November and December traditionally account for 40% of annual toy industry sales in Canada. So what happens in 2020 when the industry is already up 15% over last year through the end of October? Can that momentum be maintained? Even if the last two months are flat to last year, the industry will end up 9% higher than in 2019. Similarly, the video game industry is up 23% YTD, even before the launch of two highly anticipated console platforms in November, namely PlayStation 5 and Xbox Series X. How much higher can this growth go?
Staying Home, Staying Safe, and Staying Entertained
After a sluggish start to the year in January and February, toy sales from March onward have consistently far exceeded same month sales in 2019. Consumers looked to entertain their children and themselves at home, without other entertainment sources and travel competing for this share of household budget. Of the 95 product classes that we track, over 60% were up by more than 10% from 2019, and 10 were up by more than 50%. The largest class tracked by NPD, standard building sets, is up 18% from 2019.
9 classes have already surpassed their 2019 total volume. Some of the classes performing ahead of last year include playground equipment, water/sand toys, pools, adult puzzles, water blasters and educational toys. Looking across these classes, it is evident that many have to do with keeping children entertained over the summer months as many facilities and programs across the country were closed. During this period of widespread lockdown, consumers also invested in creating fun, safe play environments for their children at home. Educational toys also experienced strong growth in 2020 as home schooling became part of the new normal for many families.
Online Shopping Drives Average Price Growth
One other consistent trend throughout 2020 has been the increase in average price, up 16% over 2019. Much of this has to do with the types of toys being sold, such as outdoor and sports toys. The fashion doll business is up substantially over last year, with huge gains in perennial best seller Barbie, as well as new higher priced entrants driving sales and pricing increases. The increase in online shopping during lockdown also supports higher price points. Consumers are both looking to make sure they hit free shipping thresholds, and they are also less likely to purchase those little impulse items that provide a temptation at retail checkout. Typically, higher priced toys have stronger sales in November and December as they are purchased as gift items, so it is likely that this increase in price points will continue through the balance of the year. This is even more likely now with brick & mortar store closures in place in select regions of Canada.
There has been much speculation regarding the impact that the lack of theatrical releases in 2020 would have on the toy industry, as licensed toys tied to movie releases is typically a key component of toy sales. Somewhat surprisingly, overall licensed products continue to represent about ¼ of all toy sales. Even toy sales tied to theatrical releases have remained flat, although the key movie properties are from late 2019 releases, primarily Star Wars and Disney Frozen 2.
Video Games Provide a Way to Connect with Friends and Family
At the start of 2020, the expectation was that the video game industry would decline this year, which is anticipated in years of hardware transition. January and February were in fact down from last year as expected. However, once March hit and the lockdown took place across the country, sales of all video game consoles exploded. Playing online provided a great way to stay connected with family and friends, and gaming permitted parents to stay involved with their children within their own household. Nintendo Switch, which launched in March 2017, has sold more units already this year, with two months to go, than in any year since launch. PlayStation 4 and Xbox One, which were expected to fall off substantially this year in advance of the much anticipated launches of PlayStation 5 and Xbox One X, have each sold more units of hardware through the end of October than in the same time period in 2019. Software and Accessories have also grown significantly, with controllers and headsets driving accessories growth to accommodate more players as well as online play.
Will the tremendous growth in video games and toys continue through the rest of 2020? For video games, the answer is yes, driven by the launch of the two new hardware systems in November. As well, Nintendo Switch does not show any sign of slowing, and provides a great opportunity for family play.
The toy industry is more complex. As we know, families are being encouraged not to gather over the holidays outside of their immediate family. As a result, we may see consumers pull back on buying gifts for extended family. Another factor to consider is whether or not the supply chain will be able to cope with potential record demand for online sales, particularly with Black Friday being primarily an online event. Will lower priced and impulse purchases be hard hit yet again by shoppers avoiding visiting stores due to closures or fears of rising COVID-19 cases? Will those critical two weeks prior to Christmas when consumers traditionally finish their shopping be negatively impacted by store closures and stock issues? These are just a few of the questions that retailers everywhere are asking themselves as we head into the most important selling period of the year.
One thing that is consistent from year to year is that families put their children first. To whatever degree they can afford it with uncertainty and job losses due to the pandemic, households have always shown that they will put gifts for children as a top priority at this time of year. Of all of the uncertainty that has occurred in 2020, this is one fact that remains unchanged.