Episode #45: How Will COVID-19 Affect The Toy Industry’s Holiday Season?
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Are you curious about how COVID-19 might impact toy sales this Christmas and beyond? Whether you're a corporate toy professional or an independent toy-preneur, this is the episode for you. To kick off today’s conversation, we jump into a year review of the impact that COVID-19, stay at home orders, remote learning, and working all made on the toy industry. The Toy Coach highlights the top growing toy categories and the reason they experienced double-digit growth. Get ready to dive into a really important conversation on what the toy industry needs to do to hold onto the growth gained this year. According to NPD, from March to October, the toy industry experienced 19.1% sales growth. This sales boom proved that kids still love toys, and parents still need them. Listen as The Toy Coach dispels the myth that our consumer's interests are responsible for our slow industry growth. Instead, we put the responsibility back on the toy industry itself.
Ready to learn how we can maintain the growth we’ve experienced in the time of the coronavirus pandemic?
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View the NPD Group report on Q1-Q3 toy sales here.
Learn more about Toy Creators Academy and join the class of February 2021 by clicking here.
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Azhelle
You are listening to Making It in The Toy Industry, Episode Number 45.
Intro/Outro + Jingle
Welcome to Making It in The Toy Industry a podcast for entrepreneurs like you know your host, Azhelle Wade.
Azhelle
Hey there toy people Azhelle Wade here and welcome back to another episode of Making It in The Toy Industry. This is a weekly podcast brought to you by thetoycoach.com. I hope you guys can forgive me for how late in the day this episode is being released, but I just recently moved. And if you were a part of my Toy Creators Academy online course you already know that this past Monday was actually the last day of the very first group of my Toy Creators Academy students. My students ranged from authors to bakers to clowns, industrial designers and everything in between. Now the best and the worst review I was given during the course is that I offered an abundance of information. So if you need a little help turning your toy idea into a toy business, and you want to take part in weekly toy coaching sessions with me, then I want to invite you to check out toycreatorsacademy.com. The Academy will open for enrollment again in February of 2021. And if you're interested, you've got to get on the list to make sure that you don't miss the window to enroll and become a part of this awesome program. Now today, we are going to talk about the massive growth that the toy industry experienced over the first three quarters of 2020. For an industry that normally just grows 1% year over year 2020 blew everybody away when the NPD Group reported a 19.1% sales growth in the first three quarters of the year. That means from January to the end of September. Now if you don't already know, the NPD Group measures how consumers shop across all channels, they pull in data from retailers, and they perform qualitative and quantitative research to find out where consumers minds are at. Now many toy companies use the NPD Group as a resource to pull customer data and understand the trends in spending and consumer behavior. Now what got me really excited about the report released stating the 19.1% growth is this, it proved that consumers still value and need the toys that we are making to sell to them. One of the old mantras, my friends, and I used to say to each other and similarly you'll hear this in the toy industry is that kids are getting older, younger, and adults are staying younger longer. And that concept has pushed many so many toy people and toy companies to focus on extreme product categories, either very young, for instance, preschool age, or then they push into the collector territory and focus on more adults. Now the whole time. We've thought in this industry that kids just don't want toys anymore, that it's just not an industry you can expect growth in. And if anything, traditional toys were phasing out. Kids have got their tablets, their TV, their video games, and that's what they want. But now, when everyone's been stuck at home, when schools are closed, when games are canceled, what are families turning to? Toys and games, my friend, they're turning to toys and games. So that got me thinking, and my thinking got me researching. And I've concluded that the issue isn't with our ITM. And if you're inside my Toy Creators Academy group, you know, that means our ideal target market. So our problem isn't that our ITM is aging out of our toys. It's that we're not meeting them where they're at. And we're not communicating messaging that's connecting to them to encourage the sale of our toys. So that's what we're gonna dive into today. And we're gonna start with a look at the toy industry, how it's grown and changed since COVID-19. I think that's a great overview to give before I get into the rest of the episode. And then we'll go into the top toy categories and