Toy retailers vying for parents' dollars with low prices, innovation

NEW YORK - Santa's on a budget this year.

Toy retailers and makers plan to make the best of it by offering more deals and cut-price versions of more expensive toys that they hope will spur parents to spend even if they're scrimping elsewhere. Two influential lists of expected hot holiday toys show only one over US$100.

Parents are likely to keep shopping cautiously as they worry about job security, despite an uptick in home values and a rallying stock market.

"Price is more of a driving factor this year than it was before, and we will probably get our shopping done earlier so there are more choices," said Decatur, Ga., resident Ingrid Allstrom Anderson, 32, whose husband's engineering firm has been hurt by the long slowdown in construction.

BMO Capital Markets analyst Gerrick Johnson predicts toy sales will fall one per cent during the holiday quarter. They were $9.82 billion last year, according to data from research firm NPD Group Inc.

That's a smaller drop than the five per cent decline from a year ago, but still bad for a quarter when toy retailers make up to 40 per cent of their annual sales. Toy makers can make up to half.

"I think it's going to be weak, but I don't think it's going to be the disaster it was last year," Johnson said. "Parents have a better idea of what their budgets are at this point, so parents will scrimp elsewhere, not on kids."

One bright spot comes from an unlikely place: a small manufacturer's toy hamster that retails for $8 to $10 and could be the first true "must-have" toy - that is, a toy that sells out, is hard to find and appeals to both boys and girls - since Mattel's Fisher Price TMX Elmo in 2006.

Cepia Inc.'s Zhu Zhu Pet Hamsters squeak and move around, and they've been impossible to keep on shelves, Toys R Us and Wal-Mart Stores Inc. say.

Laura Phillips, Wal-Mart vice-president of toys, says the furor over the hamsters is similar to the craze she saw for the furry robot Furby in 1998 and the electronic pet Tamagotchi in 1997.

"As soon as we're getting them in, they're literally selling from boxes. It's hard to get them on shelves," Phillips said.

Retailers certainly see the toy business as full of potential this holiday.

Walmart is expanding a $10 toy promotion to 100 items, up from 10 last year. Toys R Us is opening 350 temporary stores in malls and inside Babies R Us stores in an effort to gain market share since the demise last year of KBToys, which was the largest mall-based toy seller in the U.S. Sears has also jumped into the fray with toy aisles in 20 locations.

"It's the year of competing for the consumers' dollar," said Laurie Schacht, president of The Toy Insider, a trade publication that puts together a list of toys expected to be hot for the holidays. None in its top 20 are over $100 this year. Last year there were several, including an interactive plush golden retriever.

Top toys for the season likely will be ones that "drive innovation through creativity, not necessarily technology," said Jim Silver, an analyst at Timetoplaymag.com, which put out its annual "Most Wanted" list Thursday. The only item on the list that tops $100 is the "The Beatles: Rock Band" video game, which costs up to $249.

Examples of that on the list includes Hasbro's Candy Land Sweet Celebration Game, which retails for $29.99 and allows players to change the lengths of paths to make the game last longer or shorter.