By all accounts, both Black Friday and Cyber Monday were resounding successes. Overall sales clocked in at $52.4 billion during the four days of Thanksgiving, Thursday to Sunday, which is up 16per cent from 2010. Included in these numbers are online sales which grew even more sharply – up 20per cent to $2.3 billion. Online sales hence captured a 4.43per cent slice of the total, up from 3.73per cent a year earlier. Cyber Monday was even more successful for the online segment – up 22per cent to $1.3 billion.
This is how online sales developed: See Graph 1
While we cannot break out toy online sales from these totals, national toy buyers tell me that their online sales during the five days were inordinately brisk and represented something like ten percent of their twotal sales. Overall, including brick and mortar, toy sales increased this five day period over last year by an approximate 6per cent.
Interestingly, the peak onsite traffic [in page views] for the five top brick-and-mortar retailers was not on Cyber Monday but in fact on the day after Thanksgiving, the Friday, and Wal-Mart clearly did best by far: See Graph 2
A similar picture emerges for Amazon which I show below in comparison to Wal-Mart: See Graph 3
In terms of the major manufacturers, this is the picture: See Graph 4
Again here, we see the real peak on Thanksgiving Friday. Mattel is the clear winner, followed by LeapFrog [whose LeapPad Explorer was a sensational seller]. Hasbro, long a contender for the top spot, fell to a pretty distant third.
The same buyers have said for the past couple of months that they expect fourth quarter toy sales to be in negative territory – 4per cent down for brick-and-mortar and 15per cent up for online, or down overall by 2.5per cent. And, according to the Washington Post of November 27, “retailers aren’t adjusting projections for overall holiday sales—which are still expected to experience meagre (not robust) growth this year in spite strong early season sales numbers”. My friendly national buyers at the large retailers confirm this.
Also, recent consumer rersearch suggests that the consumers will not prove them wrong. According to a new Bankrate poll 42per cent of Americans (including 49per cent of parents) intend to spend less than last year on holiday purchases, while only 10per cent plan on spending more.
So, how does this square with the very good Black Friday/Cyber Monday sales picture?
Firstly, let us look at what happened in the two leading mass retailers, Wal-Mart and Target, as far as their toy space allocation is concerned. Space is allocated by the management of these two retailers on the basis of sales expectation – if they think that toys are really hot stuff, toys get more footage. This is how toy space overall developed over the past few years: See Graph 5
This graph tells us that Wal-Mart ramped up its toy space in the last quarter last year, sharply scaled back in January, and then pretty consistently expanded it again to end up in a very sharp spike before the Black Friday weekend – and then they took most of it back again. Target, on the other hand, kept its toy space virtually unchanged since beginning of last year and this includes this Black Friday weekend.
So what exactly took place in the case of Wal-Mart? What my retailer panel tells me is that Wal-Mart devoted virtually all of its pre-Black Friday spike to specials and this virtually all on aisle caps and end caps – Wal-Mart’s own private label products, products for which Wal-Mart is the exclusive retailer, and one-time door buster specials. Once they were sold, these end caps came down again. In other words, the regular toy brands got virtually none of this one-time space.
Overlaying the graph above with what happened with two major toy categories – Fashion Dolls and Action Figures – tells the story: See Graph 6
In other words, both categories stayed virtually unchanged and did not benefit from Wal-Mart’s toy space spike.
And this is what happened to most toy brands – they did not get more shelf space and their sales did not massively accelerate during the Black Friday four day weekend.
There was a major piece of good news just now – the consumer confidence index moved sharply upwards at the end of November: See Graph 7
While this does normally presage an uptick in economic activity, this latest move reminds me of a very similar move in consumer confidence a year ago.
We then had just like this year a clear upwards move in consumer confidence and a very strong Black Friday four day weekend followed by a strong Cyber Monday. And the toy manufacturers thought that all their problems were over. Unfortunately, for the following two weeks or so, the consumers stayed away in droves. It was so quiet in the toy aisles, it was scary. Then, around middle of December, the laggards finally came back into the stores to get something, anything, for Christmas. The end effect was a disappointing December and a really huge toy inventory overhang at the end of the year.
The buyers still expect a repeat of 2010 with one big difference, though. The buyers have been under terrific pressure since middle of this year to keep inventories lean so as to avoid the inventory glut on December 31. And so their very modest expectations for fourth quarter could become a self-fulfilling prophecy and the situation of 2009 could recur when toy shelves were pretty bare from about middle of December onwards. Yes, the major manufacturers have stockpiled some inventory in their warehouses just in case this might occur but whatever they have tucked away is unlikely to be enough to turn a minus 2per cent figure into a plus 2per cent figure.
In summary, while the prospect is definitely not one of a bust, lean inventories will in all likelihood prevent a positive growth figure this year.
About Lutz Muller
Lutz Muller is a market researcher whose main clientele is Hedge Funds as well as big banks. His data is derived from three main sources: An exclusive US retailer panel, national buyers at the large toy retailers both in the US and in Europe and manufacturers in China who are suppliers to the large toy companies in the United States. For more info go to: