The UK heatwave turned out to be mercifully brief, but some good came out of it – I understand that toy sales in the first two weeks of July saw a considerable bounce, propelled by sales of outdoor toys. That said, it’s probably best to see that as a very welcome blip rather than evidence of a turnaround in consumer confidence. I saw a statistic this week which suggested that High Street footfall was actually up by a whopping 40% in June, yet sales fell in monetary terms. Plenty of people are visiting retail, but they’re watching what they spend very carefully.
This problem isn’t confined to the UK – over in the US, Walmart has issued a warning that it is expecting its profits to drop by 13% this year, while Reuters reported that both Target and Walmart are reducing FOB orders in favour of domestic business. Reuters seemed surprised (and didn’t seem to fully understand the concept of FOB trading), but I wasn’t – this often happens when retail faces tricky times…putting more of the risk onto suppliers by converting FOB business to domestic seems a perfectly prudent strategy, giving the retailers far greater control over stock and the ability to turn the tap on and off. It poses questions for suppliers, who have to decide whether to be bold or cautious in terms of how much reserve stock they bring in, knowing they could either end up with a warehouse full of stock or unable to fulfill late orders.
And this year, we may well see Christmas sales going to the wire as they did before the pandemic. I say that partly because several major toy companies have either told me or been quoted as saying that they believe retail promotions will return to a more traditional (aggressive?) pattern this year. If consumers believe that, they may be more inclined to wait for deals. In addition, Christmas falls on a Sunday this year, giving consumers a full week and a final Saturday to complete their festive shopping. According to NPD, the last time that happened back in 2016, sales exploded in the final week, but that relies on retailers holding their nerve and having sufficient stock, and also suppliers being in a position to supply right through to the end of the festive season – and in the current climate, that is two very big ‘ifs’.
There is another potential development to factor into Q4 planning: there are strong rumours circulating that Amazon might be running a second Prime Day in October. If this turns out to be true, it will certainly have an impact on the promotional plans of other retailers, although it could also be seen as an opportunity for everyone to kick start festive sales at a relatively early stage. We’ll keep you posted on whether Amazon decides to go down that particular road, and what domino effect that might have on the timing of other retailer’s promotional calendars, as we hear more.
As well as optimising stock levels for Q4, suppliers also have the tricky task of working out how much to increase prices by. Speaking to NPD this week, we are starting to get more insight into the effect that increasing prices has on sales volumes. Perhaps unsurprisingly, initial signs suggest that the impact can be significant: for example, in the Action Figure category, there is evidence to suggest that when the price of a figure goes over £10, the volume can drop by as much as 50%. Of course, this isn’t black and white: there are a lot of nuances in different categories and at different price points, and even for different consumers. But even those Kidults whose purchases of expensive toys has helped to fuel the UK market in recent years may be wondering if they can really justify spending several hundred pounds on a shiny new toy right now. It really is going to be a fascinating second half of the year…
Meanwhile, over in Hong Kong, there has been talk of a relaxation of quarantine rules, despite everyone sensible pointing out that quarantine needs to disappear completely, rather than just be shortened by a day or two, before international travelers will return in force. One supplier based out in Hong Kong asked me if I thought Western visitors would be comfortable wearing a trackable wristband as a condition of entry, as has been mooted: I suggested that a few might be willing, but that the majority would be seriously uneasy, given the wider situation with China and Hong Kong.
It doesn’t help that Toy & Edu China announced this week it would be postponing its August event for two weeks – making a change at such short notice won’t exactly help to instill international visitors with the confidence to book flights and accommodation for Asian events. China and Hong Kong really do need to get a grip of the situation before it renders Asian destinations off limits for business travelers.
Also on the international front, Nuremberg has announced that it will be opening the Model Railway Hall (7A) to consumers over the weekend next year. A few people contacted me to ask whether I thought this might be extended to the rest of the show if the move is successful, but I really can’t see it. I am not a fan of mixing trade and consumer, although I appreciate the Railway section already blurs the lines. I just can’t see that approach would work for the rest of the event.
I was sad to hear that popular indie retailer Ken Andrew, the original owner of Hal Whittaker’s toy shop in Knutsford, passed away last week. I didn’t know Ken personally, but he was extremely well-loved and respected by many people in the UK toy community, especially those who have been around for a few decades. Our condolences to his family, who I am delighted to see continue to own and run the shop, preserving Ken’s wonderful legacy.
Finally, there is one week left to sign up to the Toy World Fantasy Football League – we have 73 players on board so far, so if you would like to join them, the entry code is vnpxlv – just go to the website, where entering a team and joining our league is completely free.