Toys, Gifts & Novelties Forecast

Conventional wisdom dictates that during sluggish economic times, the less necessary an item is, the more likely consumers are to eliminate it from their budgets. It would be understandable, therefore, if you assumed that it has been a somewhat bumpy ride for those in the business of selling toys, gifts and novelties. But while it certainly has been no walk in the park, and the effects of belt tightening have certainly been felt, it has not been all gloom and doom. Wholesalers have found ways to keep their products moving, and retailers have continued to feel the demand from consumers.

Sometimes it’s all about price points. But sometimes there are other factors as well. For Emirimage Corporation, seller of remote control vehicles, the allure of bells and whistles has proven effective in sustaining interest. “People are looking to get more and more sophisticated toys as the technology advances in different ways,” says Emirimage president, Eduardo Perl. “Kids are looking to get different toys, but all of them with more and more technology. The interactive characteristic of the toys is important, but of course there are some kinds of toys that never ever disappear. A kid playing with a car, for example. And right now the technology allows for a kid playing with a helicopter. Combine that with the improvement of the technology, and it makes the kids of today the best customers for these kinds of toys.”

Perl’s customers are looking to buy cars, in his case, radio-controlled, that can perform different kinds of tricks and stunts. These items use technology that didn’t exist a few years ago. The helicopters in particular used to be marketed primarily to collectors and hobbyists of an older age, due to their high cost. But these days, the technology is so commonplace that mini helicopters have been entering the market with a lower cost, allowing them to be purchased by more than just the hardcore hobbyists. Right now, customers of all ages are showing interest in helicopters, and cutting edge technology, including gyroscopes and multiple directions of movement, has put them among the highest selling items on the toy market for the past few years.

“Because of these improvements in technology, they’ve become more easy to manufacture with certain kinds of features, that before were very expensive to do,” says Perl. “Right now helicopters are selling at retail stores for $100 or $150, and three or four years ago they were going for more than $1,000. This is the main thing, the reason more people can get the kind of helicopters that many years ago nobody could. Just like with computers. In the beginning it was very expensive to have a computer with a lot of power. Only the big corporations had the ways to get them. Then the technology was more and more accessible, and the small computers today have more power than any giant computer before, and are more available to people.”

Between cars and helicopters, Perl offers a wide variety of remote control toys, with wholesale prices covering a broad spectrum, ranging from $9 to $200. Further details on wholesale pricing are available at the company website, Perl reports that many of his buyers are successful marking up as much as 300 percent, with even the $9 or $10 wholesale priced items retailing for as much as $30. There is no fixed minimum order requirement in terms of price, but buyers must order by the case. Each item is packaged in a different quantity per case.

Very often, items may be seasonal, such as sports based products. In these cases, the time of year might be just as important a factor as price point. For Prizes, a wholesaler of licensed sports items, this has certainly proven true. Football season is the busiest time of year for the company, and a lot of buyers are interested in souvenirs and novelties for local and favorite sports teams. NFL teams and college football teams are usually the most popular. Football season predominates Prizes’ sales, accounting for more than 50 percent of the annual total.

“The buyers, as always, like to buy items that reflect current trends,” says owner, Tom Portale. “Prizes in particular sells licensed sports items. It’s a very seasonal business; July, August, September, October are our best, and that’s related directly to football season.” Portale admits that there has been a bit of a slowdown in recent years. It seems like the bigger companies are buying less, to ensure that the product comes in and goes out. There are also fewer companies buying, and some of the smaller mom and pop stores are just no longer around. It’s a combination of fewer companies purchasing and the larger companies buying less product. The customers still want to buy, but they have limited resources. Nevertheless, lower end priced items still sell better than higher priced items.

“It’s an easier impulse buy,” Portale says. “I wouldn’t say they’re totally recession proof, but I would say that the really expensive items are selling at lesser quantities, and the lower priced end is doing better on a relative basis. Our business is starting to pick up right now, and we see things being fairly decent heading into the Christmas selling season. I don’t know how good it will be, but I don’t think it will be bad. This coming Christmas season will probably be about the same as last year. I don’t think it will be better.”

