Rocked by Bankruptcy, Toy Industry Looks to Save Holiday Season

Reeling from the bankruptcy of its largest retailer, the toy industry is under extra pressure this holiday season.

One strategy to entice shoppers: low-cost, collectible products.

After years of touting play sets and devices that often topped $100 a pop, many of this year’s hottest gifts are expected to carry lower price tags. The industry is banking on wallet-friendly fare to help it rebound from disappointing sales last year -- and the fallout of a Chapter 11 filing late Monday by Toys “R” Us Inc.

A star of the toy industry’s frugal outlook is L.O.L. Surprise, a line of collectible dolls and accessories that kids unwrap. The price-point? About $10. The toy’s manufacturer, MGA Entertainment Inc., will release a highly anticipated L.O.L. Surprise package that contains 50 items in early October.

“With some of the less expensive toys, there’s bound to be lots more volume and create more sales,” said Rod Sides, vice chairman of consulting firm Deloitte LLP. “You’ll get a lot more eyes at $9.99 than $149.99.”

L.O.L. surprise is part of a burgeoning market for collectible toys -- a category that includes $14.99 Fingerlings robot monkeys and Soft’n Slo Squishies, squeezable foam toys that often sell for $5.99 to $14.99. They all appear on Toy Insider’s Hot 20 list, an industry publication’s best guess at what items will be the most coveted this season.

Collectibles Boom

Sales of collectible toys surged 21 percent in the first half of the year, according to NPD Group Inc. And the subset known as “blind collectibles” -- where kids don’t know what they’re getting until they open the toy -- soared 48 percent. The trend has been fueled by YouTube, where videos of kids opening the products have gone viral.

But toymakers face plenty of challenges as they try to tempt kids with the latest fads.

For one, Toys “R” Us’s bankruptcy threatens to roil suppliers and bring fresh upheaval to a market already disrupted by Amazon.com Inc. Shares of Mattel Inc., Hasbro Inc. and Jakks Pacific Inc. all declined on Monday as reports of the imminent bankruptcy spread.

But it’s still unclear how the move would affect toy shopping this holiday season. Toys “R” Us hasn’t announced plans to close stores, and it said locations across the globe would continue normal operations.

If some stores do end up closing, shoppers will just go somewhere else, Sides said.

“You look at the number of places that have had stores close this year, and I think the consumer now understands it’s just a part of doing business,” he said.

‘The Toy This Year’

L.O.L. Surprise has been a top seller for Toys “R” Us, a company in need of good news. Richard Barry, the chain’s chief merchandising officer, has said he expects that momentum to continue heading into the holidays.

“L.O.L. Surprise is the toy this year,” Barry said in an interview last week.

Retailers will continue to promote higher-priced items, of course. That includes “ride-ons,” vehicles that kids can get on and drive around.

“Last year’s $398 motorized princess carriage was a hit,” Anne Marie Kehoe, vice president of toys at Wal-Mart Stores Inc., said in an interview. “The next big thing is a 12-volt Frozen sleigh for $298 that’s exclusive to Wal-Mart.”

Hatchimals, which Toy Insider considered the biggest toy of 2016, is on its list again this year. A new Hatchimals Surprise set, featuring eggs that hatch magical creatures, is priced at $69.99. But there’s also an offshoot called Colleggtibles that sells for as low as $2.99.

“We anticipate Hatchimals really being as hot as last year,” said Laurie Schacht, publisher of the Toy Insider. The group’s list, which will be released on Tuesday, also includes the $99.99 Nerf Rival Nemesis gun and the new $299.99 Nintendo Switch.

Even if they opt for more budget-priced toys, parents typically shop for at least a few large gifts for the holidays, said Juli Lennett, an analyst at NPD.

“Parents want to have a few big-ticket items that are going to thrill their children,” Lennett said. “There’s definitely a healthy balance between high price and low price.”

The Toy Insider’s Hot 20

Ages 2 and under