Despite Toy Troubles, Experts Expect Big Holiday Sales in Hot Products

By KATE PRAHLAD, Capital News Service

ANNAPOLIS - What kids want, kids get.

And kids want toys. Despite the toy recalls that have made news this year, analysts expect the toy industry will still rake it in this holiday season.

"Kids are going to call the shots here," said P.K. Kannan, an associate professor of marketing at the University of Maryland's Robert H. Smith School of Business.

Across the board, toys might see "maybe minus 5 percent" in revenues in response to the recalls, Kannan said, but not for any specific brands.

The Consumer Product Safety Commission recalled millions of Chinese-made toys this summer because of lead contamination or defective designs.

"It seems like the recalls have slowed down a little bit, but there was a period where every day there was another recall," said Raquel Guillory, spokeswoman for the Maryland Attorney General's Office. "It's often hard for consumers to keep track of all of these recalls, updates, changes added to the list."

But the timing of the recalls likely will not hurt the toy industry, Kannan said.

"Consumers tend to forget," Kannan said. "If the recalls had been just before holiday season, they might have had a bigger impact."

Toy sales totaled $8 billion from January to June of this year, a 3 percent increase over the same period last year, according to a report from the research firm NPD Group. Retail toy sales for all of 2006 were over $22.3 billion, the report said.

The majority of the toy recalls took place about six months ago, Kannan said. When manufacturers own up to recalls, it gets "confidence back for the consumers, so overall you're not going to find much of an impact," he said.

One reaction consumers might have is to move away from giving toys, and instead buy books and other media such as CDs and DVDs, Kannan said.

"But toys are still one of the biggest sale items during the holiday season," he said.

Toys sold best in the fourth quarter of 2006, producing $10.6 billion in sales, helped by four "super-categories" that included youth electronics, vehicles, arts and crafts and infant/preschool. The super-categories combined generated over $9 billion in retail sales, the NPD Group said.

Dominant trends often make up for most of the toy sales and are pulled from a year's research on toys, said Toys R Us spokesman Bob Friedland.

"We're in the toy business 365 days a year, so we have the time and perspective" to see what customers really want, Friedland said.

This year, he said, "rock star" themed gifts and "Internet connectivity" toys will be two of the dominant toy trends.

Kids watch programs on television, but also turn to the Internet to watch clips, Kannan said.

"It's across-channel migration," he said. "It happens in respect to toys as well, and it's one way to jump on bandwagon of what kids are doing."

In the frenzy of shopping season, consumer groups still urge parents to be aware of recall notices, and toy stores are taking steps to be careful.

"Whenever there is a recall, of course we remove that product from our shelves, stop the sale, and if anyone attempts to purchase it, our register will not allow it," Friedland said.

In response to the sheer amount of recall reports, the Consumer Protection Division of the Attorney General's Office created a list of all the products on its Web site that is updated daily, Guillory said. Since Oct. 4, there have been 23 toy recall notices posted on the list.

"It's incumbent upon consumer protection groups like ours to make it as easy as possible when consumers are inundated with information like these recalls," she said. "Say you don't recall the name of the company. How are you supposed to get to their Web site?"

Consumers will look for alternative gifts on a very small scale, Kannan said, but substitutes for toys do not often sit well with kids.

"If people are looking for things younger children will like, there might be some level of kids getting books for presents," Kannan said. "But that may not go over very well with kids."

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