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Hottest Holiday Toys 2016

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Hottest Holiday Toys 2016 DECEMBER 9, 2016 1) The toys and traditional games market is showing strong growth. Between January and September 2016, this market DEEP DIVE: grew by 6% in the US, according to NPD, and it forecasts 6.5% growth for 2016—which suggests year-over-year Hottest growth should accelerate in the final quarter. In the UK, the market grew by 5% in the same period. 2) In 2015, US consumers spent about $25 billion on toys and Holiday Toys traditional games, up 6.7% year over year. This compares to British shoppers who spent about £3.2 billion ($4.9 billion), 2016 up 5.9% year over year. 3) Sales of connected toys in the US saw 96% growth in the 12 months ended September 30, 2016. 4) Among toys based on licensed property, entertainment and characters comprised the largest category, accounting for 74% of total sales in 2014. DEBORAH WEINSWIG Managing Director, Fung Global Retail & Technology [email protected] US: 646.839.7017 HK: 852.6119.1779 CN: 86.186.1420.3016 DEBORAH WEINSWIG, MANAGING DIRECTOR, FUNG GLOBAL RETAIL & TECHNOLOGY 1 [email protected] US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2016 The Fung Group. All rights reserved. DECEMBER 9, 2016 TABLE OF CONTENTS EXECUTIVE SUMMARY .................................................................................................................................. 3 INTRODUCTION ............................................................................................................................................ 4 THE TOY STORY ....................................................................................................................................... 4 THEMES THAT WILL INFLUENCE TOY GIFTING ............................................................................................... 5 1. SMART AND CONNECTED PLAY ............................................................................................................ 6 2. FILM FRANCHISES CONTINUE TO RULE ................................................................................................. 7 3. ACTIVE LIVING AND FITNESS TREND TO INFLUENCE CHOICE OF TOY PURCHASES ................................... 9 4. MINI TOY COLLECTIBLES ....................................................................................................................... 9 5. FURRY PET TOYS .................................................................................................................................. 9 WHAT WE HAVE SEEN FROM RETAILERS THIS YEAR ..................................................................................... 10 OUR TOP TOY PICKS ..................................................................................................................................... 11 APPENDIX .................................................................................................................................................... 12 DEBORAH WEINSWIG, MANAGING DIRECTOR, FUNG GLOBAL RETAIL & TECHNOLOGY 2 [email protected] US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2016 The Fung Group. All rights reserved. DECEMBER 9, 2016 EXECUTIVE SUMMARY In this report, we focus on the toy industry in the US and the UK, and look at some of the latest trends that we expect to influence holiday toy-gifting. The toys and traditional games market is showing strong growth. In the first nine months of 2016, this market grew by 6% in the US, according to market-research firm The NPD Group, and it forecasts total growth of 6.5% for 2016—which suggests year-over-year growth should accelerate in the final quarter. The UK saw the market grow by 5% year over year in the same period. In 2015, US consumers spent about $25 billion on toys and traditional games, up 6.7% year over year, according to NPD. This compares to British shoppers who spent about £3.2 billion ($4.9 billion), up 5.9% year over year. According to NPD, sales of connected toys—those that can connect to another device and learn a child’s preferences—saw 96% growth in the US in the 12 months ended September 30, 2016. Among toys based on licensed property, entertainment and characters comprised the largest category, accounting for 74% of total sales in 2014, according to the International Licensing Industry Merchandisers’ Association (LIMA). We believe the following five themes will reflect holiday toy purchases this season: 1) Smart and connected play 2) Film franchises continue to rule 3) Active living and fitness trend to influence choice of toy purchases 4) Mini toy collectibles 5) Furry pet toys Based on our research and the frequency of appearances in various retailers’ lists, we offer our picks for toys we think