Around Black Friday, the hot phase begins for retailers. The toy industry is also excited about the start of the Christmas business. Despite the subdued buying mood due to the crisis, the Handelsverband Spielwaren (BVS) is confident. Nevertheless: the record phase due to the corona pandemic is over for the time being.
In the meantime, people have been shaken by the crisis – first a virus, now a war and its consequences. In addition to the corona-related challenges, the current year is also struggling with high inflation. This also has an impact on the toy industry in Germany.
"In the period from January to October, the market declined by 5 percent compared to the previous year," summarizes the toy association.
This negative trend has been registered across all sales channels since the middle of the year. "Due to the strong start to the year, only the area of Generalists & Specialists still shows a positive accumulated result of +10 percent," according to the BVS. However, the numbers must be seen in connection with the strong development of toys during the peak phase of the corona pandemic. The industry had generated enormously high sales growth.
As a result, the accumulated sales are still twelve percent above the result for 2019, despite the current slowdown.
Toys: Prices are rising significantly
Toys are not spared from price increases, after all, the costs do not hit as drastically as in other areas of life. Nevertheless, some prices in the toy industry are also rising. By an average of EUR 13,07 since January, as the trade association notes. "This corresponds to an increase of 3,8 percent and is well below the development of many other areas".
Licenses remain in demand at a high level. A look at the pure license sales of the manufacturers shows that the companies Lego, Tonies, Simba Dickie, Hasbro and Mattel occupy the top 5 ranking and together account for almost 60 percent of the license sales.
"We are also expecting increased demand for products relating to the popular characters from series, films and books during the current Christmas business," says the BVS.
With a growth of plus six percent (Jan-Oct 22), the license market is developing strongly. As a result, the license share in Germany has increased to 26 percent.
The top 5 fastest growing licenses are the topics Star Wars, Jurassic World, Minecraft, Batman and Harry Potter. Together they represent over 29 million euros in additional license sales. With Spidey and his Super Friends and Asterix, new themes were also able to generate more than 2 million euros in sales each.
Funko figures increasingly in demand
With a market share of 19 percent, according to BVS, the building sets category is by far the largest product group so far this year and can even increase by another five percent compared to the previous year. Lego is the undisputed market leader here and can increase its sales by a further six percent. It is above all topics such as Star Wars, Lego Technic, Minecraft or Creator Expert with the greatest sales growth. However, smaller providers such as Cobi with their iconic models of the Trabant 601 or the Opel Rekord C are also gaining market share here.
The second largest sales growth comes from the smaller plush category. With an increase of over ten percent, the area covers many great topics. The cuddly Squishmallows and Cocomelon from Jazwares, the magical cauldron from the Magic Mixies from Moose or the Star Wars and Fantastic Beasts plushies are just a few examples of the category's numerous trends. But classic plush items from Hermann Spielwaren are also experiencing strong demand, giving the manufacturer an increase of 28 percent.
A trend of plus 15 percent compared to the previous year helped the “Action Figures” category to third place in the ranking of the fastest growing segments. Above all, the iconic figures from Funko are among the licenses Star Wars, Marvel Universe, Pokemon and Harry Potter are finding more and more fans in Germany and are finding their way into children's rooms. The figures from the Heroes of Goo Jit Zu series by Moose are also in great demand among kids. Both companies together account for over 50 percent of the growth in the action figure category.
The Youth Electronics division recorded a further boost in sales. With Zuru's Robo Alive and Moose's Little Live, both themes attracted additional buyers and gave our smallest category a plus of nine percent.
The Outdoor and Sports category, among other things, has to record declines. The area has experienced strong growth due to the contact restrictions of recent years and has now returned to the level before Corona.
Toys: retail hopes for Christmas
Despite the subdued buying mood, the toy industry is confident about the Christmas business. “Nobody wants to do without bright children's eyes again this year. The past crises have shown it: Parents and grandparents spend their last euro on the little ones," says Steffen Kahnt, Managing Director of the Handelsverband Spielwaren (BVS). In the previous year, people were still unable to travel and equipped themselves above average with board games, puzzles and the like to keep them busy at home. After the corresponding above-average growth rates of the two Corona years, the toy market is now returning to normal. The BVS expects a drop in sales of around 5 percent across all sales channels. The domestic market would thus shrink to 4,7 billion euros in 2022 (2021: 4,9 billion euros, at end consumer prices, basis: consumer panel npdgroup germany).
Whether it's a shopping experience or perfect advice - consumers could hardly wait to buy toys locally again. Kahnt: “Toy shops celebrated their comeback this year. After the bitter forced closures in the previous year, many retailers are happy about double-digit growth rates.” The delivery situation has also eased significantly compared to the previous year. "Nevertheless, no one should wait until the end to buy a toy, because individual toys are always sold out shortly before Christmas," says Kahnt.