just highlight what those were during this pandemic and why they emerged. And then we'll get into what we'll expect for the holiday season where based on NPD Consumer Reports for industries as a whole. And finally, and you have to stick around because this is my favorite part. We're going to get into my idea for what we can do to hang on to this growth we're seeing in the toy industry. And that idea is fueled by some really interesting non toy research. You know how I love my non toy research to influence the toy industry. So trust me, this is going to be good. Now, let's start out how has the toy industry evolved since COVID-19? Let's start from the beginning and go all the way back to march toy people. So when the COVID-19 pandemic essentially shut down the US in March, families found themselves at home with either very little or nothing to do. By the end of April, the toy industry reported $1 sales increase of 2.5 6 million, which was a 7.6% increase over the same time period last year. And already already unheard of. Now, many people attributed that to two things. So most obviously, first that schools were closed, and the second was Easter Easter being earlier this year, push the sales up earlier in that quarter. Now, it was at the end of April that everyone knew that the driving categories in this pandemic were going to be games and puzzles, which were growing at 55% outdoor and sports toys which were growing at 22% building sets which sales were growing at 20%. And then arts and crafts, my fav which was growing at 13%. Now within that overall 7.6% growth for the toy industry, the biggest sales drivers were actually movie properties. And it was here that we got our first taste for how important content would be in 2020. Because properties like Disney's Frozen Star Wars Toy Story, and Pokemon always had movie releases in 2019 were leaders in overall industry growth, once July hit the percentage increase of toy industry sales went to double digits and unheard of level of growth for an industry that usually just lifts 1%. So the top four toy categories continuing to attract double digit growth were games and puzzles, outdoor and sports toys, building sets, and arts and crafts. And also we saw an 8% increase in dolls. Now the reason for this growth that everybody said screen fatigue, parents and kids were tired of spending all their time on their screens, from school to work to entertainment, everything was shifting virtual families were desperately looking out in search of some screen free entertainment. Now, while the growth is like really inspiring and exciting to think like, hey, consumers want toys, they don't just want another electronic. But the real valuable lesson here is actually in the declines. So what declined at this point? Well, number one, use electronics, and the number two action figures and accessories and also plush. Now the 2% decline in youth Electronics is marginal, of course, like maybe it wasn't due to the pandemic, but it does further support that theory of screen fatigue. And it tells toy companies like maybe don't focus so much on trying to develop toy products to match this growth that we're seeing in other tech companies that are focused on green focused product. The really interesting data we got back in July was surrounding the 12% decline in action figures and accessories. So with movie theaters shut down and movie releases delayed indefinitely, there was just no support for licensed products in this category. And that's when the king content for the toy industry shifted from movies to streaming services. So we saw this because Barbie experienced major growth right and Barbie had two major releases on Netflix this year, the first being the second season of a show called Barbie Dreamhouse adventures that was released in March and the second being Barbie princess adventure, which was the movie released in September, so Barbies watch time on Netflix from February to June, doubled. And guess what toy sales followed suit. And that proved that the power of content no longer lived in movies alone for the toy industry, because now with everyone at home, it had shifted to streaming services. And then we fast forward to October which we talked about at the beginning of this episode. That's when the NPD Group reported that the US toy industry's growth reach 19.1 percent for the first three quarters of the year. That means total toy sales, right $13.7 billion, driven by social, educational and environmental interests of parents, and propped up by federal stimulus checks. While families were still stuck at home and all of their events and school, all of those things were cancelled was really interesting and exciting to see is usually about 70% of toy business is done in q4. And so far, we've seen such a massive growth. And we haven't even hit q4 yet. So that's really exciting. But many people are saying, like, Don't get too excited, you know, there's no way we can see more growth than we've already been seeing. But it I mean, still overall, even if we stay on par to last year. This is going to be a record breaking year for toys for sure. Okay, let's recap on the four top toy categories that experienced growth during all of this right? We