TOYS—Just Wait ‘Til Next Year

valley toy companies already planning for THE 2001 holiday season At Woodland Hills toy houses Applause Holding Co. and Funrise Corp., December is crunch time. Santa’s little retail elves may be busy churning out Razor scooters and Sony PlayStation 2s for this holiday season, but Santa’s toy makers are already preparing for the next holiday season. In toy time, the holiday season starts a year and a half before the calendar holiday season. At Applause, Funrise and dozens of other toy firms across the San Fernando Valley, Southern California and the nation, the customer service and sales departments are hustling to send out toys and restock the most popular lines to fill retail shelves for this holiday season. But the creative and management teams are busy preparing their sales pitches for toys for the 2001 holiday season. “This time of year, we have one foot in the present and the other in the future,” said Dave Schwartz, vice president of marketing for Funrise, which makes Tonka trucks, among other toys for young kids. Schwartz and other Funrise execs are busy planning next year’s line of G.I. Joes, at the same time they are keeping an eye on sales for toys this season. At nearby Applause, it’s the same thing. Applause, a private company with more than $100 million in annual revenue, makes more than 3,000 different toys ranging from Harry Potter-related gifts to “102 Dalmatians” plush dogs to originals, like Raggedy Ann. “Christmas 2001 started for us in July,” said Daniel Barnhart, senior manager of marketing for Applause. “Our product lines are being finalized now. Applause, like most other toy developers, started planning for the 2001 Christmas season last summer. By early November, next year’s toy line was ready. The next two months will be spent planning how to package and sell the toys to retailers. In January, the companies will begin a round of toy shows in New York and other cities to sell their lines to Toys R Us and dozens of other large and small toy stores. By February, the first orders for the following Christmas start rolling in. Toy manufacturers, mainly in Asia, begin making the toys in March. Until the toys hit store shelves in the fall, their makers won’t really know which one was a hit and which was a miss. Finding the next big hit is a tough job, one that is becoming more difficult, as more toys hit the market and compete for eyeballs. A long head start Applause planned its 2000 Christmas season line in June 1999, before the Razor hit the market and when “Star Wars” was at its height. But a lot can change in 18 months. “You run into problems with the lead time in predicting trends,” said Leeton Lee, president of the Toy Association of Southern California. “One of the biggest problems when the Beanie Baby craze hit, in the Far East there was a shortage of plastic pellets that fill up the Beanie Babies, so companies had to struggle to get enough out.” And there is the occasional flop. “There are always those ones you wish had done better,” Barnhart said. For Applause, the Slamosaurs Dinosaur Wrestling Federation toys got off to a slower start than expected. The company stayed with the product and sales have since picked up. But not all products are as lucky. The process of trying to figure out which toys will be hot the following year involves looking at what has been hot up to that point, fashion and color trends, new technology on the market and some simple intuition of what kids want. “You have to gauge how long the interest is going to last,” Barnhart said. “With the Powerpuff Girls, sales are very strong. They’re very bright (colors). We can translate that into different textures.” Licensed lines are designed with guidelines from the licensor, with one of the largest toy licensors being the Walt Disney Co. Final designs are also subject to approval by the licensor. For Funrise which makes more-basic products, such as Easy Bake ovens for little girls and trucks for boys it is a little easier. “We make a basic product that should be there next year,” Schwartz said. “But, like every company, we’re beholden to the whims of the consumer. The problem is that every toy company is trying to replicate successful past products, and we’re all sort of fighting over the same consumer.” Increased competition in the marketplace is making it tough for companies to exceed their past year’s sales performance, toy officials say. And without a Furbie or “Star Wars” drawing people to stores this year, it’s even more difficult. “We looked ahead and what we really didn’t see was any ‘Star Wars’ or Pokemon-type hit looming,” Barnhart said. “The big hit, that is becoming less and less true each year. It used to depend on Disney, but it’s changed now that there is more (toy product) on the market.” Applause, which started as a key chain and souvenir company in 1966, has built its business around the specialty toy market. The company, which got its first hit with a license for Smurfs in the 1970s, has toy lines based on licensed brands from such heavyweights as Disney and Universal, along with its own original lines. In 1995, Applause acquired Dakin, a well-known maker of plush dolls, which allowed the company to expand its line to counterbalance losses in the licensing business. Dakin toys are mainly collectibles that include Raggedy Ann, sea life artist Wyland, the Dakin Baby collection and the Jasper Bear, created by artist Lou Rankin. Applause secured $3 million in venture funding in the third quarter to continue building its original lines. Funrise, started in 1987 by Arnie Rubin, has a partnership and licensing deal with Hasbro Inc., under which Funrise makes Tonka trucks and other toys. Southern California’s large toy industry is partially driven by its proximity to Asia, where most of the toys are manufactured, said Lee of the Toy Association. Southern California also has many of the top toy licensors, from Disney to Warner Bros., which licenses many of the toys that drive the holiday shopping market. Also based here is Mattel Inc., a major licensee and importer of toys. So what can you expect to see on store shelves for Christmas 2001? Don’t ask. “Oh, oh, that is going to be so much a secret,” Barnhart said. “It will be what’s innovative and new and a little different. Nobody needs any new bears with a Santa Claus hat.”