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Toy Story

Wednesday, November 11, 2009
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The Go Go Hamster is set to be one of the top toys this Christmas. But this, and other toys in high demand, might be subject to a shortage of supply. Retailers had their fingers burned last year as demand for toys fell by 12% and many were left with excess supply after the Christmas period. Many toy retailers make over 50% of their sales in November-December, but the early stages of global recession reduced demand for toys in 2008, shifting the demand curve to the left so that, in order to clear excess stocks, retailers had to reduce prices. In a textbook example of cobweb theory, many have ordered fewer toys this year thus reducing supply, but in fact the early signs on both sides of the Atlantic and across Europe is that demand is, at least partly, restored, so there is now a risk of excess demand.

Stockists are trying to adjust to the change - this report from the US says that many have sent delegations to China to visit the factories supplying so many of the goods to try to secure supply at such a crucial time - but the usual time lag between ordering and delivery is about 4 months, so that in order to get emergency supplies in stores in time for the rush retailers are facing higher costs not only for transport (air freight rather than shipping) but for labour as well thanks to the derived demand for overtime. Dare they raise the price in order to cover the costs, or will they play it safe and cut their margins in order to secure the sales? Time will tell (perhaps we should start a Go Go Hamster price index to see if the price rises above the £49.99 that Amazon are charging today - that price has dropped from £60 since I started writing this report!) but the warning from this BBC video report is that some retailers will go bust this Christmas if they cannot get access to stock at this crucial peak period of demand.

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