Five Reasons Why Action Figures Cost More Today
Since launching battlegrip.com in 2008 we have seen action figure prices continue to climb. $12 action figures are now $18 or $20 while even the 3.75-inch standard in toys — Hasbro’s Star Wars series — have climbed to $9 and $10 depending on the store. (And if you visit a Wal-Greens or CVS it’s not uncommon to see these for $11 and $12.)
But the increase in action figure prices isn’t a case of manufacturers trying to gouge fans and take more money for the same — or, as in the case with Hasbro’s “Deluxe†Transformers, take more money for smaller toys — but rather economic reality hitting the manufacturing process.
I’ve said all of this before, but I’ve never sat down and crafted a blog post specifically about the reasons why we’re all paying more for action figures today than we were three or four years ago. And since the subject of cost comes up frequently in forums and on blogs I thought it might be useful to assemble all of my thoughts on toy costs in a single place. I hope you find this entertaining if not educational. And, as always, I invite discussion: post a comment here or tweet me at @philipjreed and share your own thoughts on the increase in action figure prices.
1. Raw Materials Costs Are Climbing
Oil, used in plastics manufacturing, costs more today than it did five, ten, or more years ago. And it’s not just oil that has climbed in price. Equipment maintenance and High-Quality Machinery Paint Applications have increased in costs over the last three or four years. And those plastic action figures that we play with use steel for the molds and paper for the packaging, so every aspect of raw materials costs as they apply to action figures has increased in price.
2. Labor Costs Keep Rising
China, for decades now, has been a great place for US toy manufacturers because labor costs have been significantly lower than in the US. But we’ve recently seen labor issues in China and as China develops and grows we see the cost of manual labor in the country increasing. One thing you may have noticed is that some toy manufacturers are starting to move their toy work to other countries; look at your Transformers Bot Shots toys and you’ll notice they say “Made in Vietnam.â€
3. Shipping Costs Hurt
When it comes to action figures the increasing costs of oil affect not only the manufacturing but also the cost of moving the toys from the factory to stores. And there’s not just one shipping charge; toys go from the factory to a port (FOB Hong Kong — which stands for “freight on board†— is commonly a part of the factory costs so the factory’s charge for toys includes shipping from the factory to the boat), from a port to a warehousing facility, and from the warehouse to a distribution center. Some larger chains like Target and Walmart receive enough inventory that the shipping containers can go straight from Hong Kong to one of their DCs, but not every store is large enough to accept full containers.
4. Safety Testing Costs More Than Ever
The toy recalls of 2007 caused manufacturers to test toys harder than ever, and safety testing is both required and expensive. And there is no one safety test for the world; the US uses one set of standards, Europe uses another set of standards, and other nations have their own standards. And in order to sell toys in places like the EU companies must test for the regional standards; the more places you want to sell your toys the higher your safety testing costs.
5. Pay Raises Aren’t Free
When you work at a job for any period of time you expect to see at least a raise or two, maybe a bonus every now and then, and promotions are nice when they happen. But when you encounter partiality at work, you might not get that bonus. If this happens to you, consider hiring an employment lawyer for help. And as experienced employees make more money the company pays more in wages. Sure you can always bring in entry-level employees to offset costs as experienced employees move on, but when you have a talented and experienced toy designer or packaging designer on staff you want to keep them. However, are you on a job hunt? Did you know that you can revive your focus by making simple changes to your job hunting strategy? To help you get off this slippery slope, read some info here before giving up job search.
This Isn’t an Economics Class
If we were going to get insane here we would dive into a discussion about how all of these points are wrapped up in the idea of inflation. But I doubt any of us want to get into the painful study of economics and that is why I broke these down and offered the reasons why toys cost more in as simple terms as I could. When something costs more to make then you either swallow the costs or pass those costs on to the customer.
Of course you can do both, slightly increasing your MSRP (Manufacturer’s Suggested Retail Price) so you share the increased costs with the customer. But this can only go on for so long before something has to change. The newest Transformers “Deluxe†toys are noticeably smaller than toys from a year or two ago; just one way in which Hasbro is sharing costs with the customers by using less raw materials and increasing the MSRP of the toy.
What Do You Think?
I’ve outlined five reasons why action figure costs are rising, but I’m not an expert on action figure design and manufacturing and my knowledge comes only from a combination of talking with designers and my own experience in game manufacturing. So what do you think? Have I missed something important? Am I completely wrong? Please let us know your thoughts by dropping a comment (below).
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Great points Phillip. A factor I’m curious about wold probably need some stats to back up: has the declining birthrate in western countries influenced the number of toys that are sold, and in turn the amount each unit costs at retail?
The only evidence I can point to offhand is anecdotal. At least within Ontario, there are physically less students enrolled in Elementary school compared to ten years ago. Less students means less teaching positions (something I feel keeny…), and
– perhaps – less children’s parents buying toys.
While collector markets continue on collecting, the primary demographic, and reason why toys are made isn’t as immense as it use to be. Combine that with children playing more interactive videogames instead of action figures, and cash-strapped families making less trips to the toy isle? I feel manufacturing costs are only one aspect of a larger shift.
