February 16, 2010 in Business

Toys go high-tech, low cost

Industry taking a tip from success of Zhu Zhu Pets
Mae Anderson Associated Press
 

Robert Eckert, chief executive officer of Mattel Inc., holds the Fisher-Price iXL that he introduced during Toy Fair 2010 at New York’s Javits Center Monday. The iXL children’s interactive device is Eckert’s personal pick for the hottest toy of the 2010 holiday season.
(Full-size photo)(All photos)

NEW YORK – If the Zhu Zhu Pets taught a lesson, it’s that a bit of technology and a low price tag can go a long way. Toy makers are taking that experience to heart.

From a digital Scrabble game that checks the words to a hovering UFO, toy makers are amping up the tech quotient but not prices.

Zhu Zhu Pets, the furry mechanical hamsters that zoom around, were the runaway hit of the holiday season. One key to their success: a price tag under $10.

The American International Toy Fair, which began Sunday, is the annual event where toy makers show off new offerings that will make their way into next year’s stockings. The focus this year is on innovation and price. Few toys will retail for more than $100, and most will be priced below $30.

“There’s still going to be some hesitancy to raise prices too much,” said Needham & Co. analyst Sean McGowan. “Last year the feeling was under $30 is where you needed to be. This year there may be more willingness to be $30 to $50. But I don’t think we’ll see a wave of $300 stuffed horses again.”

The toy industry performed a bit better during the holidays than it did in 2008, but the season was far from a bonanza. The NPD Group, which does market research, said toy revenue was flat because of discounts during the fourth quarter, but the industry sold 4 percent more toys. For the year, sales edged down 1 percent to $21.47 billion.

Tough times can spawn creativity.

“I’ve seen some really innovative products,” said Jim Silver, an analyst at Timetoplaymag.com. He pointed to radio-control vehicles as combining innovation and low prices. One reason they’re cheap: The cars themselves have shrunk, Silver said.

“What the industry has learned is that kids don’t necessarily want ‘bigger.’ It’s about the features, not the size of the vehicles,” he said.

For $24.99, Mattel is offering tiny Hot Wheels radio-control Stealth Rides cars that fit in a case that doubles as the remote control. Spin Master has several radio-controlled offerings, including the Air Hogs Vectron Wave UFO flying saucer that can sense objects below it and hover above them. That also costs $24.99.

“Consumers like radio control, they just didn’t want to spend $70,” Silver said.

Prices have fallen as technology has advanced, much like the price drops in flat-screen TVs and laptops.

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