Opinion - Letter from America

Sales of woe?

After 20 years working at A.C. Nielsen/D&B Research Company, Rick Derr opened the first Learning Express Toys franchise in the Chicago area in 1996, and then became a sub-franchiser, opening nine more stores. Although leaving the corporate environment behind, he has combined his expertise in data and numbers with a passion for the toy retail space. As his popular column returns, Rick questions why the toy industry persists with extensive discounting during its busiest season.

Richard can be reached on LinkedIn or by email at LE45@sbcglobal.net.

I must say I am worn out as I write this mid-December. Not from the Christmas rush, long hours, restocking, social media, reorders, etc., but from the endless continuous sales advertised by US retailers. It all started in October and has been relentless; I heard Black Friday mentioned so much throughout October and November that I blacked out! The question has always been why does the US toy market think that so many discounts and sales are needed right in peak season – when demand is at its highest?

And yes, I am pointing my frustration straight at the big box and online retailers - Walmart, Target and Amazon. This year, with the overhang of supply chain issues still dancing in store executive heads and the toy aisles filled to capacity, deal signs are everywhere: “Save 30%”, “Save 50%”, “Save 80%”, “Buy 2 Get 1 Free”. Ads on TV feature the latest deals and specials, and to top this off, there are also show segments called Deals and Steals. They advertise products by major manufacturers and small businesses at 50-80% off for a short time span online, many with free shipping - and customers seem to go bonkers over these deals. Two best sellers we carry have been promoted this way only this week, and obviously make our prices seem a little foolish. Exposure can be good, but the market currently seems to favour everything deal-oriented. The news media seems to like this as an ongoing story and amplifies the situation.

Now, how about Indies? Well, we have had no choice but to partake in this “deal frenzy”, although we are constantly trying to walk a fine line between keeping our customers happy, ridding ourselves of inventory and keeping cash flow strong enough to bring in new items, while negotiating a toy market that has slowed, has excess goods and frankly, nothing as hot as fidgets and Squishmallows in 2021.

That two-year run of ‘Squidgets’ allowed us to squirrel away some profits, which has helped us withstand the current environment. But I warn others, once the plane has landed, be ready to rely and focus on what got you here— your team, a unique and curated product selection and the ‘wow factor’. Realistically, I am expecting that 2023 will see a decrease in year-on-year comparisons during the first six months, as we were still benefitting from the Squidget craze, as well as new releases of Squishmallows in early 2022. Other than seasonal SKUs, we have not had a major new Squishmallows release. Perhaps the new Pokémon options and some fresh seasonals will help drive sales to offset last year. However, I’m still working on there being around a 25% decline.

As I write, there are 10 solid shopping days and two more Saturdays to go, including Hanukkah. We usually average the equivalent of about 8-10 weeks of non-holiday sales in these 10 days, but we continue to be both optimistic and frustrated by the US market. In the end, we have had a really stellar year - my third best of all time - and feel blessed to have been able to donate to charitable causes this year, more so than any time in our company history.

I hope you all enjoyed a successful year end with the joy of Christmas and all the blessings we receive from the toy industry. Hopefully, I will see some of you at trade shows; the Toymaster May show, Learning Express and ASTRA summer shows or even the new Toy Fair in New York City in September. Until then my friends, Happy New Year and welcome 2023. Cheers, Rick.