lord of the Rings: The Mines of Moria, Lego
8. Mike the Knight’s Deluxe Glendragon Playset, Character Options
9. Monster High Ghouls Rule Dolls, Mattel
10. My Moshi Home, Vivid Imaginations
11. Nerf N-Strike Elite Hail-Fire, Hasbro
12. Twister Dance, Hasbro
13. Web Shooting Spider-Man, Hasbro

The Frontline

We ask marketers on the frontline whether our ‘trends’ research matches their experience on the ground

Stuart Grant
Buying director
The Entertainer

One of the reasons there is pressure to offer discounts is that there is no urgency in the market. Maybe 10 or 15 years ago, toys were always in short supply: people were always chasing around for the Teletubbies or the Tracy Island of that year. But there are very few products now that are in short supply. The only thing that I can’t get for love or money is Furby, which has relaunched this year.

The testament of that is that it’s selling without any price promotion because there’s just a complete lack of supply. So the market isn’t touching the price because they can’t get enough stock. I think it’s similar for most industries where there is never a lack of supply. Everyone is struggling to show growth in a market that’s declining and therefore there’s too much stock around.

We have quite a tight marketing campaign across the whole year: we run discount flyers during every month apart from November and December and then our big push is with our Christmas catalogue. It has around 320 products, so it’s quite a good representation of what we stock but also of what’s going on in the market. We absolutely sharpen up our prices on that media to make sure we are putting our line in the sand in terms of competitive retail.

Alan Simpson
Chairman
Toy Retailers Association

A lot of the cut pricing has to do with the consumer delaying their Christmas spend rather than them realigning their budgets. Yes, everyone is seeing a tightening of the strings but we’ve also seen in previous years that children are always the last to feel that and parents and grandparents will go the extra mile to make sure the child at Christmas is well looked after.

In previous years it used to be the case that the January sale actually started in January. But consumers have realised that they have a lot of power and if retailers have bought in a lot of stock for Christmas, they will expect to move that stock pre-Christmas. Therefore, people have a lot of control over when they spend and that has an effect on retailers being forced to bring sales forward, which has happened in previous years.

At the moment, we’re also seeing the big supermarkets going after market share for toys. They are competing with the major toy retailers and the smaller specialist shops are caught in the middle. But the smaller independents can also wait and say that they’re not interested in fighting over market share: they’re interested in the toy industry as a whole. When the bigger players run out of stock, they will be the places that consumers go.  

Alan Dadswell
Company director
Toys n Tuck

We’re having to work very hard to build our sales because people are looking for offers and deals. That’s the way it is this year. We’re members of Toymaster buying group and as part of that we had a sale in November to try to compete with all the other sales that are going on. Going beyond that we’ve done promotions individually with suppliers where we’ve tried to run special offers and talk to everyone in the market to see what we can give the consumer in the way of good value offers. That’s what you really have to do.

In terms of Christmas marketing, our buying group produces a catalogue and we go out with our sales flyer. But we also try to do different things: for example we do a letter to Santa [campaign] where children write their letters to Santa and send them into us. We then send them a letter back and also do a little present in the shop for them: at the bottom of the letter it says something like ‘by the way, Santa has left a little present in the shop for you, come and collect it’. It won’t be anything huge and usually it’s something we’ve built up in stock from our suppliers through the year. But it’s just a nice way to get people into the store.

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