had games and puzzles, outdoor and sports toys, building sets, arts and crafts and dolls. The reason behind all of that growth was pretty clear. With stay at home orders limiting travel and experiences. Parents are turning to toys and games for help, like what do they do with their kids. They're leaning on toys and games. And toy companies responded with toys that met consumers where they were at emotionally from social causes to health concerns. We saw the toy industry put focus where the consumer needed it to be in mass creation kits and health heroes action dolls. So the toy industry is doing what I was saying in the beginning, answering consumers needs where they were at and the consumers were loving it. Alright, now let's talk about what we're expecting for the holidays. And this is based on an NPD Group research report put out for industries overall. Okay, but guess what, the outlook for the holidays is actually pretty good. Now according to the NPD Group, American consumers are actually planning to spend a little bit less than last year, but almost the same amount as the year before, which is 2018. Now, if you are a toy entrepreneur gearing up for holiday sales, here is what you need to pay attention to. Half of consumers polled are looking to buy their friends and family something intangible this year. And that means subscription services and gift cards. Now, for those that are interested in subscription services, while normally that would point to food services like hellofresh, or green chef, or maybe beauty boxes, it could also point to toy subscriptions. So if you have a subscription service worked into your toy line, make sure you're advertising it as a valuable Christmas option, because it appears that gifting experiences is what consumers are looking for. And we want to meet them where they're at and with what they need. The rest of consumers that still want to purchase a specific product are going to be heavily influenced by free shipping. So make sure that you have a plan to offer free shipping this holiday season. Now another really interesting data point and prediction from the NPD Group is that there will be a big financial loss of impulse shopping due to less store traffic and impulse shopping is huge, huge business. But I do want to say here, if you have an online store, I actually see this as a big opportunity to recoup some of that impulse store shopping money into impulse online shopping. So how do you do that? Well, you're going to do that with an upsell. Many online store platforms like Shopify or WooCommerce, have upsell add ons that you can purchase to add to your store. And what these upsell add ons do is when a customer puts a product in their cart, and proceeds to checkout, a dialog box pops up and says, Hey, you know customers who bought what you have in your cart also loved this. Or it might say, Would you like to add this bonus item at a discounted price. And the best ones have a little timer that says you know you've got two minutes to take advantage of this one time deal. And boom, you've got impulse shopping online. Okay, so the benefit of this is obviously an increase of sales in your online store, and potentially you're recouping the predicted loss of impulse sales industry wide from regular you know, retail stores, but I also want you to see the long term value. First time buyers of any good or service are 27% likely to return to buy again after their second purchase that jumps to 54%. So number one, your upsell is an easy sale to make. And number two, if you make the upsell, you convert that first and second purchase all at once. So my toy entrepreneurs, I want you to think about an implement that feature ASAP onto your online stores if you haven't already in advance of the holiday season. Okay, let's get back to what we're predicting for q4 sales. Now, in the top types of physical planned gifts, toys are sitting at number four on the list of all consumers. So making up 26% of the gifts Americans are planning on buying. Now when do they intend on buying them? Well, starting this week, actually, with shipping delays and out of stock inventories happening 41% of shoppers are planning to shop earlier than they did in previous years. Where are they shopping? Well, you can definitely expect an increase in online shopping, it's been increasing year over year, it's going to be going up 5% this year, meaning that 80% of consumers are intending to shop online. So if you are an online toypreneur, really I want to push this point, more people are shopping online and earlier, you need to make sure you have free shipping to create the least amount of possible friction resistance or hesitation for someone who's interested in buying your product. On top of that, you need to implement a digital upsell strategy to recapture the money that we already know is predicted to be lost due to a reduction in store traffic and thereby impulse shopping at store level. And finally, with our holiday research, the research found that consumers are more sensitive to the causes that company support this year, making them more likely to purchase product from a company that supports social and environmental issues that they believe in and less likely