By Gary Symons
TLL Editor in Chief
A report from NPD Group shows growth in the North American toy sector has stalled, after two record breaking years.
“After three record-breaking years for the toy industry, 2022 was a challenging year. U.S. consumers were forced to endure significant economic headwinds stemming from inflation and adverse macroeconomic factors,” said Juli Lennett, vice president and toy industry advisor, The NPD Group. “While these headwinds certainly impacted overall consumer behavior, the toy industry still managed to finish the year on a positive note as spending kept pace with the previous high-water mark of 2021.”
The US market declined slightly in overall revenue for 2022, while Canada managed to attain minor growth year over year.
Drawn from retail sales figures, the NPD data shows that US toy revenue dropped by 0.2% for the year, a decrease of roughly $49 million.
Diving into the details, NPD found the decline was driven by a 4% decrease in unit sales. On the positive side, the average price of $12.68 was 3% higher than in 2022, but as toy manufacturers and retailers also face the impact of inflation, the benefit of a gain in unit price is dampened by higher costs.
It’s also worth noting that 2022 started out stronger than it finished, and the current momentum is toward lower sales revenues.
In Q4, the toy industry saw both dollar sales and unit sales figures down 5% over 2021; a critical factor given the importance of sales over the holidays.
While North American sales were flat overall, the Canadian market outpaced sales in the US as our northern neighbor ended the year with a 1% increase to $2.39 billion.
“2022 was another banner year for the Canadian toy industry. After three years of record-breaking growth, and despite significant economic challenges, Canadian consumers once again demonstrated how much they value the toy industry,” said Jeff Bowes, toy industry analyst, The NPD Group.
In the great white north, unit sales were down by 4%, almost exactly the same as in the US, but the average selling price increased to $19,06, an increase of 5% from 2021.
There is good news for the US toy industry, however, as this flat lining of revenue comes after two record-breaking years. US growth was pegged at 9% in 2021 and 19% in 2020, so the overall Compound Annual Growth Rate came in at an impressive 9% for the past three years. Analysts point out that it would be unreasonable to expect that level of growth to continue forever, particularly when the market is beset by high inflation rates and the threat of a possible recession.
The NPD research also uncovered those categories that grew and those that declined over the past year, and let’s just say, if you’re working at Jazwares, the news is good for your Squishmallows as the plush category grew by 31% over the past year, and wth a CAGR of 23% over 2019.
The next highest levels of growth were seen among ‘explorative’ toys with 16% growth YoY and 22% CAGR, while building sets continued to perform strongly with 8% YoY and a CAGR of 16%.
One category that really suffered over the past year was outdoor and sports toys, which saw revenues fall by 11% YoY, although its CAGR over the past three years remained robust at 8%. The other was the dolls category, which fell 12% YoY, causing its three-year CAGR to fall to zero.
Collectively, those two categories have a bigger impact on the toy industry as a whole, as outdoor and sports toys is the largest segment by revenue, while dolls places fourth.
The top toy properties of 2022 included Pokémon, Barbie, Marvel, Star Wars, Squishmallows, Fisher-Price, Hot Wheels, L.O.L. Surprise!, LEGO Star Wars, and Melissa & Doug. These top ten properties collectively grew 7%, while the rest of the market declined by 2%.
Finally, NPD also looked at the prospects for 2023, and warned that inflation and economic uncertainty could drag down toy sales, despite the boost from a robust film release schedule for this year.
“Like last year, 2023 will bring about bright moments and deep groans. With a more significant theatrical calendar this year compared to the last three years, the U.S. toy industry will be poised to enjoy the fruits of several tentpole movies,” said Lennett. “However, if inflation and other adverse macroeconomic factors linger later in the year, or become worse, we can expect to see families pulling back on the number of toys they purchase or trading down to lower price points.”