Toy Sales to Escape Downturn in Otherwise Bleak Holiday Sales Season

13-Nov-2008 1:45 PM EST

University of Alabama

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    Credit: The University of Alabama

    Concept Photo: Bleak Holiday Sales

Newswise — Most experts predict the upcoming holiday season for retailers will be the worst since the recession in the early 1980s when the nation was hit by increased bankruptcies, agricultural exports plummeted, crop prices fell, interest rates increased, and the federal budget deficit jumped.

Even so, said Dr. Kristy Reynolds, Bruno Associate Professor of Marketing at The University of Alabama Culverhouse College of Commerce, kids need not worry, at least not as much as mom and dad. "Toy sales will be okay or at least not as hard hit. Toy sales are usually resistant to economic downturns because parents are reluctant to cut back," Reynolds said.

As might be expected, overall holiday sales are already sagging badly, except at Wal-Mart, Costco and a few other big retailers. And, Reynolds said, "There are signs that Wal-Mart has reported that don't bode well for this holiday season. That's important because Wal-Mart is often an indicator of the economy and consumer behavior, and Wal-Mart has reported that it has spotted some negative trends."

For example, she said, more families are buying baby formula at the beginning of the month, and there has been a decline in credit card use.

"Wal-Mart executives say they believe that, one, people have maxed out their credit cards, and, two, people really have to make hard choices in how they spend their money," Reynolds said.

Reynolds said other signs of tough retail times include a double-digit increase in purchases of private label " read less expensive " goods, and an increase in the purchase of stables over discretionary items.

"And there was a recent report that many Americans are cutting back on their prescription drug purchases," Reynolds said.

Reynolds said she expects to see declines in product areas in which consumers can delay purchases, such as some appliances and clothing.

Retailers are already holding holiday sales and deep discounts, but Reynolds said even those tactics and lower gas prices have not been enough to lure shoppers back into the stores. Some companies are launching "value" campaigns, stressing, for instance, that the most economical clothing is clothing that lasts, she said.

The ubiquitous gift cards will remain popular, but Reynolds said she expects their growth to slow some, except, maybe, for gas cards. "Shoppers may get better value by buying merchandise instead of a $50 gift card," Reynolds said, "if a $50 gift is marked down to $25."

And while gas prices have dropped, Reynolds said there will still be a segment of shoppers who will do all or most of their holiday shopping online. "This year, good deals and free shipping will be more important," she said.

And of course, no matter how bad things get, the holidays are not complete without Elmo, especially the new Elmo Live, which sells for about $60 and is drawing good reviews.

And, Reynolds noted, Hannah Montana and High School Musical items will be popular with the kids, along with WiiFit, MP3 players and GPS systems for the older folks.

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