will be the most popular during the 2016 holiday period: InDividual toys: Source: Amazon 1) Hatchimals 2) Pie Face 3) Fisher-Price Code-A-Pillar 4) Trolls Hug Time Poppy Doll Franchise/play sets/toy range: 1) Star Wars products 2) Lego sets 3) Disney toys 4) Shopkins collectibles 5) The Nerf range Source: Target DEBORAH WEINSWIG, MANAGING DIRECTOR, FUNG GLOBAL RETAIL & TECHNOLOGY 3 [email protected] US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2016 The Fung Group. All rights reserved. DECEMBER 9, 2016 INTRODUCTION “A pair of hop-along boots and a pistol that shoots is the wish of Barney and Ben, Dolls that will talk and will go for a walk is the hope of Janice and Jen,” – Meredith Wilson It’s Beginning to Look a Lot Like Christmas, 1951 2015 revenues for the US toy Little did Wilson know that simple toys would get a high-tech makeover market totalled about $25 over the next half a century or so. And that “Mom and Dad (may not) hardly billion. wait for school to start again”, as these high-tech toys can even impart education and teach skills to children while they play. Toys and games are a major element of holiday-season gifting. In this report, we focus on the US and the UK, looking at the scale of the toy industry, consider some of the latest trends that are driving sales and could influence holiday toy-gifting, and run down a list of the top toys for the season provided by various retailers and toy retailer associations. The Toy Story The toys and games markets in the US and the UK are not just very large, they are growing quickly, too. NPD forecasts this market will grow by 6.5% in the US in 2016. It has already grown 6% between January and September 2016—suggesting growth should accelerate in the final quarter. During this period, games and puzzles saw the highest growth (+16%), followed by action figures and accessories (+12%) and dolls (+12%). Figure 1. US: Sales Growth by Toys and Games Subcategories, Jan–Sep, 2016 16% 12% 12% 9% 5% 3% 1% -2% -1% -1% -9% In the UK, toy unit sales are expected to exceed 400 million units. Source: The NPD Group/Retail Tracking Service In the UK, the toys and games market grew by 5% in the first nine months of 2016, according to NPD. The fastest-growing UK category during this period was games and puzzles (+15%), followed by soft toys (+12%) and dolls DEBORAH WEINSWIG, MANAGING DIRECTOR, FUNG GLOBAL RETAIL & TECHNOLOGY 4 [email protected] US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2016 The Fung Group. All rights reserved. DECEMBER 9, 2016 (+9%). The group forecasts UK toy sales will exceed 400 million units this year, with almost one-third of the expected £3.3 billion ($5.0 billion) 2016 revenue to be recorded during the holiday season. NPD expects shoppers to spend an average of £105 ($131) per child during the festive period. In 2015, US consumers spent about $25 billion on toys and traditional games, up a solid 6.7% year over year, according to NPD. This compares to British shoppers who spent about £3.2 billion ($4.9 billion), with sales up a robust 5.9% year over year. Together, these two countries represented over 40% of the global toys and games market in 2015, we estimate from NPD data. Figure 2. Estimated Global Toys and Traditional Games Market, 2015 (USD Bil.) $25.0 $57.9 $4.9 US UK Rest of the World Source: The NPD Group/Fung Global Retail & Technology THEMES THAT WILL INFLUENCE TOY GIFTING Games and toys may be produced for and marketed to children and youth primarily, but parents are the decision-makers for the most part. Their beliefs and opinions greatly influence the choice of toys and games they buy for their children. We believe the following five themes will impact holiday toy purchases this season: 1) Smart and connected play 2) Film franchises continue to rule 3) Active living and fitness trend to influence choice of toy purchases 4) Mini toy collectibles 5) Furry pet toys We discuss these themes below, with a focus on the first two: the first Source: Amazon (smart and connected play) is new and growing quickly; and the second (film franchises continue to rule) is substantial in size. DEBORAH WEINSWIG, MANAGING DIRECTOR, FUNG GLOBAL RETAIL & TECHNOLOGY 5 [email protected] US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2016 The Fung Group. All rights reserved. DECEMBER 9, 2016 1. Smart anD ConnecteD Play Smart and connected toys—those that can connect to another device and VC funding in connected toys learn the child’s preferences—are quickly gaining traction. Sales of rose from $6.6 million in 2011 connected toys saw 96% growth in the US, in the 12 months ended to $104.3 million in 2015. September 30, 2016, according to NPD. This category has been invoking interest from parents and investors alike. AngelList—a
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