American consumers will be bearing the cost of
safer toys, but not until after this year's Christmas season.
Shoppers can expect price increases up to 10 percent next year
to pay for increased vigilance by toy makers and stores after more
than 3 million lead-tainted toys from China were recalled worldwide
since June. That means a $6.99 Barbie doll could go up to about
$7.70, or a $70 child friendly digital camera could retail next
year for almost $80
A 10 percent average increase would be the biggest one-time
price hike in toys in several years, analysts say. And it's more
than twice the government's measure of consumer inflation of 4.7
percent during the first seven months of this year.
Consumers could also see higher prices on other Chinese imports
like fish and children's apparel, but the big price gains in toys
could be more jolting.
Shoppers have become accustomed to cheap playthings from China
because Wal-Mart Stores Inc. and other discounters have waged
cost-cutting campaigns. Critics say real safeguards were sacrificed
to keep prices low, however.
Analysts said the price increases are unlikely to hit until at
least January because manufacturers and sellers already ordered the
toys for Christmas. That's no consolation for parents, though.
"I will pay more (for toys) because I know it will ensure
safety," said Lisa Sallese, a Wilton, Conn., mother of a
7-month-old boy and a 2-year-old daughter. "But it stinks. It
should have been safe to begin with."
Most of the rising costs come from emergency third-party testing
in the U.S. by both makers and sellers as they aim to root out any
unsafe products, analysts say.
Mattel Inc.'s three high profile recalls of lead painted toys
since the beginning of August have pushed product testing to a
frenzied pace. Companies are removing playthings from shelves and
sending them to independent laboratories to be examined. The price
of labor, overtime and testing will drive up costs in the short
term, analysts said, but increased regulation will likely keep them
higher.
The U.S. Toy Industry Association supports a federal requirement
to make safety testing and inspection mandatory and is working with
the American National Standards Institute to develop industrywide
safety procedures. But during Wednesday's Congressional hearing on
toy safety, senators urged even more stringent measures including
stepping up fines for selling or failing to report dangerous items.
This year, "both retailers and manufacturers will share the
costs," said Eric Johnson, professor of operations management at
Dartmouth's Tuck School of Business. "But in the longer term,
costs will have to go somewhere. And consumers will see it."
Johnson estimated toy prices will rise by 10 percent next year.
He said that the most vulnerable are mass-market toys including
die-cast vehicles which run the risk of containing lead.
Anita Frazier, toy analyst at market research firm NPD Group
Inc., added that higher prices will stick around because some toy
makers will shift a portion of their production from China to the
U.S. or Europe, where labor is more expensive.
This week, Toys "R" Us Inc., the nation's second-largest toy
seller behind Wal-Mart, said it would be using an independent
laboratory to test every branded product, according to Kathleen
Waugh, a company spokeswoman. The retailer will be absorbing the
extra costs this year, but Waugh said that she believes next year
"pricing could increase."
The Walt Disney Co. - hit by Mattel's recall of 436,000 cars
based on "Sarge," a character in the Disney-Pixar movie "Cars,"
that were believed to contain lead paint - will independently test
toys featuring its characters. The tests will begin in the next two
weeks and will include all categories of products from about 2,000
licensees, including Mattel, which is the largest maker of
Disney-related toys.
Disney consumer products spokesman Gary Foster said Disney will
absorb the additional costs which he estimated to be about several
million dollars this year. It's unclear whether future costs will
be shared by licensees, he said.
Price wars led by Wal-Mart have put financial pressure on toy
manufacturers, though they have been able to push through price
increases in recent years as they face higher resin and other
related costs. In particular, makers have been wrangling over
prices with their Chinese suppliers, which have struggled with
higher labor costs amid a shrinking pool of workers in the
country's southern region, according to Pat Furey, senior category
consultant at Ariba Inc., a global sourcing and procurement
management company.
NPD's Frazier also noted that average toy prices have been
creeping up because of the industry's increasing focus on
higher-priced electronic gadgets like child friendly digital
cameras and cellphones which retail for about $70.
The average toy price remains relatively cheap because the bulk
of toys sold involve $1 items such as cardgames and miniature cars
- impulse purchases that can be picked up in the local supermarket.
According to NPD, which tracks prices of specific toys and
categories, the average selling price of a toy increased to $7.53
in 2006, compared to $7.17 in 2005 and $6.97 in 2004.
Chris Byrne, a New York-based toy consultant, said shoppers can
still expect price wars this holiday season, led by Wal-Mart.
Some shoppers say they are postponing toy buying until they are
comfortable that the toys are safe.
"I am open to price increases as long as they are going to do
their job," said Jenny McMorow of Buffalo, N.Y."We've been
spoiled enough by the low prices."
For her twin sons' birthday next month, McMorow will be avoiding
traditional toys and looking at playswings or a sand box. "Nothing
they can chew on or swallow," she said.
(Copyright 2007 by The Associated Press. All Rights Reserved.)
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