Holiday shopping: Toys will be the “shining stars” of the season, say experts

The most resilient category of holiday spending is: Toys.

But toy stores are also expected to feel the effects of inflation during the biggest shopping season of the year.

“Holiday spending will be muted,” said retail analyst Bruce Winder. “But toys are the last thing you cut when you have kids. You want something under the tree for them; maybe you can do it more economically.”

While Canadians are expected to pare down their shopping lists this gift-giving season amid rising prices, high interest rates and a bleak economic outlook, they still appear willing to open their wallets for toys, experts say.

“Toys have been this shining star in Canada,” said Tamara Szames, NPD Group’s Canadian retail industry consultant. “It continues to outperform the rest of the retail industry.”

While toy sales may be resilient, spending on children’s games, books and dolls continues to decline, he said.

“If you look at the first six weeks of the fourth quarter, toy sales are down 17 percent compared to last year,” Szames said. “That’s a pretty strong pullback.”

Even so, sales are comparing to the “astronomical growth” recorded last year, he said, noting that consumers were shopping even earlier in 2021 amid fears of inventory shortages.

“If we compare toy sales in 2022 to 2019, there’s still 22 percent growth,” he said. “Expenses for children during the holidays will continue to be a priority.”

Consumers are increasingly looking for sales and deals, and some will have to wait until later in the season to buy gifts.

“Customers have been waiting for the Black Friday sales this year,” said Sarah Jordan, CEO of Mastermind Toys. Officially on November 25, many retailers have already started rolling out their Black Friday deals, and sales are expected to increase this week.

“It’s a return to a more normal pre-pandemic holiday shopping pattern,” he said. “When we go back in history, Black Friday was the beginning.”

So far, buyers appear to be more price-sensitive than in previous years, Jordan says.

“People are shopping on a budget,” she said. “Customers are twice as likely to buy gifts under $25 on our site as under $50.”

But when it comes to the season’s hottest toys and big-ticket “must-haves,” shoppers aren’t waiting, Jordan said.

Popular toys like the Magic Mixies interactive Crystal Ball are being bundled online in what he calls “more transactional shopping.”

Many shoppers are returning to in-store shopping, and “tried and true” classic toys, Jordan said.

“One of our fastest growing categories right now is stylish,” he said, noting that it grew 30 percent year-over-year. “It’s usually a category that is helped by being in the store to feel, touch and see the product.”

Cash-strapped shoppers are looking for cheaper, more basic toy options, said Marty Weintraub, Deloitte partner and national leader in retail consulting.

“We are likely to see a decline in trade as shoppers look for cheaper toys,” he said. “There’s always good, better, best. We’re going to see more deal-seeking behavior.”

Mastermind Toys launched its own private label this year. Jordan gives the store the ability to make classic toys rooted in child development more accessible.

“If you think of the grocery store private label you think it’s removed with better prices and value,” he said. “But we’re focused on building sustainable toys that kids will keep playing with again and again.”

Meanwhile, the impact of high inflation on consumer spending could leave toy retailers with excess inventory at the end of December.

Many stores faced supply chain issues last year, leaving some shelves empty before Christmas.

Stores have ordered goods earlier than usual this year to avoid shortages, but now there is more inventory than usual, experts said.

“Stores were gearing up for a big shopping season, but inflation has dampened consumer demand,” said Tandy Thomas, an associate professor at Queen’s University’s Smith School of Business.

“Excess inventory will be a problem this season, which means retailers will be highly motivated to move that inventory. This will likely lead to deep discounts.”

Canada can see a big return on Boxing Day sales, as well as big promotions in the days and weeks leading up to Christmas.

“Retailers will want to drive consumers into the store and that will result in deep discounts,” Thomas said.

This report by The Canadian Press was first published on November 20, 2022.