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September 15, 1998

12 Min Read
The Toy Market:  Growing as fast as its customers

Gary Baughman, chairman of the Toy Manufacturers of America, estimates that toy sales will increase by 4 percent in 1998 despite troubling domestic and international market pressures.

The 95th annual American International Toy Fair mirrored what has been a tremendously successful year

Tickle Me Elmo and Star Wars characters--that's what started the surge in sales in 1997. Then came the Beanie Babies, and then the stampede to the stores for "virtual pets" like Tamagotchi's Nano Pets and Giga Pets. Business was booming, and it was only the first half of the year. Double-digit growth was experienced at various times as the year rolled on. By the time the dust settled, toy manufacturers' shipments for the traditional toy and game industry were up 7.8 percent in 1997 over 1996. For the total industry, including video games, shipments grew 6.9 percent, or 14.3 percent in dollars. Unit sales grew 5.6 percent (from 2.99 billion in '96 to 3.17 billion) for the industry, not including video games. Estimates are that retail sales of traditional toys and games reached $22.58 billion in the U.S. alone. No wonder Elmo's tickled.

These statistics and estimates were presented at the kickoff of the 95th annual American International Toy Fair (Feb. 9-16, New York). Like the toy industry, the toy expo was bustling, with 1695 exhibitors from 23 countries previewing up to 6000 new toys. Some 40,000 attendees were registered to see what the hot items will be this year. Meanwhile, many of the top-selling toys introduced to the market in '97, like the virtual pets, Barbie's Sun Jammer and Motorhome, and Lazer Challenge, had one thing in common with existing top-selling champs like K'nex and Lego--you guessed it! They are injection molded.

Alien Visit

ArticleImage2398.jpgPaul Cleveland of WPF Toys experienced an unusual occurrence that led him to create his new line of alien toys. Cleveland was raised in New Mexico near Roswell, the reported site of a 1953 alien spacecraft crash. One night in 1955, the then 10-year-old Cleveland had gone outside to finish his chores. When he walked back into the house, it was bedlam. His worried parents demanded to know why he had run away. The boy was confused and said he just finished his chores, but his parents replied that he had been gone for more than 3 hours! Soon after the incident he began to grow and in four years he was close to 7 feet tall. The events of that strange night were soon forgotten . . . until 1997. Cleveland, now a successful toy industry executive, was in a product development meeting when he broke out into a cold sweat and felt a strange prickling sensation. He was watching a video spoofing the Roswell Alien autopsy and suddenly images of aliens flashed across his mind. He immediately began to draw what he saw in his head, a series of alien creatures. And so, Alien Anatomy, Action Aliens, and Alien Invasion, a new line of toys, was developed. (WPF Toys & Games Inc.)

In his state of the industry address at the opening day press conference, Gary Baughman, chairman of the Toy Manufacturers of America (TMA) discussed the positive signs that created the momentum in strong retail sales in 1997 and should help fuel growth in 1998:

  • Consumer confidence is at a 28-year high. "This, combined with an influx of new toys that captured the hearts and minds of children across the nation and around the world, resulted in strong retail sales during most of the year," Baughman says.

  • The American economy was strong through 1997, in spite of the volatility of the Asian stock market and what Baughman calls its "current meltdown."

  • A new trend was spotted last year: toy sales are becoming a year-round industry, with less of an emphasis on 4Q sales. Baughman attributes this mostly to creative product development, marketing, and licensing.

  • When it comes to licensing, Baughman says that the marriage of Hollywood and the toy industry hit an all-time high in '97 with toy spin-offs of summer blockbusters like Star Wars, Batman and Robin, and Men In Black.

In summing up industry performance in 1997, Baughman notes that the most exciting aspect of the American toy industry is that it continues to be product driven, "With children ultimately steering the industry, the next big toy may come from an established toy company, or a small manufacturer with a very big idea. That is what keeps this industry electric."


