Christmas 2009 was coming, but Lionel headquarters wasn’t sure how much Santa would be bringing. They’d just cut the ribbon on the model-train company’s first retail shop in New York’s Rockefeller Center. Behind the plate-glass windows employees had built a 1:48 scale city, complete with Christmas trees, piled-up snow and, of course, model trains (going so far as to include a New York City subway among them.) The location was unbeatable, but Lionel had done no advertising. After all, the recession was in full effect. Execs hoped the locomotives would stoke interest in the 109-year-old brand, and maybe help sell some of
Lionel’s new, lower-priced train sets aimed at toddlers and pre-schoolers.
But as things turned out, Lionel’s train was an express. Shoppers came in droves, snapping up not only the $60 and $230 starter layouts, but just about everything else from box cars to track sets. Even the prized CC2 locomotive (a 16-wheeled monster priced at $1,800) flew off the shelves.
But what about that recession? Lionels’ management could draw but one conclusion: Consumers may still be pinching pennies, but when it comes to their kids, the wallets still come out. “Lionel trains are a big-box gift—and they’re not cheap,” says William Finkel, Lionel’s manager of business affairs. “But they’re still not a flat-screen TV or a videogame system. It’s a toy for the whole family, and it’s [a gift that’s] still going to be around decades from now.”
Finkel’s not the only marketer in a position to be optimistic. Indeed, despite the enduring effects of a recession that’s supposedly over, parents are still shelling out money on their children despite double-digit unemployment and ongoing mortgage defaults. And that’s good news for any brand that makes toys, clothes, candy, or just about anything else an American kid could want. According to the Winter 2010 Cassandra Report, while 71 percent of parents say they have been personally affected by the recession, 90 percent of them say they’re spending less on themselves so they can spend more on their offspring.
“You feel less guilty when you’re buying for your kids,” explains Melissa Lavigne, director of trend consulting for Creative Artists Agency’s Intelligence Group, the authors of the study. “If I splurge on myself during this time, it almost feels immoral. But if it’s for my kids, it seems more reasonable.”
It certainly seems to be a trend, at least. When the economic upheaval shook the country in 2008, American families pulled the purse strings tight, spending an average 4.3 percent less over the prior year on apparel, shoes and accessories, according to the U.S. Labor Department’s Consumer Expenditure Survey released last fall. But that reduction didn’t significantly impact kids under 16, for whom spending remained constant. And while spending on adult vices like cigarettes and alcohol decreased, spending on entertainment increased $144 per family, to $2,835, with the majority of that going to toys, hobbies and playground equipment, the Labor Department said.
The child-friendly spending trend didn’t just show up in government data; you can see it on the earnings statements of the companies that make kid stuff. First-quarter sales for Mattel were up 12 percent over the same period last year. Hasbro’s Q1 figures show double-digit increases in girls’ toys (up 16 percent) and pre-school products (up 18 percent.)
Neil Friedman, president of Mattel Brands (whose Barbie sales jumped 4 percent in the U.S. last year), speculates that many parents are seeking to shield their kids from the withering effects of a recession that everyone’s sick of hearing about. “Parents typically want to make sure the child isn’t feeling the same kind of stress and difficulty they are,” Friedman posits.
“They want to keep the kids’ lives as normal as possible, so they’ll buy for the kids when they won’t buy for themselves. That might be a 99-cent Hot Wheels car or a $9 Barbie, but the play value makes it worthwhile to the parent.”
But another force has entered the picture to motivate parents to spend—innovative marketing on the part of retailers and the brands themselves. Sears Holdings Corp.’s discount chain Kmart saw same-store sales increases in both the third and fourth quarters of ’09 (for the first time in three-and-a-half years) with especially strong numbers in toys and children’s clothing. The black ink followed the mass retailer’s decision to make its recession-friendly layaway program a centerpiece of its advertising. “I would’ve expected customers to put the big-ticket items on layaway, like electronics or outdoor furniture,” says Mark Snyder, the chain’s CMO. “But when I look through the store layaway merchandise rooms, they’re just stuffed with kids’ apparel.”
On the brand front, it’s the much-loved, iconic names that have fared particularly well—but not without some strategic thinking on the part of their marketers, who have employed social media, multi-brand partnerships and retail promotions to lure cash-strapped consumers. The more innovative ones have even turned the recession to their advantage.
Take Hasbro, for example. Knowing that more families were opting to save money they’d otherwise spend in restaurants and movie theaters by staying home, the toy giant came up with Family Game Night. The promotion—based on popular Hasbro board games including Monopoly and Clue—pulled in retailers Target and Walmart and brands such as Domino’s, PepsiCo and Kraft to give parents a one-stop shop for low-cost home parties, complete with snacks, beverages, entertainment and coupons. “Since money’s tight, many families have been looking to the home as the hub of entertainment,” says John Frascotti, global CMO.
“And for a relatively small amount of money, people can host game nights over and over.”
That perfect storm of nostalgia, staycations and convenience drove Hasbro’s games and puzzles business up 18 percent in the fourth quarter of ‘09.
That same we-know-you’re-broke tactic also worked for Crayola, which used the rotten economy to remind parents that a night of making crafts with their kids awaited on the other side of a $10 crayon box. “We [told] consumers that they’re giving kids the opportunity to be inspired, to use their imaginations, to express themselves,” explains Sharon Hartley, executive vice president, U.S. marketing and sales. “We knew parents were getting very purposeful about their spending, so it made sense to dial up the value message in our marketing.” Crayola also developed an online holiday gift guide, partnered with mommy bloggers and created Twitter parties so parents could talk about creativity and trade ideas for using the products. Crayola saw a 30 percent sales jump at holiday time, Hartley said.
It goes without saying, however, that all these brands are still after the same slice of pie. With big names like Crayola and Hasbro selling quality kid time to parents, smaller brands have discovered they’d better get creative as well. This was the case with family-owned Spangler Candy Co., maker of Dum Dum Pops, a treat since 1924. While lollipops are an affordable treat, the company still had to sharpen its marketing to stay competitive at a time when so many kid brands are promising value.
Spangler recently launched an iPhone app called Flick-A-Pop that quickly became the top kid app with 800,000 downloads. (Play the game by unwrapping a Dum Dum and “licking” it with your finger to see how many you can eat in the allotted time). Spangler’s sales climbed between 5 and 7 percent last year. “People tend to trade down during recessions, but they always want to treat their children and grandchildren,” says Dean Spangler, president and CEO. “Maybe they don’t take them out for a $3.50 sundae, but they’ll buy a big bag of Dum Dums for the same price that’ll last a month. By definition, we’re well-positioned for adverse times.”
And so is Lionel trains. The Rockefeller Center pop-up store drew so many parents and their children that the New York Daily News and Time Out New York covered its opening. Now, Lionel’s plans include opening five more stores for the coming holiday season.