Ian Flanagan, co-owner of Opportunity Buys, a wholesaler of home décor, giftware and novelty products, has witnessed a general change in how people are viewing the market. “Whereas years ago people just wanted to see how cheap they could buy something, with no regard to quality, nowadays in the market you see more people saying, ‘We want better quality at a reasonable price.’ So if you’re able to provide a good quality product to the person, obviously it’s still not going to be as cheap as it used to be, when people didn’t care about quality. But now what Opportunity Buys in particular is trying to do is offer that good quality merchandise at a price that’s reasonable. It’s not something that the consumer has to pay $100 for, but people are more willing to spend that $20, as long as they know they’re getting something of quality.”

The economy has something to do with this shift. In today’s climate, many consumers are trying to move away from buying Chinese goods, and while this is never going to happen completely, it has taken its toll on wholesalers like Flanagan who deal in goods produced there. But as he points out, not all products coming out of China are necessarily of low quality, and the assumption that only junk is made overseas is often incorrect. “They do great work over there,” he says. “It’s just a matter of being able to provide it to the consumer at a price that’s reasonable. You can have stuff made in the United States that’s cheap and of poor quality, too. If you want better quality, there’s going to be more cost involved. What our company does is, we don’t say how cheap can you make it, we say we want the best quality we can get at a reasonable price. A lot of companies just go over there and ask how cheap can you make it? We don’t do that. We want to get the best quality we can and still be able to turn around and wholesale it out there at a price that, by the time it reaches the consumer, is not going to result in a grossly overpriced product.”

Flanagan’s customers comment all the time that they can get the merchandise other places where perhaps it’s a little cheaper, but the merchandise is of significantly poorer quality. With Opportunity Buys, they can spend that extra half dollar or dollar and get something that is of really good quality, which they can then turn around faster. With such higher quality products sitting next to lower quality products, as long as customers can see that difference in quality, they’re usually willing to pay five or six dollars more for it. “What everyone needs to remember is we’re on our way back up,” says Flanagan. “The U.S. as a whole is heading in the right direction economically. The economy itself is improving and getting better, and everyone needs to keep their chins up and keep pushing forward. Stick with your suppliers. If your supplier is supplying you with a good quality product and introducing new items, that’s a supplier you want to stay with.”

For many of these companies, such as SJT Enterprises, it’s all about gift giving. The wooden plaques, key chains, refrigerator magnets and other fun items SJT carries do especially well in the fourth quarter, right around Christmas time. And it’s no wonder, as they are inexpensive, well made and attractive. Specifically, owner Tim Smith cites the extremely popular wooden dog plaques for keeping his company’s business going strong through tougher times. “Our sales last month were the best we’ve ever had in 25 years, and it’s primarily because of the pet plaques; they’ve just done so well,” he says. “Even during bad times, during a bad economy, people will still buy something with their dog on it. It’s amazing.”

To the point made by Ian Flanagan, Smith notes that people seem to prefer items made in the U.S. For this reason, he makes sure his products are clearly labeled, “Made in the U.S.A.”. He reports receiving emails and phone calls on a weekly basis, sometimes daily, letting him know that they really like to see that they can buy something made domestically; more and more a rarity these days. In contrast to Flanagan’s more optimistic appraisal however, Smith has found that end customers do not seem as willing to pay as much as they used to. While a few years ago the magic number for a gift item was right around $20, now, because of the economy during the past year or two, that number is $10. This is reflected in the feedback from his buyers, who are now looking for items more in the range of $10 or less.

SJT Enterprises does business with a wide array of retailers, ranging from Hallmark stores and higher end gift stores, all the way to mom and pop novelty type stores; even some dollar stores, drug stores and flea markets. Virtually any type of retailer, Smith has found, does pretty well with his items. He’s hopeful about the future, but cautious at the same time. “The improvement keeps increasing every single month,” he says. “But I don’t think we’ve even scratched the surface. Because this country’s so large, I don’t see much of an end in sight.”