Really Hot Wheels

This year marks the 30th anniversary of Hot Wheels. The success story starts with one man's idea to speed up the industry. In 1967, Elliot Handler, one of the original founders of Mattel, decided to add axles and working wheels to the static wheel diecast model cars of the times. What was developed was a prototype gravity-powered car that could run at a record-breaking scale speed of 300 mph downhill. The secret to such high-performance racing action was low-friction wheels made of styrene that were hung on torsion bars and soon to be patented by Mattel. Handler took one look at this new, ultrafast car, and exclaimed, "Wow, those are hot wheels!" thus also naming the new product. (Mattel Inc.)

What's Ahead
Baughman's projections for the performance of the toy industry in 1998 were tempered by a few factors now confronting U.S. and international markets in general. First and foremost, he says, fluctuations in Asian economies are cause for concern, despite the strong American economy and a healthy degree of consumer confidence in the States.

"Americans are watching the collapse of the Asian markets to determine the impact on the U.S. economy. The issue is complex and presents unique challenges for the toy industry," he says. Even though Baughman expects the weaknesses in Asian currencies to push production costs lower in 1998, he believes that the overall impact will be unclear for months to come.

Domestic factors also are affecting the industry. During the last decade, Baughman says children's entertainment has undergone a rapid transformation, making it more difficult for toy companies to effectively market to children. He believes that the changing face of television--with the coming of such networks as Nickelodeon, WB Network, and UPN--is making it tough to find a mass audience of kids to advertise to. And he says that the disparity of advertising costs among major networks and new entertainment outlets also has influenced the marketing mix in recent years. As a result, he cites the growing trend of toy companies combining marketing outlets like TV, the Internet, and CD-ROMs to reach today's kids.

Silver Anniversary Bells

ArticleImage4398.jpgLego Systems Inc. celebrates its 25th anniversary in 1998. For 25 years, Lego has been building kids' imaginations in the United States. The Lego System of Play has grown from 108 elements in 1973 to an assortment numbering more than 2000 pieces. While the Lego collection unveiled at the 1973 Toy Fair featured 19 sets, the Lego Showroom at the 1998 Fair showcased 178 construction toys. (Lego Systems)

ArticleImage5398.jpgThe new "See & Store" labeling system from Baby Biz Products Inc. now makes it easy and fun for children, even preschoolers, to organize their toys and art supplies.

ArticleImage6398.jpgYomega Corp. makes a number of different styles of high-tech yo-yos, including the top of the line "Raider" Roller Bearing model, hailed by enthusiasts as the "Lamborghini of yo-yos." This high-tech spinner seems to sleep forever, with seasoned players performing up to 40 "around the worlds" with one swift throw.

Nevertheless, Baughman sees the healthy performance of the toy industry in 1997 creating the momentum for 1998. Taking all the factors into account, Baughman anticipates that traditional toy and game shipments will grow by about 4 percent by the time the dust settles this year.

Toy Stories

  • The K'Nex Challenge. K'Nex recently challenged kids to determine the number of red K'Nex Rods they would need, laid out end-to-end, to equal 1 mile. Many kids took the challenge quite literally, but found they'd never accumulate enough rods to get the answer. So using their math skills, they measured and calculated, and several hundred kids entered the contest with extremely close answers--very heartening news for parents and educators. More and more schools are adopting the "K'Nex in the Classroom" teaching program. For those who think they can do as well as the kids, one red K'Nex Rod is 5.112 inches long. (K'Nex Industries Inc.)

  • Is There a Doctor in the House? Pressman Toy Corp., the country's third largest game company, celebrated its 75th anniversary in 1997. The New York City-based, family-owned business was founded in 1922 when, in an effort to ease children's fears of visiting a doctor, Jack Pressman introduced the first toy doctor bag. Even with this interesting start, Pressman's core business was--and remains today--classic games. In its 75 years, the company estimates that it has sold more than 25 million checker sets and 15 million sets of chess and Chinese checkers. (Pressman Toy Corp.)

