NEWS
Photo by Andrea Piacquadio
Is the toy industry
inflation-proof? Inflation is rising, and the talk everywhere is of the cost-of-living crisis. But what does this mean for the toy trade? And with a potential recession lurking around the corner, does the old maxim that the toy industry is recession-proof hold water, asks Tim Murray
W
ith the cost-of-living crisis threatening to spiral even further, the toy trade, in keeping with many other “Without being businesses and industries, is readying itself for further turmoil, arrogant or over-confident, as inflationary pressures add to ongoing supply chain woes and people will the after-effects of the pandemic. still buy toys The traditional perceived wisdom – that the toy trade is fairly for their kids inflation-proof compared with at Christmas. other, pricier and potentially more Consumers volatile sectors – still holds true in may choose – many respects, but, as with the during times of past few years, it must be noted that we are in uncharted territory. hardship – to There are now few senior buy less or at executives in the toy trade lower prices, who will remember the last they will be great inflationary period during the 1970s and the 1980s, looking for a when the recession took hold, bargain, but unemployment was high and they’ll still inflation rose and rose. A look back through the archives buy toys” is revealing. During the early 1980s, many toy manufacturers in the UK were listed on the Stock Exchange, with analysts poring over their figures, and the recession had hit hard, causing financial problems for suppliers and distributors. Airfix was among the biggest casualties. And associated problems with companies heading into receivership made analysts jittery about the business. As an early issue of TnP noted: “Airfix’s financial problems were all the more surprising given the bullish reports coming from the company in the weeks before the collapse. This has led city analysts to treat with some scepticism the public statements of the toy trade at this time of year.”
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And, it continued: “Instead the City seems likely to rely on its own judgement of consumer spending patterns during the present deep recession. The verdict, not surprisingly, is somewhat gloomy.” One similar pattern, then as now, is that although the conventional wisdom is that ‘even during the bad times, most parents can still manage to buy toys for their children at Christmas’, there is nothing conventional about the current state of not just the UK economy in a post-Brexit world, but the global economy, too. The perfect storm currently facing the UK – trying to navigate the after-effects of the pandemic as well as the lingering issues caused by changing business practices from leaving the EU – means that this is a problem unlike any ever experienced by the business before. There’s more too – as one industry insider noted: “It’s so uncertain. The raw material costs to make the toys are rising, electricity and energy prices are soaring, there are so many different factors.” But – and this is a big but – there are always the lower cost options. “Toys, generally speaking, have an average price of £10,” says one expert I chatted too. “It’s not a major investment, like a car or big new electrical equipment. “Without being arrogant or overconfident, people will still buy toys for their kids at Christmas. Consumers may choose – during times of hardship – to buy less or at lower prices, they will be looking for a bargain, but they’ll still buy toys.” With this in mind, retailers may want to look for the kind of bargains and offers that will appeal to cost-conscious shoppers. They want to buy goodies for friends and family, but they want to leave the store with enough money to get their food shopping in too…
And while it’s now easy to see the effects of the current cost-of-living crisis – you’ll have noticed it in your shopping basket and when the energy bills plop through the letterbox – what isn’t yet entirely clear is what this is going to do to discretionary money in parents’ pockets. Ironically, living in a post-Covid world means parents may be more inclined to treat their kids and skimp and save elsewhere. After the mental anguish children have been through during assorted lockdowns and restrictions, some believe that parents will still want to treat their children to make up for the torrid times they have just lived through. What isn’t yet certain is how the current problems will affect the supply chain. For with container costs having risen sharply over the past few years, what will happen to these? That’s a question, like consumer behaviour and what will happen in stores, and whether or not retailers will pass on increased costs to their customers, that is unclear. Proceeding with caution may be a favoured option, but remember, no one wants to up the cost of toys or see the industry failing. For, like the conventional wisdom of toys being fairly inflationproof, so too is the belief that acting like a Scrooge in the run-up to Christmas, especially where toys are concerned, is not necessarily a good look. As TnP stated in 1981: “While the prevailing mood of the City as Christmas approaches remains pessimistic about the trade, one analyst was at pains to point out that the City did not enjoy this Scrooge-like role. ‘After all, we’re all parents as well as stockbrokers and we want to say the trade is doing well. It’s just a pity the industry never lives up to expectations.’’
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