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When Times Are Tough, The Tough Go Bargain-Hunting

Monday, November 16th, 2009
By Anita Frazier, Entertainment Industry Analyst Toys & Video Games

I was shopping last weekend for a gift for my twins to take to their friends’ party, and I entered my local specialty retail store without a preconceived notion of what I was going to get, but with a definite price range in mind. As my kids suggested various items to me, I evaluated it against my predetermined price range. Too often, my response to their suggestion was, “No, honey, that’s above my price range,” but eventually we settled on the perfect gift for the boy that they thought he’d enjoy, while also sticking to my budget.

It seems like everywhere you turn, there are constant reminders of the tough economic climate that still faces us on a global scale. Even with continued news regarding the unemployment rate, and the volatility of the stock market, NPD’s latest Economy Tracker revealed that overall concerns with the U.S. economy as a whole are easing among consumers, while consumers’ views of their own personal situation are declining compared to last October. Despite these difficult times, the U.S. Toy Industry has posted year-to-date sales through September ‘09 that are just 1% behind last year’s figures.

So how, if at all, has the economic situation impacted the toy industry? At a very top-line view, NPD’s monthly consumer tracking service of the toy industry indicates that this year, so far, a greater percentage of toy sales are being purchased via a “store deal” or a “price reduction.” Conversely, for the 12-month period ending September ‘09, the percentage of toy purchases made which utilized “no special offer” declined 2 percentage points over the previous 12-month time frame. While there was little increase in the use of a manufacturer rebate or a manufacturer coupon over these periods, there was an up-tick in purchases made using either a store promotion or store coupon. The promotional vehicle seeing the greatest increase by far was with purchases made via a store sale. From this it would appear that consumers are actively seeking price discounts when making their purchase decisions.

Our latest toy industry topical report, Toy Purchase Decisions, lends more insight into these findings, and the role that price and promotions play in the toy purchase process. The biggest impact price plays is in the selection of the retailer. The majority of toy purchases are planned, and of those planned purchases, for 78% of them, the buyer knew exactly where they wanted to shop. So where do store sales and discounts come into play? Well, a shopper could have two or more specific items in mind when they enter the store, and the presence of an in-store price reduction could sway their decision to one over the other. Also, while a majority of toy purchases are planned in advance, the rest are not, and the study found that those that purchased toys on impulse were more likely to take advantage of an in-store price reduction indicating that price promotions are an important catalyst to unplanned purchases.

And there is something new at play in this arena that I find particularly fascinating. The impact of “social shopping” and the retailers and manufacturers use of social sites like Twitter and Facebook to communicate promotions to their fans and followers. Just the other day, Toys R Us used the power of Twitter to communicate that the first 50 shoppers to their store that day could pick up Zhu Zhu Pets (which for those of you who don’t know is emerging as the hot hard-to-find toy of this holiday season). The retailer also uses Twitter to promote their “Deal of the Day” which is usually a very compelling price reduction on popular items. The sheer variety and creativity in the use of social media makes this trend a really fun one to follow, and certainly we’ll see an impact on how purchases are made because of this phenomenon.

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