What kind of impact will tariffs have on the toy industry? Can we handle a non-value added cost of business? Will the resulting increase in retails, that do not accrue to the manufacturer's or retailers bottom line, damage what would otherwise be healthy businesses?
History tells us that there will be an impact but not anywhere as big as some of the other sectors. As the old saying goes: "If it goes in the icebox, the toy box or the medicine cabinet its recession-resistant". Remembering those words are comfort in challenging economic times. They also remind us of reality. I have gone back to 1980 and have found that, based upon annual NPD data, the toy industry has fared well when the economy has gone into a slump. It seems odd to say it, but toys are, at least in the minds of parents, a necessity.
Here is what I think will happen to toy purchases in the event that the tariffs go into effect. Assuming that the tariff is passed on to the consumer, unit sales will stay steady, but the average amount spent on toys will decrease. In other words, parents will purchase a less expensive product or version.
I think this will be particularly true for toys that are popular in those retailers that sell to lowest income shoppers, i.e., Dollar General, Family Dollar, and even Wal-Mart.
Remember, it's not just toys going up in price but virtually all consumer goods. That means a family that is just getting by is going to be highly stressed economically. They will have to make very tough choices on what and when to buy.
Let's hope the tariffs do not go into effect on December 1. We don't want to find out if I am right.