Friday, December 30, 2016

Manufacturers Face Difficulty Predicting Popularity of New Toys

Over the years, there have been a variety of "must-have" toys that hit the shelves in the month or two leading up to Christmas. From Chatty Cathy in 1960 to Tickle Me Elmo in 1996 and everything in between, there have been so many toys that had booms in popularity around the holidays. Of course, because of the surges in popularity, those toys would often sell out quickly, and parents who wanted to find the toy for their child would have to pay much higher prices to scalpers. Some might ask themselves why the toy company didn't just manufacture more of them to begin with, but as Shan Li discusses in her L.A. Times article, the answer is not so simple.

First of all, toy manufacturers have no way of knowing which toys will be the most popular. Since only a couple of toys each year receive huge popularity, if they produced enough of every toy in their catalog to meet the demand that a must-have toy faces, then they would not make any money and would end up with warehouses full of less popular toys that won't sell. Still, some manufacturers take a chance and make an educated guess as to which toys will be most popular. Sometimes that pays off in boosted profits, and other times the company has massive losses.

There's no way to predict with 100% certainty what choices the average shopper will make during the holiday season. Many people believed that the popular item this season would be the Nintendo Wii U, a modern gaming system, when in reality, Nintendo's retro NES Classic Edition is the game console garnering the most demand. It seems that the best thing a company can do is keep their eyes open, and when they see that demand is spiking for a certain toy, try to ramp up production quickly enough to meet the demand. Some companies even keep extra factories "on retainer" during the holiday season to help make the ramping up process more efficient. Ramping up doesn't work out for every toy, however.

For any toy, it can be difficult to suddenly increase production enough to meet the spike in demand. It is most difficult when the toy involves any sort of electronic components, Manufacturing a gaming system is much more complex and time-consuming than manufacturing a stuffed animal, so if that "must-have" item of the year is an electronic device, it is more likely to stay at limited quantities, even if the manufacturers try to increase production. A few years ago, the popular toy around the holidays was the "Pillow Pet." However, because it didn't have any electronic components, the manufacturers were able to increase production to meet demand without having to raise prices. Even though the stores caught on early enough to try to ramp up production, the electronic components of this year's "Hatchimal" make it difficult to quickly produce.

While all of that is true, sometimes the decreased stock for certain products is done on purpose by stores and manufacturers alike. When shoppers are searching everywhere for the toy, other shoppers see that and get interested in the toy because of how interested the shoppers seem. High demand for a limited commodity begets even more demand by people wondering why others seem to want it so much. So, sometimes they will keep a supply of the product in storage, to limit the amount on the market and drive up demand and prices. Many companies even release the extra supply just before the holidays to capitalize on last-minute shoppers still looking for the right toy who are willing to pay anything they need to in order to get it.

They never know when interest will spike, so companies will often keep producing certain toys even after the popularity has waned. Like with the Bakugan, sometimes a toy will see a sudden surge in popularity for no apparent reason. Sometimes people will see it in stores and be interested; other times the toy will have appeared on a television show and people get nostalgic. There is no one factor that determines a product's popularity, even after it has already been popular, so in much the same way, shoppers can't expect manufacturers to know ahead of time which toys they should produce the most of. In general, it's a flip of the coin, and only the luckiest manufacturers succeed in the end.

Find out more about us at Any Questions? Contact our Escrow Expert! Sepulveda Escrow Corporation (818) 838-1831. Follow our company on FacebookTwitterLinkedIn, and Google+.

No comments:

Post a Comment