  • Putty in Your Hands. More than 230 million eggs of Silly Putty have been sold since 1950--that's more than 3000 tons! Over the years, Silly Putty has been put to some unusual uses: The astronauts of the Apollo 8 mission carried Silly Putty into space with them to alleviate boredom and to help fasten down tools during the weightless period. Many athletes including baseball, football, and tennis players use Silly Putty to strengthen their grip, and Silly Putty is recommended by many therapists as an ideal stress reliever because of the calming effect it can have on your nerves. (Binney & Smith Inc.)

  • 50 Years of Scrabble. This year marks Scrabble's 50th anniversary. Even though it's a word game, the real story about the Scrabble-brand crossword game is numbers. One hundred million sets have been sold worldwide and between 1 and 2 million are sold each year in North America. Of keen interest to the legions of passionate players, somewhere more than 147,000 words can be used in the scoring arsenal. (Milton Bradley Co.)

  • Loads of Joes. G.I. Joe was the world's first action figure. Today, two out of three American boys own a G.I. Joe, and boys 5 to 10 years of age own an average of 10 G.I. Joe figures. Kids aren't the only G.I. Joe fans--more than half a million adults collect G.I. Joe. (Hasbro Inc.)

    Tink Fast

    ArticleImage7398.jpgWhat toy has been keeping kids constructively occupied since Woodrow Wilson was in the White House? It's Tinker Toys, and don't forget to wish them a happy birthday: this classic toy of construction and motion turns 85 years old in 1998. What's the secret of Tinker Toys' eternal youth? They move with the times. In 1992, Playskool introduced a major redesign--all-plastic Tinker Toys--which allow kids to build bigger structures than ever before. (Playskool, Div. of Hasbro Inc.)

    ArticleImage8398.jpg80 Years Young. Lincoln Logs will celebrate an 82nd birthday this year! They were designed and developed in 1916 by John Lloyd Wright, son of one of America's most famous architects, Frank Lloyd Wright. The younger Wright conceived his idea for Lincoln Logs when he was traveling with his father in Tokyo and became inspired by the construction techniques used in the foundation of the earthquake-proof Imperial Hotel, which his father designed. (Playskool, Div. of Hasbro Inc.)

    ArticleImage9398.jpg"Reality Fighters" from MGA Entertainment is the first interactive handheld LCD game that lets kids battle against each other from two separate units, while depicting the same action on each unit's LCD screen.

    Barbie BonanzaArticleImage10398.jpgSince 1959, close to 1 billion Barbie dolls and members of the Barbie family have been sold in more than 140 countries around the world. Two Barbie dolls are sold every second somewhere in the world. The typical American girl between the ages of three and 11 now owns an average of eight Barbie dolls! That compares to seven in Italy and five in France and Germany. Barbie has had a menagerie of more than 35 pets, including 17 dogs, 11 horses, 5 cats, a parrot, a chimpanzee, a panda, a lion cub, a giraffe, and a zebra! (Mattel Inc.)

  • Sketch This. "The World's First Laptop" turns 38 this year. After more than three decades, the same ingredients--the bright red case, glass screen, aluminum powder, plastic beads, and two knobs that help control the movement of the stylus--still make Etch-A-Sketch one of the world's favorite drawing toys and the original laptop. Besides a switch from brass to larger plastic knobs, the classic Etch-A-Sketch hasn't changed; only for a time in the '70s were pink- and blue-framed models made available. What's more, five of the toy's original assemblers from 1960 still dedicate their "magic" handwork to making Etch-A-Sketch today. (The Ohio Art Co.)

  • Whittle While You Work. Cootie celebrates its 50th birthday this year. Herb Schaper whittled the first Cootie out of wood in 1948. In the first years, Schaper built--by hand--40,000 wooden Cootie games. Three years later, more than 1.2 million were produced with the aid of machinery. By 1978, Cootie's 30th birthday, more than 30 million Cootie games had entertained kids worldwide. Milton Bradley acquired Cootie and other Schaper classics in 1987. (Milton Bradley Co.)

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