honoluluadvertiser.com

Sponsored by:

Comment, blog & share photos

Log in | Become a member
The Honolulu Advertiser
Posted on: Saturday, September 15, 2007

Toys will cost more beginning next year

By Anne D'Innocenzio
Associated Press

Hawaii news photo - The Honolulu Advertiser

Workers assemble toys at the production line of Dongguan Da Lang Wealthwise Plastic Factory in Dongguan, China. Soon, American consumers are going to have to bear the cost of safer toys.

ASSOCIATED PRESS LIBRARY PHOTO | September 2007

spacer spacer

NEW YORK — American consumers will be bearing the cost of safer toys, but not until after this year's Christmas season.

Shoppers can expect price increases up to 10 percent next year to pay for increased vigilance by toy makers and stores after more than 3 million lead-tainted toys from China were recalled worldwide since June. That means a $6.99 Barbie doll could go up to about $7.70, or a $70 child-friendly digital camera could retail next year for almost $80.

A 10 percent average increase would be the biggest one-time price hike in toys in several years, analysts say. And it's more than twice the government's measure of consumer inflation of 4.7 percent during the first seven months of this year.

Consumers could also see higher prices on other Chinese imports like fish and children's apparel, but the big price gains in toys could be more jolting.

Shoppers have become accustomed to cheap playthings from China because Wal-Mart Stores Inc. and other discounters have waged cost-cutting campaigns. Critics say real safeguards were sacrificed to keep prices low, however.

Analysts said the price increases are unlikely to hit until at least January because manufacturers and sellers already ordered the toys for Christmas. That's no consolation for parents, though.

"I will pay more (for toys) because I know it will ensure safety," said Lisa Sallese, a Wilton, Conn., mother of a 7-month-old boy and a 2-year-old daughter. "But it stinks. It should have been safe to begin with."

Most of the rising costs come from emergency third-party testing in the U.S. by both makers and sellers as they aim to root out any unsafe products, analysts say.

Mattel Inc.'s three high-profile recalls of lead-painted toys since the beginning of August have pushed product testing to a frenzied pace. Companies are removing playthings from shelves and sending them to independent laboratories to be examined.

The price of labor, overtime and testing will drive up costs in the short term, analysts said, but increased regulation will likely keep them higher.

MANDATORY TESTING

The U.S. Toy Industry Association supports a federal requirement to make safety testing and inspection mandatory and is working with the American National Standards Institute to develop industrywide safety procedures. But during Wednesday's congressional hearing on toy safety, senators urged more-stringent measures, including stepping up fines for selling or failing to report dangerous items.

This year, "both retailers and manufacturers will share the costs," said Eric Johnson, professor of operations management at Dartmouth's Tuck School of Business. "But in the longer term, costs will have to go somewhere. And consumers will see it."

Johnson estimated toy prices will rise by 10 percent next year. He said that the most vulnerable are mass-market toys, including die-cast vehicles, which run the risk of containing lead.

Anita Frazier, toy analyst at market research firm NPD Group Inc., added that higher prices will stick around because some toy makers will shift a portion of their production from China to the U.S. or Europe, where labor is more expensive.

INDEPENDENT TEST

This week, Toys "R" Us Inc., the nation's second-largest toy seller behind Wal-Mart, said it would be using an independent laboratory to test every branded product, according to Kathleen Waugh, a company spokeswoman. The retailer will be absorbing the extra costs this year, but Waugh said that she believes next year "pricing could increase."

The Walt Disney Co. — hit by Mattel's recall of 436,000 cars based on "Sarge," a character in the Disney-Pixar movie "Cars," that were believed to contain lead paint — will independently test toys featuring its characters. The tests will begin in the next two weeks and will include all categories of products from about 2,000 licensees, including Mattel, which is the largest maker of Disney-related toys.

A Disney consumer products spokesman said Disney will absorb the additional costs, which he estimated to be about several million dollars this year. It's unclear whether future costs will be shared by licensees, he said.

Price wars led by Wal-Mart have put financial pressure on toy manufacturers, though they have been able to push through price increases in recent years as they face higher costs. In particular, makers have been wrangling over prices with their Chinese suppliers, which have struggled with higher labor costs amid a shrinking pool of workers in the country's southern region, according to Pat Furey, senior category consultant at Ariba Inc.

NPD's Frazier also noted that average toy prices have been creeping up because of the industry's increasing focus on higher-priced electronic gadgets.

• • •