I’ve never done real predictions for the year ahead before, but I do weigh in on things going down in the industry as they come up on message boards. A boss of mine once asked me how I always seemed to know what was going to happen; the truth is that you just have to think of what bad stuff could happen, and then make it worse. People want to believe nothing but good things are in the future, but I’ve found that that is rarely the case.
That said… here are my predictions for the new year:
- The toy industry is going to get worse in 2009. 2008 was a terrible year for toys, with Chinese factories closing, material and distribution costs soaring, a weak dollar, toy companies shutting down, and even some of the biggest retailers disappearing for good. So far, nothing is on the horizon to turn this around. In fact, I expect more factories to close and more companies to get out of the toy biz.
- Toys R Us and Walmart will do very well. TRU has had some very bad time in this decade. But with former Target Exec Jerry Storch’s plans finally becoming apparent, and with KB Toys’ closing, look for TRU to start turning things around and once again becoming the main destination for shoppers looking for toys. I’m especially pleased with the smart decisions to redesign all aspects of TRU, from the layouts to the new logos and store graphics to the combining with Babies R Us. Walmart on the other hand, will continue to dominate with their reliance on toys being loss leaders and undercutting the other retailers during the holidays.
- Hasbro & Mattel to initiate mergers…or spin-offs. This one is a little more out there, but I think if the economy continues to decline or level out the "Big Two" will look for new ways to juice the stock price in light of a brutal Holiday 2008. One of two things will happen: either we’ll see a repeat of the late 80s acquiring sprees, with both looking to buy out smaller companies to show "growth" OR you’ll see them start to spin-off successful brand categories into their own corporate entities to make themselves lean enough to be profitable. Since expanding 20 years ago, both companies are just too unwieldy at this point to have any leeway for new ideas, and we’re seeing how hard it is for Mattel to keep their profit margin and still make even the lowest quality product. Look for new safety/QC laws that will make their job even harder.
Licensed toys will stay strong…but become even less worth paying big bucks for the license. Movie based toys will continue to decline in sales, while the cost of the licenses + restrictions for studios will make this option less attractive for toys companies. I still don’t see a push for developing in-house brands for a couple of more years, but look for this idea to be more attractive in 2009.
That’s it for now. A couple of no-brainers, a couple of riskier predictions. I wouldn’t ask anyone to invest based on my analysis…or would I?