The downturn in the economy has resulted in an increase in the desire for more useful gift items. This somewhat obvious trend is one that was born out of necessity. One of the companies it has affected is Mustang M/C Products, a supplier of motorcycle related gifts. “Since Mustang has been in the motorcycle industry for 30 years, we are the ‘go-to’ guys for most popular items such as head and neckwear, bike calendars, vest chains; items that every rider will find useful,” says Mustang vice president, Mike Panasci. “Then, of course, we have our angel pins, gremlin bike bells, and other popular items that are uniquely ‘biker.’”

Mustang’s “Biker Essentials” line does extremely well during the holiday season. In this way, it is not unlike many other lifestyle lines such as golf and fishing, for which perhaps 75 percent or more of sales are derived from gift buying during the fourth quarter. The rest of the year runs closer to a more normal buying pattern. “Like most companies, we were not fortunate enough to avoid the effects of the economic downturn,” says Panasci. “New motorcycle units were down close to 50 percent last year, and those dealers make up a significant segment of our business. It was an eye opener, however, and we have taken the necessary steps to operate leaner. We’ve seen a nice rebound this year, and we look forward to continued growth. As biker lifestyle merchandise continues to cross over into the non-rider market, we see continued growth for unique, high quality gift items.”

A key ingredient to staying in the black is keeping track of the newest trends and fads. Especially in the toy category, trends move quickly, and the hottest items are always changing. Keeping your finger on the pulse of the industry can make all the difference. Novelty Poster has done well providing the product demanded by children nationwide, from the days of Tamagotchi a decade ago, right up to the silly band craze of today.

In addition to silly bands, company owner, Jeff Sokoloff, also reports success with silicone bracelets and a brand new item: silly rings. A smaller version of silly bands, they’re expected to soon be flooding the market. But for now, Sokoloff believes he may be the only one carrying them. He also anticipates great success from the licensed Disney bracelets that are just hitting the market, as well as sports themed bracelets. “It’s popular priced merchandise, cheap retail,” he says. “Kids always have a five dollar bill in their pocket to spend. The price point is what makes it.”

Television advertising helps, and Sokoloff indicates that “As Seen on TV” items are always hot. These include products like the Snuggie and the Pillow Pet. With many of the most popular items, customers keep coming into stores and asking for them, which then leads store owners to ask Sokoloff about them. Then he’ll go out and try to buy that merchandise. Six months ago, for instance, he had hundreds of stores coming to him, asking for the silicone bracelets. So he started jumping all over it, finding the manufacturers and buying them. Sokoloff obviously values feedback from his customers. “We always look for that next hot trend, something that the kids want. A lot of parents will even call the stores to see when there are more coming in.”

Whether it’s price points, technology, seasonal appeal, or keeping up with trends, it takes strategy and planning to be successful in the toys, gifts and novelties category in today’s environment. It’s a challenge, but one for which more than a few enterprising wholesalers are prepared. And that preparation makes all the difference for retail profits.

For more information:
Emirimage Corporation
5269 NW 161 Street
Hialeah, FL 33014
Tel.: 786-287-1250
Fax: 305-628-3090

5242 Argosy Ave.
Huntington Beach, CA 92649
Tel.: 714-891-1710
Fax: 714-897-5260

Opportunity Buys, Inc.
1515 Brookville Crossing Way
Indianapolis, IN 46239
Tel.: 317-353-6684 / 800-894-2816
Fax: 317-353-6694 / 317-353-6696

SJT Enterprises
28045 Ranney Pkwy, Suite L
Westlake, OH 44145
Tel.: 440-617-1100 / 800-326-7419
Fax: 440-617-0987

Mustang M/C Products
278 Town Hill Road
Terryville, CT 06786
Tel.: 860-582-9633
Fax: 860-585-0407

Novelty Poster
81 North Forest Ave.
Rockville Center, NY 11570
Tel.: 516-561-1378
Fax: 516-561-3605