3 reasons why holiday toy sales will be huge this year

The pandemic and its accompanying recession could make for a very Grinch-y holiday season, but toy makers and industry analysts say there are several reasons to still expect presents under the tree, despite all the turmoil.

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Chauncey Alcorn
, CNN Business
CNN — The pandemic and its accompanying recession could make for a very Grinch-y holiday season, but toy makers and industry analysts say there are several reasons to still expect presents under the tree, despite all the turmoil.

The pandemic has already been an unanticipated boon for toy makers as parents have hunkered down with children at home. Sales of Lego blocks, Barbie dolls, board games and puzzles have soared since the lockdown orders hit the US this spring.

The US toy industry grew 16% in the first six months of the year, according to the market research firm NPD Group, and the growth is expected to continue.

Parents feel guilty

For most of the year, children have been prevented from seeing their friends, playing in parks or having birthday parties, and analysts say parents will try to make it up to them during the holidays.

"When it comes time to the holidays, parents will cut back on themselves, but they won't cut back on their kids to make things as normal as possible," said Jim Silver, CEO and editor-in-chief of the toy industry review site Toys, Tots, Pets & More.

Last year, holiday retail sales grew by 3.7% compared with 2018, exceeding $1 trillion for the first time, according to a report from the market research firm eMarkerter. That report, released in February, predicted 2020 holiday sales would increase by about 14% to more than $156 billion.

That was before coronavirus spread throughout the country. Now, experts expect 2020 sales to match, or potentially exceed, last year's figures, despite unprecedented job losses.

Deals are everywhere

Retailers are extending by weeks or months the usually frenzied discount windows like Black Friday and Cyber Monday, giving shoppers more opportunities to find holiday deals.

"In an effort to cut down on crowds and the stampede mentality that single-day events such as Black Friday tend to invite, many retailers are putting emphasis on great deals all season, and the season has already begun," said James Zahn, senior editor of The Toy Insider and The Toy Book trade publications. "Overall, I'm optimistic that we'll likely see the year come out flat or slightly ahead."

Independent toy stores are following big retailers' lead, encouraging families who want to avoid potential crowds and missing out on sellout items to get an early start on holiday shopping.

It's easier than ever to shop online

With brick and mortar stores shuttered or limiting capacity, online shopping has become more mainstream than ever.

Silver anticipates more than 50% of this year's holiday toy purchases, even more than last year when Amazon, Walmart and Target enjoyed the bulk of ecommerce sales.

"You're going to see online sales reach a level that's never been seen in the toy industry," Silver said.

Curbside pickup sales have also skyrocketed for retailers such as Walmart and Target. BMO Capital Markets toy industry analyst Gerrick Johnson expects toy shoppers to take advantage of the ability to buy online and pick up items in person, which some customers think is faster than home delivery.

"People still want to go to the store, but they want to make sure their items are in stock," Johnson told CNN Business.

One potential hiccup for toy makers

Last year, "Frozen II" and "Star Wars: The Rise of Skywalker" hit theaters nationwide during the holiday season, fueling sales of related toys for kids who are fans of both franchises.

This year, studios have pushed back the release dates for blockbuster sequels like "Wonder Woman 1984, "Minions: Rise of Gru," and the Marvel Cinematic Universe's "Black Widow". But many analysts said they don't expect the lack of major films in theaters to damp toy sales too much.

"It's not going to be like last year, but there's still some carry over," Silver said.

For example, last year's hit "Avengers: Endgame" generated more than $1 billion action figure and other intellectual property sales.

"I think those Marvel characters are still going to do fairly well as there's no other new things to pull away from those classics," Johnson said.

In addition to Legos, dolls, playsets and Marvel-related products, the industry analysts say toys such as LOL Surprise! and Baby Yoda are expected to sell well this season.

"This year the number one action property is going to be Baby Yoda," Silver said.

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