Analysts Say Q4 Looks Bright for Toys & Games Despite Uncertainties

holiday-shoppingOctober 6, 2020 | The world might be in turmoil, but parents and gift givers are still planning to buy toys and games for the children in their lives, with analysts predicting toy sales to be up at least a couple percentage points in the last half of 2020.

“I am expecting a good holiday season, and our outlook is certainly better than I was thinking just a few weeks ago,” said Gerrick Johnson, an analyst for the toy, video game, and leisure sectors at BMO Capital Markets Equity Research. “Exiting Toy Fair [New York] in February, I had made a forecast for the U.S. toy industry at retail to be down four percent. I now anticipate U.S. retail will be up seven percent for 2020 (up three percent in the back half).”

Johnson’s outlook is based on NPD’s definition of the toy market, which does not track many of the smaller dedicated retailers that have closed or are struggling. Nonetheless, he said major mass and online retailers are feeling upbeat about the upcoming season and leaning into the toy industry by placing solid orders.

As for consumers, Johnson believes the holiday shopping season is getting off to an early and strong start.

“This is a major change in trend compared to recent years,” he said. “I’m not sure the exact reason why this is happening, but many consumer habits have been altered by the COVID-19 pandemic, and we know from experience that earlier shopping always means more items are purchased through the season.”

According to Johnson, some of the risks associated with his positive outlook include a U.S. unemployment rate of more than eight percent, fewer kids at school to share toy ideas with each other, a lack of movie events to generate excitement, and pantry-loading in the first half of the year. And the shift to online sales is projected to hurt impulse purchases, which are a strong component of toy sales.

On the other hand, a boost in online shopping presents a “tremendous” opportunity for online retailers to provide “unique, ‘sticky’ shopping experiences that will keep consumers engaged and spending,” said Juli Lennett, vice president and industry advisor on toys at The NPD Group, in a recent blog post.

Lennett added that concerns about there not being a last-minute rush to stores due to fears of COVID-19 presents yet another “opportunity for savvy online retailers.”

As reported by The Toy Association in its mid-year trends presentation at Toy Fair Everywhere, Q4 is expected to bring a mix of high quality educational toys to keep kids entertained and learning at home, as well as a resurgence of formerly popular categories, including collectibles, plush, action figures, and dolls, as kids begin making their holiday wish lists.

“This year has been so uncertain, but one thing is for sure: toys and games are considered ‘must-haves’ by families who are spending more time together at home and trying to make it through less than ideal circumstances,” said Adrienne Appell, senior director of strategic communications at The Toy Association. “We have long studied and spread awareness about play’s many benefits for kids and adults alike. Toy companies have risen to the challenge to provide consumers with the tools they need to have fun, stay engaged in learning, and relieve some of the stress associated with the pandemic.”