Spielwarenmesse: Changing pricepoints in the toy industry

Choose language

 

Kind spart Geld für Spielzeug
  Market

Market

Changing pricepoints in the toy industry

from Steve Reece

Historically toy price points at retail have been very resistant to inflation, despite seemingly every other product category or service going up in price constantly! The toy industry remains under such unrealistic pressure to never allow price points to go up, which hardly seems fair, but then life isn’t fair apparently.

Over time the hard price points for long established toy categories have hardly changed. Board games, action figures or dolls are all at very similar prices as they were 20 or even in some cases 30 years ago, despite inflation of at least 2-3 per cent per annum in most developed countries. The toy business has done an incredible job in the face of stern challenges over time of getting more and more efficient at manufacturing good products at steady pricing.

High priced toys

Porsche 911 RSR, Lego
Porsche 911 RSR, Lego

One area where prices can go higher than historically was the case is at the highest end of the market. We’re not just talking about showpiece high end toys like Lego’s Millennium Falcon product which sells for hundreds of Euros, there is a clear place in the market for mass market toys which sell in high volumes and which feature technology, functionality or accessories to justify higher price points. Whereas once upon time mass market retailers sometimes said, ‘If it’s more than €24.99 or $19.99, then forget it’, today we have more room at the higher price points if we can justify them.

For instance, just looking through Walmart’s ‘Top rated by kids’ product list for peak season 2019, the toys featured include a large Disney The Lion King plush ride on toy at $149, a $148 scooter with multiple features for $148 and a large playset based on a popular cartoon series at $99.99. In fact, the list features 26 products with a price over $40.

It’s clear then if the most mass market of all mass market retailers can justify price points well above standard toy pricing, then nearly any retailer should be able to. The hard reality though is that the price points must be justified with attractive features, functionality and size.

Low priced ‘collectable’ toys

My little Pony, Hasbro
My little Pony, Hasbro

One of the big changes of the last few years is the increase in price points for what we would usually call collectable toys. No longer are these just a few euros, collectable price points can now go as high as €9.99, or even occasionally on really hot products €14.99. This of course is a genuine and massive change, which has made this already attractive product category particularly appealing to larger toy companies who have the marketing budgets and capability to create collectable frenzy among kids of the target age. Now they can justify their marketing activity and product development against a significantly higher price point which means that they can justify the development of more cool products with a greater chance of launch success.

There are still limits though, as I was reminded on a recent Consultancy project we worked on. We were helping an Asian toy company secure distribution outside Asia on a really hot product line. The price points were significantly higher than the established price points for those types of collectable products in ‘Western’ retail, and therefore it was harder to secure distribution than it could have been. So, while the highest viable price points or collectable toys have definitely increased over time, there is still a ceiling whereby even hot demand products are less attractive.

Looking forward on pricing

There are several factors looming on the horizon in terms of toy pricing:

  1. China’s rising wages and living standards – this continues to be a major challenge for the global toy industry, as China continues to manufacture the majority of the world’s toys at this point in time, and for the foreseeable future, manufacturing cost inflation is going to be an ongoing challenge for toy companies, retailers and consumers due to rising wages in China.
  2. Recession – in terms of economic cycles, we are coming to the point in the next 3 to 5 years where we could logically expect a global recession of some degree of severity. We can hope it isn’t as bad as the global financial crisis of the late noughties, but it will still come most probably. Aside from the tension around trade relations between the USA and China, Brexit and the effect that has on the European economy, consumer backlash around plastic consumption, pollution caused by cars and other environmental factors which may cause recession, there are always unexpected events and crises which can hit. In a recession, consumers and retailers tend to pressure price points down as far as possible. For the toy industry, the last financial crisis proved to be a huge boost for the collectable toy category as attention switched from pushing the more expensive products to selling more of the lower price products. Therefore, we can expect this to happen again to some degree should another global recession hit.
  3. Toy materials & manufacturing costs – it’s clear that consumers around the world are beginning to backlash against plastic as a material and as a throwaway feature of their lives. The toy industry which primarily depends on plastic for both product and packaging has a long way to go to deal with the threat this presents to the global toy market size. However, I am optimistic that materials can be changed to be less damaging to the environment and more acceptable to the consumer. The catch though is that this may come with an increased price, which would be a major factor for the toy business.

Overall though, we can feel relatively secure in the toy business. We offer fun, trendy toys at the lowest price points and great functionality and experience at the highest price points. And regardless of the challenges we should continue to have something to offer to children and parents regardless of their budget and regardless of the broader economic climate!


The opinions expressed in this article are those of the author and do not necessarily reflect the views of Spielwarenmesse eG.

Expert knowledge, the newest trends and latest developments of the industry. Stay well-informed with the monthly visitor newsletter of Spielwarenmesse®: subscribe now

Newsletter

Stay informed with trends and developments of the toy market. Register for one of our newsletter.

 

Newsletter

Stay informed with trends and developments of the toy market. Register for one of our newsletter.