Economic woes both at home and abroad have North American retailers preparing for a lean holiday shopping season with the toy industry in particular expecting a weak year.
As a result, experts say, consumers might see less discounts than they are used to, and possibly, emptier store shelves as Christmas draws near.
"We are seeing very lean inventories. Most of the retailers (are) planning for lower levels down anywhere from five per cent to 10 per cent lower compared to last year," John Morris, a BMO research analyst specializing in apparel retail, said in a conference call earlier this week.
Surveys show that consumers in both Canada and the United States are conflicted about their financial situation – it's not as bad as the recession years of 2008 and 2009 but 2011 isn't exactly a good year, either.
Going into the holiday season, a Deloitte Canada survey says only 29 per cent of Canadians have a positive economic outlook, compared to 33 per cent with a negative outlook and the large remainder with only a neutral outlook.
Experts say Canadians' low confidence in the market suggests they are more concerned about paying down debt this holiday season than splurging on loved ones.
"Survey respondents told us that their highest priority is to pay off debt, although debt to income ratios continue to rise across the country and are now much higher than those of Americans who have focused on paying down their debt in the past couple of years," Deloitte Canada's Jean-Philippe Vorsanger said in a news release.
The survey said 50 per cent of Canadians plan to stick to a budget this holiday season, with a median expenditure of $477.
"As a result, retailers should anticipate low, single-digit growth over the holiday shopping season," Vorsanger said.
However, their American counterparts seem to be tiring of saving for a rainy day (or more realistically, paying down credit cards and other bad debts) and want to open their wallets a little bit.
"Americans are starting to buy more discretionary items reflecting pent-up demand so we might see a better holiday season for retails of non-essential products such as games," said Sal Guatieri, vice-president and senior economist with BMO Capital Markets.
Toys to get your hands on early
"If I had any bit of advice for toy shoppers this holiday season it would be to get out there early," BMO research analyst Gerrick Johnson said.
Johnson says that in 2010 the holiday toy shopping season got off to a hot start but tanked in December, leading many toy retailers to order less inventory this year.
"Nobody wants to get stuck with inventory that may not be sellable after December 26," he said.
Sales, if they do happen, are more likely to start when the shelves are full in November, while tailing off in December as a result.
Johnson also expects more retailers to focus on pop-up in-store promotions rather than sales advertised in advance through traditional media.
While there may not be a blockbuster toy of "Tickle me Elmo" proportions this season, there are still some toys more likely to fly off the shelves a bit earlier than others.
The Xia-Xia Hermit Crabs, a chic robotic pet toy aimed at young girls and Hasbro's Beyblades, a spinning top toy for boys based on a anime show, are expected to be the big sellers.
Analysts also expect the two old-school titans of the toy industry – Mattel's Barbie series and Lego – to have solid years.
The toy industry is generally considered to be "recession resistant" but that doesn't mean it doesn't have bad years – which 2011 appears to be.
"In 2011, we're expecting a flat overall growth given that we're seeing about five percent price inflation in toys (and) our flat estimate implies about a five percent decline in units purchased," Johnson said.
"That's about as weak as it gets for the toy category."
