Few businesses are more seasonal than toy firms.
Franklin Pierce Adams said that Christmas is over and Business is Business and it's true that for many businesses Christmas is the most important time of the year. Indeed, it's not unusual for some firms to make over half their annual sales in the month before Christmas and if you're in the Santa Claus business it's the one time of the year when you get to work lots of overtime!
But Christmas is also a great time for the advertising industry thanks to the traditional pre- bombardment of Christmas toy marketing that aims to harness children's "pester power" to make parents feel guilty if they don't but the toys which their children are demanding.
Christmas – A Potential Budget And Home Wrecker
For many people Christmas can be a difficult time because it places tremendous strains upon the household budget, although they are often reluctant to admit so to anyone else. Far too many people spend money they really can't afford because of a combination of pester power, tradition and their desire to keep up with the proverbial Joneses who are almost certainly equally stretched.
It's no surprise that divorce lawyers' busiest time of the year is that following the Christmas and New Year holiday which exacerbates existing tensions by putting family members into much closer proximity with each other than at any other time during the year.
One aspect where commercial Christmas causes some people to dig themselves into a financial hole is shopping for toys, thanks to the one of peculiarities of the toy business, the "must-have" Christmas toy. The Christmas must-have toy causes many parents to pay staggering amounts for toys which will probably be stuffed in the back of the cupboard by the end of January (anyone seen a Furby or Teenage Mutant Ninja Turtle recently?).
I Want My Hamster
A few months ago the must-have toys were going to be the Waybuloos, the new Teletubbies, but fashion is fickle and the must-have toy for this Christmas, both here and in the USA, is probably going to be the Go Go Hamster. Mr. Squiggles and friends were going for £10 each back in August and you might be able to find some in the shops at that price but they're currently selling online for upwards of £40. Expect to see stories soon about parents fighting in the aisles over the last hamster.
Don't be surprised to see Go Go Hamsters selling on eBay for over £100 in mid-December and £20 in mid-January (entrepreneurial fools may already be thinking about stockpiling Go Go Hamsters for resale).
The Manufactured Shortage
The toy business depends upon pre-Christmas sales for much of its annual turnover but it then has to cope with a severe seasonal slump in the New Year as shoppers cut back on buying toys. In order to smooth out sales the toy industry in the last few decades has developed the method of over-advertising and under-producing in the run up to Christmas. The result is that many parents are unable to buy the toys which their children are demanding so they end up buying other toys for Christmas presents and must also promise to buy the demanded toys in the New Year.
A good example of over-advertise and under-produce was seen in 1983 where the manufacturer of the Cabbage Patch Kids was hit with a false-advertising charge for harassing children by advertising toys which they had no chance of supplying before Christmas.
Nowadays toy shortages are likely to be exacerbated by the recession because retailers have become wary of holding too much stock, particularly of toys which turned out to be not so hot, so when the must-have toy phenomenon hits the shortages will become even greater.
This creates a positive feedback cycle; stories about massive queues, parents fighting in the aisles and toys selling on eBay for multiples of their original price will create even more publicity which in turn fuels demand to the point where many parents become largely insensitive to the price; they must have the toy at whatever price and consequently budgets are wrecked.
You can see an example in this Canadian TV report from 1983 which shows parents literally fighting to get the must-have toys.
Enjoy Christmas, but remember that it has the potential to be a budget wrecker that leaves you with a financial hangover!
P.S. In case you were wondering about investing in the firm which makes the Go Go Hamsters, you can't as they are made by a private company called Cepia which is based in St. Louis, Missouri.
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