No mention of profit margins? and the steady increase of margin per unit over the last few years? One look at an example you used- Star Wars Vintage Collection- the toys use at least 60%+ reused molds and parts… and the price still goes up. I think the real issue is the Big Two US toymakers have gotten used to making a certain amount of profit per item made, and all the rising costs is a convinient excuse to raise the price even more for the consumer while still making the same % of profit per item, instead of doing “the right thing” which to be take a little less than the usual 200-300% per unit markup. For example why sell 100 hamburgers that cost $1 each to make for $5 when you could sell them for $25 each and sell only 25 of them and make more? Also don’t discount the influence of the art toy/japanese toy market and their marketing/sales techniques ofthe last ten years (limit the availability/use free pr of social networks/big artificial markups)- one big example would be matty.com. They know toy collectors will buy it regardless.
I think you have to include the growing collector’s/ secondary market as well. When you have more adult collectors willing to pay higher prices for toys, that lets manufacturers know that they can raise the prices and still sell items. And when manufacturers see toys (like the recent GI Joe zombies and FE Prime Transformers) selling for 2+ times the MSRP on ebay, this allows the manufacturers to bump the MSRP a little.
Of course this goes back to the old supply and demand law.
Some really great points Philip. I think it is easy for many of us to forget these when we are in the stores cursing the rising prices. Though I do think some things are beyond reasonable (i.e. the BMF).
Great points all around. I guess the way I’ve been looking at it is just the normal increase of costs all over. Everything is more expensive than it was 10 years ago, why would toys be any different. Plus with the US economy in the dumper, the US Dollar is worth like 70 cents, so that’s also a major issue.
While all of your points are true, Hasbro actually made record PROFITS last year in boys toys, including extremely strong sales from their licenses products, including Transformers.
They lost a ton of money on their investment in Battleship – a movie NO ONE should’ve invested in in the first place – and, if I recall correctly, their My Little Pony-ripoff franchise, which FUNDAMENTALLY misunderstood why MLP is popular with people in the first place (GIRLS MUST LIKE IT BECAUSE IT’S CUTE AND GIRLY).
“In 2011, we reported a record $4.29 billion in
revenue. This represented 7% revenue growth
over 2010, which is ahead of our 5% compound
annual growth rate target for revenue growth”
http://investor.hasbro.com/annuals.cfm
Honestly, as far as I can tell, Transformers are getting smaller and expensive BECAUSE Hasbro can (“The TRANSFORMERS brand delivered $483
million in revenues during 2011”), and because they want to recoup profits from some massively boneheaded decisions in other categories.
As far as transformers go, the smaller more simple designs and higher prices have resulted in me not buying any official toys in a long time. The aesthetic is too low to hold my interest. Third party toys had me spending so much I felt guilty. I spent so much on igear seekers over a short period of time that I decided I could pursue bigger hobbies and sure enough I have my own music studio now.
Really good thoughts. I have a few others to throw in:
1. The same figures rarely stay on shelves for as long as they have in the past. Most companies no longer offer a yearly offering of action figures that continues to get refreshed over and over. In the 80s and early 90s it was not uncommon to be able to find a particular figure for at least 1-2 years straight. These days new waves are constantly expected and thus a particular figure doesn’t see release or have the chance to be as profitable as in the past. Probably the reason why reuse is so popular.
2. Most of today’s toys are much more complex. Every POA and paint app adds to the cost and tooling.
mattel’s done the same thing, publicly pined over the falloff of toy sales, while releasing record profits statements to their shareholders… that’s hard to account for, if the margins were remaining static. the only way one sells fewer units than last year, yet records more profits than last year, is to price gouge. no doubt costs of doing business are going up, and for many reasons you mentioned phil, and a few you didn’t (like licensing costs… terminator salvation figs cost more to license today than the kenner terminator figs did, for example), but again, you only record net sales down and net profits up if you’re working some tricky math.
Awesome article. I’d like to add some things.
1. Toy companies used to count on the fans “buying it regardless of quality” but that time is gone. Hasbro pushed Episode 1 product this year on the strength of that being the 3D movie release. Well..we saw this movie before and a large number of us didn’t like it..and didn’t buy the toys the first time. Result: A whole year of Ep1 toys sitting on pegs and barely anything new for actual Star Wars fans to buy.
2. The slow painful demise of high ticket items. Used to be you could count on being able to find 300 people to buy an item from a property they love, even if it is 300 dollars. It is not the case anymore.
3. The biggest companies consistently re-use parts for new figures and don’t pass a dime onto the consumer. Less articulation..less paint..the simplest packaging possible and reused, repainted parts…same old rising prices. That’s a major question consumers should be asking.
4. The death of the clearance section: Remember when you could find a whole half of an isle at Toys R Us where items close to a year old were marked half price? I can still buy Playmates Star Trek figures at my local TRU..and not dirt cheap. Had you heard that a lot of companies destroy non-selling product rather than discount or sell off to deep cut discount stores? Why does it seem more economical to them to destroy rather than clearance?
