Christmas is coming: an event as exciting for the toymakers hoping to fill stockings with this year’s hottest new playthings as it is for the children who will open them on December 25th.
Expectations of a bumper festive period have brought early Christmas presents for investors in companies such as Spin Master, Hasbro and Nintendo – manufacturers behind some of the biggest hits – that have all had a good year on the stock market.
The Christmas crackers are the usual mix of new, must-have toys and some familiar faces. But analysts are betting that the products most likely to make it will be interactive, linked to well-known franchises, such as Star Wars, collectibles or family games.
"Some form of licensing has become critically important. A lot of kids have a smartphone and so they are far more connected than you and I were as kids," said Matt Hudak, toys and games analyst at Euromonitor. "Parents are looking more and more for that interactive element."
The holiday season is critical for Mattel, Hasbro and other toy companies as their fourth quarters account for more than a third of annual revenues. Toy sales are up 6.5 per cent between January and September in the US alone, according to NPD, and the research group is forecasting strong sales during the holiday season, boosted by higher prices and two additional shopping days between Thanksgiving and Christmas – one of those landing on a Saturday.
In Ireland and the UK, record Black Friday sales also suggest a good season for toymakers.
Hatchimals
The furry toy that hatches from an egg is this year's knockout Christmas gift. It is already so popular that US retailer Target is limiting sales to two per person – if shoppers can find one in the first place.
As ever, some parents are prepared to pay up to secure this year's must-have gift. A Hatchimal retailing at €79.99 in Argos on Thursday sold on Ebay for $132.50 (€127) and is for sale at $199 at a merchant on Amazon. com.
Its runaway success appears to have taken recently listed Spin Master, the Canadian manufacturer of the toy, by surprise. It posted a note on its website stating that demand had exceeded all expectations and that it was ramping up production.
“We don’t want anyone to be disappointed, nor do we support inflated prices from non-authorised resellers. While additional product will hit retail shelves in December, we anticipate this inventory will also sell out quickly.”
Shares in the Toronto-listed group, which also makes other popular products, including Zoomer Chimp and Paw Patrol, have risen more than 70 per cent in the past year to hit a new high.
Launched in October, Hatchimals are reminiscent of Bandai of Japan’s Tamagotchis from the 1990s as both are toys that encourage children to nurture. The eggs contain touch technology allowing children to interact with the shell, which then indicates when it is ready to hatch. The furry toy that emerges is also interactive and there are several families of Hatchimal, creating an element of surprise as to which furry creature will pop out.
Mr Hudak said that the relatively high price tag on a Hatchimal made them less of a collectable item than the Shopkins range of small toys, but the fact that there were several types would drive desire to own more than one.
Barbie
You know you've made a successful comeback when comedian and author Amy Schumer is in the running to play you in a movie. This is especially so for Barbie who just a couple of years ago fell out of favour with parents across the US due to her unrealistic body shape and monoethnicity.
But Mattel, the company with the biggest global market share for toys and games, has finally modernised the world’s best known plastic doll to reflect the US’s increasingly diverse population and celebrate the different shapes and sizes of girls and women.
It has worked. As Juliana Chugg, Mattel's global brand officer, said last month: "Barbie is on fire. Barbie has two key consumers: the girls who request to play with the product and the mums who approve and purchase the product. Barbie had only maintained a connection with one. This was really creating tension in the purchase decision."
Having introduced 23 multicultural Barbie types, with eight skin tones and a variety of body sizes, Mattel reported “double-digit” sales growth globally for Barbie in its most recent quarter, the first time in four years, the company said.
Barbie tops the National Federation of Retailers' list of the most popular girls gifts in the US this year while her Dream House was among the most popular toys bought online on Cyber Monday, according to Adobe Digital Index. This home upgrades into a wifi-enabled smart house with floor sensors, embedded speech recognition and stairs that transform into a slide.
Super Mario Run
Released this week, Super Mario Run – Nintendo’s first smartphone game featuring the world’s most famous plumber – is a gift that will be played under the dinner table by children and adults nostalgic for the 1980s alike.
The scrolling platform game is affordable, easy to play with one finger and there is no worry it will be sold out. All you need is an iPhone, a €10 iTunes gift card and an internet connection.
After decades of sticking to its video game consoles, Super Mario Run is Nintendo’s most aggressive attempt to capture the $36 billion smartphone games market. Since the game was revealed at an Apple event in September, shares have risen 12 per cent and bullish analysts have projected it could generate $500 million in revenues by the end of March.
The Kyoto-based company’s pricing strategy is unique. Super Mario Run, distributed only via the iOS App store, can be played free of charge for the first three levels but there is a one-off cost of €9.99 for the full version. While the price is small for a Christmas gift, €10 is expensive compared with other smartphone games that adopt a “freemium” model of paid in-game upgrades.
Analysts are divided on whether the pricing strategy will work but there seems little doubt that the game will be a big hit over the holiday season.
"Demand for Nintendo games as a Christmas gift has always been very strong. It's easy to imagine that parents will buy iTunes gift cards and tell their children to go play with Mario," said Hirokazu Hamamura, gaming industry expert at Japanese publishing and media company Kadokawa Dwango.
Lego
The phenomenally popular interlocking plastic bricks have topped the NRF’s toy wishlist for boys since 2012 and this year is no different, not least because the world’s most profitable toy company enjoys strong demand for its licensed Lego products, such as Star Wars.
This Christmas, Lego will continue to benefit from this partnership, with many of the figures and vehicles from this month's Star Wars spin-off Rogue One expected to be among the most-wanted.
On Cyber Monday, Lego was among the best-selling items online, according to Adobe Digital Index, holding the top position for the number of units sold and most revenue generated.
Target says Lego's Friend Amusement Park Bumper Cars and AT-ST Walker sets are proving popular, while Amazon says the Danish company's Disney Moana's Ocean Voyage will be among its top sellers this season.
Lego has enjoyed years of double-digit profit growth thanks to the leadership of Jorgen Vig Knudstorp, who embraced the rise of digital entertainment while rivals such as Mattel struggled to accept the new reality of the toy industry.
The Dane is stepping into the chairmanship role just as Lego’s pace of expansion is beginning to slow from, admittedly, unsustainable levels. The success of its holiday season in the world’s largest toy market will be an important indicator of how well initiatives with its retailers in the US to improve marketing and displays in store are faring.
– (Copyright The Financial Times Limited 2016)
