Toys and the Economic Turndown

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Toy Retailers Won't be Squeezed Too Hard due to the psychology of recession

The global financial market is pretty gloomy these days, and analysts are finally using the “r” word.  As in Re-cession.  What does this mean for toy retailers, and for your average shoppers looking for toys and games?

First off, you may be surprised to learn that toys is one of the more protected sectors of the economy during a down-turn.  As analyst Steve Buxbaum said in a CNN money article earlier this year, “You just can’t explain to a 4-year-old that he won’t get the toy he wants because there’s a recession.”

But of course our children must learn that during tough times, we have to make sacrifices.  What this means for many consumers is that they will find ways to meet their needs at discount stores, warehouses and outlet stores more than before.  In market lingo, this kind of shopping behavior is known as “trading down.”

Small Retailers May Suffer

On the flip side, recessions hit small businesses the hardest, so small toy retailers and unique toy boutiques are more likely to suffer than the big box stores.  This may mean that many small toy shops will go out of business as they cannot cut corners like larger and more monied institutions.  However, those toy shops that focus on popular toys that cannot be found at the big box discount stores may find the “sweet spot” to financial success during the credit crunch.

Also, online retailers may be protected from the economic downturn too, as online shoppers typically have more discretionary income to spend in the first place.

If we take a wide-angled view of this process, we can see how this process actually strengthens the value of toys.  The shops that prosper in this economic climate do so not only because of their deep coffers, but also because they offer excellent products and value.  For toys, this means that traditional toys and games may rebound somewhat, as these toys are well-built, produced with quality materials, and well-loved by millions.

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5 Comments

  1. during the height of the economic recession, our online and offline business in the US have suffered some major drop in sales. now our sales are getting slowly back to normal.

  2. Our country had been so much affected by this Economic Recession. there are lots of job cuts and company shutdowns. We are seeing some signs of economic recovery right now and we hope that it would continue.

  3. Our country was also hit hard by the Economic Recession. At least we are seeing some signs of economic recovery now. I hope that we could recover soon from this recession.
    *,.

  4. Things must be really bad because over here in Bay Ridge, Brooklyn, the local K and B Toy Store shut down due to lack of sales. I was shocked because it was located right by the “R” train station the middle of the shopping district here. I really thought it made a lot of money because people would always buy toys and board games there. I even bought star wars monopoly there.

  5. You are definitely right, it would be difficult to explain to a four year old why they cannot have the toy they want. i can’t imagine trying to explain that to my two year old daughter.

    I think online retailers will do better than traditional brick and mortar stores for teo reasons. First they online toy stores can access a broader market than traditional toy stores. Second, they do not have the over head that traditional toy stores do. A third possible advantage for online retailers is that man do not have to have inventory on hand but can make deals with manufacturers and wholsalers for drop shipping. The advantage definitely goes to online toy retailers.

    Beau

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