to purchase from those that don't. So highlight your values. I mean, I always say company values are super important. So you want to make sure you're highlighting that on your homepage, maybe even your checkout page. Where is your customers money going to? What causes Do you support and believe in as a company as a whole, that's going to be very important to your shoppers? Okay, now let's get into my favorite part of the episode. How can we hang on to all of the growth that we've gained since the start of the pandemic? What we know is that toy sales increased 19.1% this year so far. What's interesting about this is that it shows kids and parents haven't lost interest in toys at all. It shows that maybe kids aren't growing up faster than we originally thought. It shows that parents and kids haven't had the time to play. What the toy industry should actually be planning is a marketing campaign for when the world goes back to normal. What will tug at the nostalgic heartstrings of families to get back to together time. And why do I say this? Why do I think that a marketing campaign can do all that? Well, because of soap. What did she just say soap? Yes, I said soap. Well, did you know that years ago, soap wasn't something that Americans actually thought they needed. It was a marketing campaign that convinced America that they smelled bad and needed to shower more often. That boosted the sales of soap tremendously. In fact, it's been proven that scrubbing your body too much with soap is actually bad for your skin. Yet those marketing campaigns were so effective that they shifted the expectations of our society. Now Edward Bernays is said to have been the pioneer of PR. He used propaganda techniques to appeal not to the rational part of the mind but to the unconscious. He used his techniques to convince Even kids that bathing could be fun. And he did so by sponsoring soap sculpture competitions and floating contest to prove that ivory bars were more buoyant than their competitors, soap products. So all this research got me thinking that the problem isn't our consumers, it might be our marketing. You know, we're so busy showing the features of our toy products in commercials or with YouTubers. Like look, she comes with 50 pieces or he dances or watch how this lights up when you wave your hand in front of it. What we're really not promoting are the benefits. And the benefits are what sells in every other industry and the benefits are what's going to connect with parents. So what if the toy industry did the same? What if toy companies made a huge marketing campaign effort aimed at shifting the expectations of our society and highlighting the emotional and familial benefits of our toys, we would do this so that when the world reopens, and the window of time we have to play gets narrower and narrower, that we've sent out an ingrained a message of the value of family time, and play time. So travel with me into the future, okay. One year from now, toy company sales are back to growing 1% year over year, or maybe even negative if we're going back to normal jobs are stagnant innovation is a luxury, no one is playing with toys unless pushed by movies or TV. And kids are said to be growing up faster. But really, they're just playing with screens. And parents, parents are okay with all of it, because they only see their kids in the evening after a long, stressful day at work, and they just need a little peace. Things go back to normal and we let our industry fade in importance or, or we invest in our future as an industry. And we together make a concerted effort to shift the minds and priorities of families for the long term. We take them back from tech companies and we show them the emotional intellectual and familial value of reduced screentime. So viscerally that is all that they can think about when they turn on their computer or hand their kid an iPad, imagine what companies are maintaining 20% year over year growth that the American Dream now involves weekly game nights and toy exchanges between friends. Sleep overs without the latest girls activity party kit are just a joke because the mindset of Americans has shifted to believe that it's no longer socially acceptable to not have toys in your life. Imagine toys in the home being synonymous with a good parenting and fulfilled life's purpose. Okay, toy people. That is all I have to share with you today. I really hope you enjoyed this episode about how the toy industry has grown and evolved and changed since the pandemic and where it might go in the future. If you have any ideas for future episodes, I'd like to invite you to join my podcast community on Facebook and let me know I will leave the link to it in the show notes. So head over to thetoycoach.com/45 to join now, as always, thank you so much for joining me here. I know that there are many podcasts out there so it means the world to me that you tuned into this one. Until next week. I'll see you later toy people.
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Thanks for listening to Making It in The Toy Industry podcast with Azhelle Wade, head over to thetoycoach.com for more information, tips and advice
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