Supermarkets are doing a roaring trade in pocket money toys but are failing to make the most of the opportunity offered by bigger-ticket items.
The typical price paid for toys in the grocery channel is 40% lower than the market average, coming in at just £3.71 compared with the £6.31 typically paid across the toy market. Take the supermarkets out of the mix and the average price paid at the remaining retailers (including toy specialists, department stores and catalogues) rockets to £9.05 [NPD year-to-date August 2012].
The reason for the huge disparity is the supermarkets’ focus on very low-price products, and particularly blind-bagged collectible toys that typically sell for around the £1.99 mark. Toy market analysts NPD say two-thirds of the toys sold by supermarkets are priced below £2.49, and a whopping 87% retail for less than £5.
While supermarkets could develop their online offerings further to drive sales of more expensive products, a major opportunity in-store could be in shifting focus towards the gifting market, targeting shoppers looking to pick up presents for their child to take to a friend’s birthday party.
Wholesale prices 20 October 2012: dry ingredients
While the world’s attention focuses on rising grain prices, dry ingredients are now cheaper than this time last year as the bad harvests in 2011 are forgotten. At £3,504/t, hazelnuts are 33.5% cheaper year-on-year after an unusually small harvest in turkey last time sent prices soaring.
Low supplies coupled with high demand also forced cashew prices higher in 2011, leading to a sudden drop-off in demand. This has been slow to recover, leaving cashew prices 26.9% below 2011 levels and down 3.5% month-on-month.
Apricots also rose sharply after a poor harvest in 2010 and fears over the 2011 harvest, but have since become nearly 20% cheaper as an improved harvest is expected for this year, calming market jitters.
Meanwhile, honey - the only ingredient in our tracker to show a year-on-year increase, up 3.1% - has been moving up slightly, largely due to weather-related problems in many producing countries.
Presents for birthday parties are typically bought in the £5 to £9.99 price bracket, where supermarkets currently hold just 19% of the market by value compared with their 59% share of the £2.50 to £4.99 bracket. Among the products particularly suited to this market are single action figures - typically priced around £6.99 - and low price point fashion dolls.
Targeting gift shoppers would also reduce the risk of supermarket toy sales being hit by consumer cutbacks, says NPD analyst Frederique Tutt.
“While the under £5 price point can sound attractive, consumer spend on impulse and no-occasion purchases - the core of toy business for grocers - is the first budget to be cut, according to our consumer research,” she adds.
If a retailer could build itself a reputation and position as a destination for birthday present shopping, it would fill a gap left by the collapse of Woolworths in 2009, says NPD. “The birthday present market was Woolworths’ sweet spot,” adds Tutt. “No one has succeeded in taking its place, and the market has become fragmented since its collapse.”
In the meantime, and despite commodity cost hikes on plastics, the average price paid for a supermarket toy has fallen by 1% year-on-year - partly a result of the successful tactics employed by toy suppliers to mitigate cost increases.
“If manufacturers are forced to increase their retail price in order to maintain their margin, they tend to do it when they launch a new brand as it is much easier than with an existing brand,” says Tutt.