I have been seeing a number of individuals and organizations making predictions about how the toy industry will finish up in 2020. Most of what I have seen has been optimistic, with forecasts for an increase running in the low single digits.
As much as I hope they are correct, they are leaving out five critical variables that could have a negative impact on the fourth quarter.
- The launch in November of two new video game consoles, Sony’s Playstation 5 and Microsoft’s XBox Series X.
- The continuing demand for the still scarce Nintendo Switch.
- Markdowns and closeouts at the many stores that have closed or are closing in 2020.
- The potential for civil unrest after the election.
- The lack of Christmas spirit on the part of Republican or Democratic supporters depending upon which side loses the election.
I have researched the issue and have found that, historically, each time a new video game console is released, the toy industry suffers. Below are the toy industry results for 2010 through 2015. The parentheses indicate a negative percentage.
We have two new consoles releasing this year with Nintendo producing 25 million new Switch units. Families still stuck inside due to Coronavirus will justify purchasing a new console ($499 for the XBox and $399 for the Playstation) plus software as a smart purchase. A way to entertain the family while in lockdown. Those dollars will come at the cost of toy purchases.
There have been numerous bankruptcies this year. Most have not involved toys, but many of the retailers involved do carry some toys or sell products that, marked down, could steal toy dollars. from the fourth quarter. Here is a list of some of the closings:
GameStop – 320 stores
Stein Mart – 279 stores
Tuesday Morning – 230 stores
J.C. Penney – 155 stores
Modell’s – 153 stores
A.C. Moore – 145 stores
Bed, Bath & Beyond – 110 stores
Sears / Kmart – 96 stores
2020 is the most discordant Presidential election in my lifetime and possibly since the Civil War. There is a lot of passion in the streets. Whichever side loses is going to be severely lacking in the Christmas spirit. If the election is challenged, it could result in even more unrest and confusion. That’s never good for business.
Those who are doing the forecasting for the toy industry in 2020 will want to consider these variables. They could well determine the outcome for 2020.
