Holiday shopping is in full gear and retail sales comparisons over last year seem reasonably strong, but I’m not sure that means glad tidings for the toy industry.  There seems to be a lot of consumer electronics and winter clothing going out those retail doors.  Flat screen TV’s (seemingly the “gift du jour”) are very high ticket items which skew retail dollar volume higher, but probably mean less individual items purchased, thus creating the illusion of an overall strong sales season – when in fact it really means just a very strong sales season for Samsung, Sharp and Sony.

On a smaller scale, this phenomena directly affects the toy industry when you look at the number of Xbox’s sold.  If you’re a kid getting an Xbox and a couple of games to go with it, you’re not likely to be receiving a lot of other toys once you factor in clothes, that you really don’t want, and embarrassing seasonal sweaters.

As I gaze into my crystal ball (admittedly a very cloudy crystal ball), I see toy sales for the year being flat to slightly down.  With margins being tight due to oil and resin prices, transportation costs, etc. etc. etc.; it looks to be a difficult but not terrible year.

The toy industry, like everyone else, is going to have to wait for oil prices to come down before it can begin to breathe a little easier.  Once oil prices do ease, watch out for Walmart and its brethren trying to squeeze manufacturers and capture the cost differential for themselves: “You worked on smaller margins last year; you should be able to work on smaller margins now.”

In this month’s China Report, be sure to read Why China Stands to Grow Old Before It Grows Rich, a fascinating look at what population demographics may mean for China’s future that draws some surprising conclusions.  If you are interested in reading the whole report, The Graying of the Middle Kingdom, shoot us an e-mail and we will forward it to you.

Lastly, during the layoff years of late 2000 through early 2004 and the subsequent housing boom, a lot of people have either moved or moved on and we have lost track of them.  Our Missing Person’s page has typically averaged about ten people that we are trying to track down but has recently swelled to several dozen.  Please check the list as you run into people during the holiday season (or during that long January 2nd plane ride to Hong Kong) and let us know where to find them.  Toy companies are now in full hiring mode and we have lots of job opportunities.  What better gift to give to a friend or colleague than helping them take the next step in their career?

Seasons greetings to you and your families,

Tom Keoughan