Kids: The Recession-Proof Industry
WHY YOU SHOULD CARE
While many industries are suffering, parents are still keeping children-focused companies alive.
- Spending on children’s nonfiction books has grown 66 percent and on board games by 228 percent.
- Searches for “kids crafts” on Google are three-times the 2019 numbers.
People cut back during a recession, especially when that recession doubles as a pandemic. But while parents fight to cover basic needs amid mass job layoffs, there is one area where they haven’t stopped spending — their children.
Forced to entertain and teach their kids at home, parents are purchasing books, games and crafts in skyrocketing numbers. Sales of children’s nonfiction books jumped by 66 percent in the week ending March 21, according to the market tracking firm NDP Group. Total toy sales in the U.S. grew by 26 percent in late March, as the White House issued social-distancing guidelines for the nation, while board games and puzzles grew by 228 percent and building sets by 76 percent, according to the market tracking firm.
[Parents are] loading up on things to keep their kids occupied at home.
Juli Lennett, toys industry adviser, NPD Group
Germay-based puzzle maker Ravensburger reported a 370 percent increase in its North American sales in March. In mid-May, Google searches for “kids crafts” were three times higher than the corresponding period in 2019. And it isn’t just a U.S. phenomenon. In South Korea, sales of educational toys increased by 400 percent as the pandemic shut schools in February.
So while the world economy remains in a tailspin, the “doing it for your kids” industry is doing well. Calling it “phase two of the big scramble,” Juli Lennett, industry adviser for the NPD Group’s toys division, notes that parents are “loading up on things to keep their kids occupied at home, help them navigate their new homeschooling situation and to also be a source of entertainment for the whole family.”
Sure, not every kid-related company has seen its stock rise. While its Uno, Pictionary and Barbie doll sales rose in early May, the toymaker Mattel saw its shares fall more than 9 percent due to lower-than-expected sales and disappointing quarter losses. The Entertainer, a U.K.-based family store chain, also saw its sales drop by three-quarters after closing its physical locations and moving to digital by necessity. Demand for its products remains high — yet with warehouses functioning at a fraction of their usual capacity, supplying enough is proving tough.
But once lockdowns lift, this will cease to be a disadvantage, even during the recession. Brands with established online distribution models are already benefiting. “Interactivity and high play value were two characteristics tying all of this week’s best-selling juvenile titles together — from classics such as MadLibs, to sticker activity books featuring beloved characters, and write-and-wipe educational workbooks,” adds Kristen McLean, NPD’s books industry analyst.
It’s a pattern analysts also saw in the Great Recession of 2008, where spending on their kids became the last place where consumers cut. This time around, Woody Garrison, who lives in Hawaii, says his family stocked up on LEGO sets for his son when the pandemic began, adding that the diversions “help tremendously.” Shannon Edry, a nurse and mother of two young children in Georgia, says her family has been buying more hands-on goods, such as arts-and-crafts supplies, a baby pool and sidewalk chalk. “With parks being closed, we tried to make our backyard as fun as possible.”
The decision isn’t purely driven by parental love. It’s also made necessary by biology. While parents can put off buying new clothes for themselves, young children can outgrow their clothes and shoes in just a few months. The types of toys they enjoy playing changes with their learning curve, often within a year or two. The need for new will increase should the pandemic extend far into summer and fall, when last year’s seasonal outfits pulled from storage might prove ill-fitting. Which is why some experts are seeing buy-low opportunity in stocks involving children’s toys and clothing now, with the hopes of a surge in later in the year.
Still, the economic crisis may test how sustainable this spending will be if it drags out. More than 36 million people filed for unemployment in the first two months of the pandemic hitting the United States, and the unemployment rate reached 14.7 percent in April. While children’s growth spurts and ever-changing attention spans will probably outlast any recession, only time will tell if their parents’ checkbooks can keep up.