5. That leads into my last point..the slow demise of the “Exclusive”. More than a handful of toys at this years SDCC could be bought at later shows, or even online after the show had ended. Items I had to fight to buy at SDCC where easily attainable months later at NYCC. At what point do we laugh and say none of what a company has is actually exclusive? Look at Mattel and their “Sold Out” items that turn up 6 months later on their website at half price, then later at discount stores for even less. No reward for supporting a toy line and buying up front anymore.
OK..tirade complete.
@Blayne – ” A factor I’m curious about wold probably need some stats to back up: has the declining birthrate in western countries influenced the number of toys that are sold, and in turn the amount each unit costs at retail?”
Earlier this month there was a post at Global Toy News — http://www.globaltoynews.com/2012/12/us-birthrate-plummets-look-for-fewer-children-in-four-years.html — that was all about how birthrates and I wouldn’t be shocked at all to find out fewer children equals higher prices for toys.
Combine lower sales with higher manufacturing costs and that would make the cost per unit on toys climb more. So you probably are right and birthrate is another part of the big puzzle.
@the big r – “I think the real issue is the Big Two US toymakers have gotten used to making a certain amount of profit per item made, and all the rising costs is a convinient excuse to raise the price even more for the consumer while still making the same % of profit per item, ”
See, that doesn’t bother me at all. Those are multi-billion dollar businesses with a lot of employees and shareholders and someone making a profit off of their work is fine with me.
And it trickles down through the supply chain. The plastics provider needs to make his buck. The shipping company needs money. Target and Wal-Mart need to make a buck. If every single company involved in toys going from concept to shelf has a minimum profit per unit then that’s just more money added to the MSRP.
But really, I don’t have a problem with someone making a profit on anything. And on a luxury item like toys they can set whatever prices they want; set too high, though, and I’ll pass.
@Neal – “When you have more adult collectors willing to pay higher prices for toys, that lets manufacturers know that they can raise the prices and still sell items.”
I’m not sure how much after-market sales affect the decision when setting MSRP. I would think that if after-market value had an effect on manufacturers it would be reflected in their case packs; there’s nothing stopping them from adding more of a design to a case and pulling out something that doesn’t have the higher eBay prices.
@PaxCybertron – “Everything is more expensive than it was 10 years ago, why would toys be any different.”
Right! I suspect that if I was a hardcore furniture collector and ran a furniture blog I’d be writing almost the exact same reasons for why coffee table costs are rising.
@LXNDR – “While all of your points are true, Hasbro actually made record PROFITS last year in boys toys, including extremely strong sales from their licenses products, including Transformers.”
I’m okay with that. And since sales between Hasbro and (for an example) Wal-Mart are a black box, we don’t know what the deal is. It’s possible that Hasbro raised their cost to Wal-Mart by 5% and then Wal-Mart turned around and raised the MSRP by 10%.
“My Little Pony-ripoff franchise”
Now this I’m not at all familiar with. Are you saying MLP is ripping people off or that Hasbro has a MLP knockoff brand (in addition to the MLP brand they own).
@Openchallenge – “. . . and sure enough I have my own music studio now”
Have you played with Garage Band on the iPad? If not then you need to borrow an iPad and give it a shot. Wow.
@Barbecue17 – “These days new waves are constantly expected and thus a particular figure doesn’t see release or have the chance to be as profitable as in the past. Probably the reason why reuse is so popular.”
Has anyone ever written about frequency of new releases over the past thirty or so years? Because to me my gut says new toys come out faster than ever these days, but maybe it’s just because I’m older and have a better sense of time than I did as a kid.
But I totally agree that it feels like we don’t get “this year’s toys” the way we once did.
You know what I really miss? Those old toy catalogs that were backed in vehicles and playsets.
@dayraven – “. . . you only record net sales down and net profits up if you’re working some tricky math”
The other way is to streamline everything internally and on the production side of things so that you’re making more profit per toy sold. And Barbie and Hot Wheels account for a lot of Mattel’s sales; how often do we see new tooling on Barbie? And Hot Wheels designs get reused for many years.
It’s very possible that Barbie and Hot Wheels are making so much that they offset any losses in the “collector” brands that Mattel releases. (Though I doubt a single collector toy has been designed intentionally planning to lose money.)
@Paul Nicholasi – “At what point do we laugh and say none of what a company has is actually exclusive? Look at Mattel and their “Sold Out†items that turn up 6 months later on their website at half price, then later at discount stores for even less.”
Completely agree with you here, Paul. I am at the point I HATE convention exclusives because they are rarely exclusive. And the process of buying some exclusives at shows like SDCC is just so frustrating that I don’t have it in me to care. For example, I wanted the exclusive Bruticus at SDCC this year BUT the lines and the over-sized box (how would I get that home?) led me to pass.
I kinda regret passing on it, but the process of buying really was more of a headache than it was worth.
And Mattel’s “sold out!” at Matty Collector often feels to me as if someone at the site is manipulating the market. We cannot see inventory levels or their sales numbers, but you are right. If Mattel was sitting all of the action figures they had in their Black Friday sales then why weren’t those toys available from their site before the sale?