Despite all the retailers' confidence, their economic situation has recently deteriorated further. BVS Chairman Rainer Wiedmann: “We entrepreneurs are currently being pinched from three directions. The trading margins are melting, energy costs are exploding and good employees are in short supply and can hardly be paid anymore.” Above all, Wiedmann appealed to politicians to finally noticeably relieve the burden on medium-sized companies.
Concerns about the future plague the toy industry
The "turn of the era" and the period of upheaval in the German economy have arrived in the toy industry. After the boom years of 2020 and 2021, the mood among the toy manufacturers organized in the DVSI has also deteriorated in view of the great uncertainty as to whether the old triad of economy, prosperity and growth will continue to support the German business model in the future. High energy prices and the erosion of purchasing power in private households and imminent shortages of primary products, raw materials and human capital are doing the rest to make the industry think. Nevertheless, and despite all the crises: the interest of consumers in toys, who have very clear ideas of what may or must be on the gift table, remains undiminished. And China is no longer the "Klondike" of past decades. These are the central results of this year's DVSI INDEX with the special topic "Are we beginning an era of scarcities?" and the exclusive DVSI end consumer study by YouGov.
Even bazooka, bang, double bang and a 200 billion euro relief package couldn't fix it in the end. The "multiple crises" have also left mental scratches in the toy industry, which has been accustomed to success, which was able to achieve an increase of 2020 percent in 11,1 and 2021 percent in 4,4, so that relatively little of the good mood of the past few years has remained.
Only 33 percent of those surveyed said the situation of their company was good or very good (2021: 62 percent), while 30 percent saw the situation as only sufficient or even insufficient. The DVSI members are particularly worried about the higher costs for energy (96 percent) and raw materials and preliminary work (93 percent), but also supply chain and logistics problems (64 percent) and the gloomy consumer climate (57 percent). Manufacturers are also looking to the coming year with skepticism. The reasons for that are obvious. Russia's war against Ukraine continues to have a massive impact on the global economy.
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The deterioration in sentiment is not surprising. 50 percent of the economy is known to be psychology. The forecasts of the leading economic research institutes, which have been correcting their data downwards for months and see Germany already slipping into a recession, as well as the clouding of the consumer climate have also left their mark on an industry that is generally resilient to crises. But no rule without exception. Some large manufacturers are expecting a slight increase in sales this year, but without being able to build on the previous strong years. The “brand” is likely to play an important role here. In the DVSI end consumer study by YouGov, 30 percent of the buyers surveyed stated that they often to very often pay attention to brands when making purchases, and 42 percent do so at least partially. Manufacturers with a strong brand at the point of sale should therefore enjoy a certain advantage in the favor of consumers.
Still wanting to play
In general, the Germans do not seem to have lost their desire to play. 43 percent of all respondents have bought toys in the last 12 months, either for themselves or as gifts. And they have clear ideas about what toys have to bring with them in order to be able to score with them. In the pandemic years 2020 and 2021, toys with a built-in “learning factor” experienced brisk demand, but the focus is again on “pure play” and the fun factor (50 percent). After all, toys that offer a "learning & knowledge" aspect are still in vogue (31 percent).
Legendary automotive pioneer Henry Ford is said to have said that 50 percent of his advertising is wasted money, he just doesn't know which 50 percent. The DVSI end consumer study provides grist to his mill. Toy buyers are less inspired by bestseller and trend lists, advertising or awards than by personal “recommendation marketing”.
They are based primarily on information and wishes from the recipient (58 percent), parents or legal guardians (45 percent) or recommendations from friends and acquaintances (40 percent). In general, they leave little to chance. 64 percent of those surveyed set a certain budget in advance or define maximum prices for themselves. They are also consistent in drawing up "to-do lists" for relatives, be they relatives such as grandparents, aunts or uncles, who increasingly have to follow parents' instructions so that they can get the "right" toy (47 percent). to buy. This is likely to reflect a gradual social change: the fewer children a society has, the more attention is paid to the few in order to always do the “right thing”.
The current situation among toy manufacturers is also having an impact on consumers. In order to master the current challenges, the companies surveyed rely on a bundle of measures. These include price increases, expansion of storage capacities, but also measures to optimize supply chains and supplier relationships. Against the background of the ongoing crises, the industry is skeptical about the coming Christmas business and the year 2023. "The worries are quite justified," says DVSI Managing Director Ulrich Brobeil, "but I am convinced that the maxim 'Am Kind will be saved last' applies. Perhaps the toy editions will be limited in price this year, understandably, but playing as a value in itself has not lost any of its relevance during this time either.”
The "multiple crises" have not only led to a gloomy mood in the industry, but also to a reassessment of relations with China. 42 percent of those surveyed want the China strategy to be revised. 55 percent even a reduction in dependencies on certain goods. The “geopolitical turning point” is also having an impact on the toy industry, because 46 percent of the companies surveyed stated that a return to the “old normal” is not really possible, and another 24 percent are convinced that there is no turning back are.
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