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Who says grown-ups shouldn’t believe in Santa Claus? A year ago this time, with the market crash in full fury, even well-off parents found themselves forced to cut back on gifts for their kids. Holiday toy sales for 2008, in fact, fell at nearly twice the rate of the overall retail industry. But this year, savvy parents are in for a holiday smart gifts surprise: toymakers offering a host of scaled-down versions of must-have models kids are begging for—and at parent-friendly prices.High-tech toymaker WowWee, for example, recently released its new Alive Mini Cubs ($20), baby renditions of a popular $50 plush line released last year, complete with the “tilt sensor” that makes them purr and coo when picked up. The popular American Girl dolls, each of which stand more than a foot tall and cost between $95 and $160, are being offered in downsized versions (about half as tall) for only around $20. Even notoriously costly ride-on vehicles are being scaled back: Instead of promoting its pint-size $436 Jeep Hurricane, souped up with FM radio and cupholder, toymaker Mattel [MAT] is betting this year on its battery-powered dune buggy—also with “monster traction”—for about $100 less.
Of course, some of this is happening because of the still shaky economy. According to a recent survey commissioned by the bank ING Direct [ING], more consumers intend to rein in holiday-gift spending this year compared with last. “Anything over $100 is going to be a tough sell,” says Reyne Rice, a trends specialist with the Toy Industry Association. But for toymakers, there are other reasons as well. The cost of creating playthings—safety testing, plastic prices, shipping—has been rising of late, making it even less attractive for manufacturers to focus their energies on large, complicated and expensive products that will likely languish on store shelves. Some of those very products (think robotic dinosaurs the size of 3-year-olds) were the ones that flopped last year, says Jonathan Samet, industry watcher and publisher of The Toy Book. The result: the shrinking and simplifying trend.
Still, from a parent’s perspective, pulling the old lowcost switcheroo with these smaller or less complicated toys has its risks. Depending on a child’s age and emotional attachment to the particular toy she saw on TV or played with at her friend’s house, the substitute may only elicit a groan. And as San Jose, Calif., birthing coach Angelita Paniagua points out, there’s no guarantee her young daughters will even go for the expensive option: “You spend $200 on something and they may or may not like it.”
It hasn’t always been bargain time in Playland. Along with all things kid-related—from strollers to private-school tuition—toy prices have steadily risen of late, goosed by the red hot video-game sector, where sales have more than doubled in five years. Toymakers justified higher price tags by reissuing many classics in “premium” editions, like a $159 wooden-mounted Monopoly board, complete with felt-lined money drawer and leather deed cases.
The other price-boosting trend is the drive to make playthings bigger, more lifelike and more high-tech. The “it” toy two years ago? A 25-pound robotic horse, priced at $300, that nuzzles a child when stroked, swishes its tail and whimpers when left alone in the dark. But when the crash hit last year, many manufacturers got stuck pushing pricey products already in the pipeline. Ken Maxwell, vice president of marketing at Peg Perego, says his company couldn’t have picked a worse time to promote its $750 Polaris Ranger ride-on toy, which was supposed to wow kids with grown-up features like cupholders and a working mp3 player, but “we had invested so much that we had to launch because we were too far into it.” Not surprisingly, companies that have continued to push only pricier products typically haven’t fared as well this year. “The higher-end stuff has gotten pummeled,” says Richard Gottlieb, a toy consultant based in New York City.
Fast-forward to 2009. Despite the recent recovery in the stock market, most parents are still balking at the big-ticket toys—even educational ones. Paniagua, for one, says she keeps a secret tally of each time her daughters ask for a gift, and once it passes five, the item merits holiday consideration. Her 5-year-old daughter, inspired by a Chinese character on a popular cartoon, has asked over and over for a $230 computer language program called Rosetta Stone that she’s seen advertised on TV. List or no list, though, Paniagua is unmoved and plans to substitute a $40 Berlitz program instead. “We’re trying to make ends meet,” she says.
Which is why toy companies are shooting for what Samet calls the sweet spot of $30 to $50. Executives at toy giants Mattel and Hasbro [HAS: 32.06, -0.37, -1.14%] say the majority of their products have long been priced at under $30 but acknowledge that they’ve increased efforts to bring prices down further while still packing toys with “play value.” Mattel, for one, created Spike Jr., a half-size spin-off of a remote-controlled dinosaur that launched last year for $140. Rival Hasbro spawned a triceratops in its Stompers line from a larger cousin named Kota, a $300 robo-dino that, despite being dubbed one of the most innovative toys of 2008 by the Toy Industry Association, flopped badly in the fallout of the market crash. Of course, the new mini-bots lack the robust features of their bigger counterparts; they can’t blink their eyes, for instance. But they can stamp around and let out a roar. And both retail for $25.
To be sure, some industry officials say they’re not completely shying away from offering more expensive products this year. That is, “if they provide the innovation and price value necessary to command their higher retails,” says Lisa Mancuso, senior vice president of marketing for Mattel’s Fisher-Price brand. The company recently expanded its lineup of ride-on vehicles when it added the Stinger XS, a twoseater for 3- to 6-year-olds that’s styled like a dune buggy. While it doesn’t include a working sound system or those everpopular built-in cupholders, the XS boasts its “off-road” mobility and costs just $320—as much as 25 percent less than similar models in its class.
And most parents seemgrateful for the budget-friendly alternatives for those big-ticket items. Last Christmas, Leighann Calentine of Champaign, Ill., knew she was in for a potentially expensive holiday when her 2-year-old son, Rowan, spent their entire visit at a local children’s museum glued to the Thomas the Tank Engine–themed train table, an elaborate setup of wooden tracks and cars modeled after the characters from the famous kids’ TV show. After doing her research and realizing she could easily spend $400 to $500—money she didn’t have in the holiday budget—Calentine found a similar Toys “R” Us store-branded set for only $160 and then splurged a little for a handful of the Thomas character engines. By taking this approach, she says she saved as much as $300. As for Rowan’s reaction on Christmas morning? “He came out and had no interest in opening any of his other presents,” she says.
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