Opinion - Rick Derr - Letter from America

Will it be a cruel summer - or a cool summer?

After 20 years working at A.C. Nielsen/D&B Research Company, Rick opened the first Learning Express Toys franchise in the Chicago area in 1996, and then became a sub-franchiser. Although leaving the corporate environment behind, he has combined his expertise in data and numbers with a passion for the toy retail space. This month, Rick dons his shades for a look at what the summer has in store.

As the lyrics to Taylor Swift’s Cruel Summer go: "’It's cool’, that's what I tell 'em; No rules in breakable heaven; But ooh, whoa-oh; It's a cruel summer with you”.

We will soon see whether this is true. Summer has begun, with schools now taking a break until September, meaning higher traffic during the week and less on weekends. Play events will be kicked off and sidewalk sales started; the water toys are out in full force and a travel section has been set up in-store. Let’s go!

But wait – there are tariffs, unrest on the streets, wars in other parts of the world, no measurable drop in consumer prices, and consumers are just now feeling the spike in toy prices at the big box retailers. In fact, the US news recently called out Walmart for stocking items that have gone up +20-40% already. I want to be clear; we have not raised prices and are working with our vendor community on ways to mitigate price spikes even later into the year. It’s my belief that we will have a scarcity problem, not a pricing problem.

So, where do we stand as I write this on Friday the 13th (oh my) of June? Dollar sales are up +10% versus our forecast of +5% for the year. Traffic has increased, as well as our average ticket, to $45 vs. last year’s $44/ticket. Most importantly, our Gross Profit is up +15% as there are less promotions and couponing going on. It seems even the ‘big retailers’ are concerned about stock and not willing to move toys at sale prices. We’ll monitor this to see if anything changes as we approach July and the annual Amazon Prime Days (for which no dates have been set yet).

I wish I could tell you just one thing is driving this increase, but I can’t. Some possible explanations are:

• Our speed to market on new collectibles.

• Pokémon scarcity driving consumers our way - we are a sanctioned play store so receive allocations regularly.

• Our value section, which reinforces our fair pricing and may look better in comparison to the online and big box retailers.

• Our social media presence, which we’ve doubled down on, and our increased audiences on social platforms including streaming providers.

• Our curated selection of items, which is a foundation of the magic in our stores for consumers of all ages. We work really hard at this.

I’m also looking ahead. Here are my Top 10 products that will help keep the excitement going in indies (in no particular order):

• Cookie Run Kingdom TPG game (Devsisters)

• Nano-Mals (Hasbro)

• Gui Gui (Moose Toys)

• Labubu (Pop Mart) and other Asian inspired characters (too many to list here)

• Magna Tiles’ fall line-up

• Jelly Bands (WeCool)

• Taba Squishy explosion (various)

• Webkinz relaunch (Ganz)

• DoTeki (Tomy)

• Qubitunes (Qubs Toys)

We only need to hit on two or three of these new items, which all have the potential to continue driving traffic, differentiate us from mass retailers, and keep consumers highly engaged. It’s worthing noting that 7 of these 10 new items have sub-$20 RRPs, a great price point for trying a new toy. Many are gender neutral, with an element of collectability and repeat purchase. I like the line-up.

Let me finish up with two learnings I have gained from almost 30 years in the toy business (and almost 70 years of age). Firstly, I give compliments freely and generously because they are mood enhancers - not only for the recipient, but for me as well. And secondly, I have learned not to be bothered with a wrinkle or stain on my shirt, as personality speaks louder than appearance.

I wish you all a great – and cool – summer.