Recall Repercussions: Hot Toys will be Even Hotter this Holiday Season

West Chester, PA — September 11, 2007 — Parents have been waiting in line for the "must-have" gifts for years (remember Cabbage Patch Dolls?), but this year consumers should expect even more out-of-stock toys, frazzled parents and disappointed children than ever. Although customers are likely to blame the store for being out of a hot toy, the reality is the supplier is the one who is out.

Jane Hoffer, president and CEO of Prescient Applied Intelligence Inc., a supplier of advanced commerce and supply chain solutions, gives some insight into why certain toys will be flying off the shelves faster this year: "Because of the recent recalls on toys and scrutiny of imported toy products, concerned parents who want to stay away from toys with paint and magnets will be looking more toward stuffed toys and dolls, ever-popular electronics and board games."

Toy sales have been on the rise, creating a greater demand for toys in general. According to the Toy Industry Association, the toy industry as a whole showed an increase in sales for the first time in years, bringing in $22.3 billion in sales last year, a 0.3 percent increase from 2005.

Out of Stocks = Out of Presents

Once a toy becomes out of stock, stores usually will not receive a new shipment before the holiday season is over. The lead times needed make it almost impossible. "Without visibility into consumer demand, suppliers won't be able to forecast properly for the holiday season. That means there won't be enough products on the shelves," Hoffer said.

That usually means no matter how many sales associates with whom you beg and plead, if the store is out of that must-have toy, you're out of luck. By the time the reorder is processed and fulfilled, Santa's sleigh will probably be back in the garage for another year.

Take a look at the rush for T.M.X. Elmo in 2006. The lack of Elmos on the shelves created a buying frenzy among shoppers trying to acquire this sought-after toy. Some of those lucky enough to snag one took advantage of the vacuum by selling the stuffed toy on eBay for more than three times the retail price. Those not willing (or able) to pay the high prices were left with disappointed children when they saw no Elmo under the tree.

Consumers may wonder what can be done to prevent stores from running out of key products during the holiday gift rush. While it may already be too late for the 2007 season, Hoffer suggests that both suppliers and retailers should prepare for the future and take a closer look at consumer demand, which can be exacerbated by unexpected events like recalls.

"Really, it comes down to being a demand-driven enterprise. Retailers need to work with their suppliers to provide an accurate view of consumer demand so that suppliers have the data necessary to have enough of the right toys to stores in time for the holiday season," Hoffer said.

Accurately forecasting consumer demand is difficult enough for existing toys, let alone brand new ones. But there is software available that provides visibility into historical product movement and category trends so toy manufacturers can use that insight to better plan for the amount of products that need to be manufactured and shipped to stores.

An analysis tool is also helpful for the introduction of new toy products by comparing historical movement of similar products to forecast the demand for a new product. Going back to T.M.X. Elmo, using an analysis tool, Mattel could have used the demand data from the wildly popular Tickle Me Elmo to predict sales and create orders for the new T.M.X. Elmo toy.

Still, it may not have been enough. Once a toy becomes "hot," it can break through even the strongest demand planning applications and be out of stock. "Sometimes being out of stock is what makes a toy hot in the first place," adds Hoffer.

2007's Hottest Toys

As for the toys expected to create shopping headaches, Hoffer predicts youth electronics to rule this holiday season: "Toy manufacturers are giving everything a high-tech twist this year. Familiar favorites will have new, interactive features, and plug-and-play technology will prove to be big in 2007's hot games. Also, expect anything robotic to fly out the door, especially following the huge popularity of the Transformers film this summer."

Some of the biggest toys for this holiday season are expected to be Webkinz, stuffed toys that come with a code for kids to log on to a Web site and play with their pet in an interactive world; Pleo, a baby dinosaur robot similar to a Furby; Transformers Optimus Prime Voice Changer Helmet, which makes kids' voices sound like a robot; PlajaPets, stuffed animals with interchangeable heads and tails; Smart Cycle, a plug-and-play interactive learning toy for tots; Chat Diva Barbie, which talks into a cell phone; Harry Potter and the Order of the Phoenix video games and toys; T.M.X. Ernie and Cookie Monster dolls; and anything and everything from the Disney hits High School Musical, Cheetah Girls and Hannah Montana.

Hoffer should know. Besides being president and CEO of a supply chain company, she is a mother of three young children.

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