Toy makers change the game

Move over plush and puzzles – tech toys are the new kids in play box.

Toy and game retailing has undergone a revolution over the past five years to 2008-09, leading to average sales growth of 12.7% a year.

Demand has been fuelled by the introduction of interactive toys along with the increasing popularity of electronic toys over traditional merchandise.

Sales have also been affected by other drivers, including real household disposable income, consumer sentiment, competition from department stores and the relative share of consumers aged from birth up to 14 as a share of the total population level.

Gradual reductions in the cost of computer chips along with strong consumer demand for more technologically enhanced merchandise led manufacturers to create a new breed of electronic and interactive merchandise to entertain and educate children.

Socially, demand for tech toys has also been boosted by “age compression”, whereby children demand more adult-like toys at a younger age. The resulting effects has been a shift away from traditional toys and increased demand for technologically interactive toys and games. The introduction of computer games has also in-effect broadened their target market, with the average age of computer game players rising to 30 years of age.

It will be a tough game for toy and hobby retailers over the five years to 2013-14. With anticipated growth of just 2.8% averaged a year over the five years, sales will to a large extent be affected by weaker trading conditions in 2009-10 and the first half of 2010-11, owing to mounting uncertainty about the stability of the domestic economy.

The full impact of the Federal Government’s two stimulus packages along with growth in disposable income levels and consumer sentiment are expected to return toy and game retailers to a better trading environment by 2013-14.

Sales growth over this period will also be affected by demand from the relative share of consumers aged up to 14, the popularity of computer and video games among younger adults, and continued competition from external players such as department stores.

The infant and pre-school category is expected to grow in the future. Demand will be supported by a rising birth rate, growing involvement in the raising of children by grandparents (which will lead to a higher level of spending on toys by grandparents), growth in disposable income levels (as more parents return to work earlier) and the continued introduction of tech toys.

Year-on-year growth in this category is reported to be in double digits and continues to be driven by parents who want to educate their children at a younger age.

Key success factors for operators in the industry

• Proximity to key markets. Operators benefit from being located in high traffic areas. In addition, the need to have a sufficient population base and particularly an age group structure that will support a toy store.
• Economies of scope. Operators should ensure that a comprehensive range of the most popular selling toys are on offered to cater for all consumers.
• Ability to control stock on hand. Operators should ensure that they have sufficient stock on hand to meet consumer needs during busy selling periods.
• Production of goods favoured by the market. Retailers need to stock toys that are competitively priced and perceived as being “value for money”.
• Having a good technical knowledge. Sales personnel must be customer oriented and have a broad knowledge of the toys available.
• Attractive product presentation. Toys should be well presented in an attractive and efficient manner that entices impulse buying.

Major market segments

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