Walmart’s Low Prices Slash the Toy Industry

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The first shots across the bow have been fired, as Walmart cuts toy prices earlier than ever this year. This will be a year of deep discounting of toys – and while that sells more toys and is intended to increase sales in other product categories as well, I can’t help but wonder what, if any, are the unintended consequences of cutting prices so drastically and so early in the season.           

Let’s think about this a moment. It is conventional wisdom that using toys to bring in customers helps retailers in the 4th quarter. But what about the rest of the year? Might the higher prices of toys after the 4th quarter inhibit sales the rest of the year when consumers experience sticker shock?             

Nm_walmart_091118_mn Do toy manufacturers benefit when their toys are "footballed" out the door at bargain basement prices? I don’t know, but I have heard complaints that consumers are given an unrealistic concept of what a toy of a certain sort must cost. When classic board games are sold for $3.00, where is the opening for innovation or for new concepts who must pay their own way, so to speak?             

When one retailer cuts the price of a toy too far, others cannot meet that price and stay in business. They have to cancel orders so as not to be perceived as the high-price seller of toys in the consumer’s mind. Fewer of a popular toy may be sold as a result. That is certainly not what we as inventors want to see happen.           

What to do? Nothing is one option. Or, manufacturers can insist that retailers not sell below a certain price. Good luck with that. I don’t have an answer, but I am not sure the status quo is the best we can do. 

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