Revenue is expected to decline at an average annual rate of 1.5% in the five years to 2011 to total $17.4 billion
Los Angeles, California (PRWEB) October 26, 2011
Hobby and Toy Stores industry will experience slightly better results over the five years to 2016, according to IBISWorld, the nation’s largest publisher of industry research. Improved economic conditions will likely boost consumer spending, encouraging consumers to increase their spending on toys and hobby goods. However, the industry will continue to face challenges from discount department stores and mass merchandisers. External competition will remain a large threat because department stores will continue to provide popular items at discounted prices. Therefore, revenue is projected to rise at a modest average annual rate of 0.6% in the next five years to total $18.0 billion by 2016.
The Hobby and Toy Stores industry has fought through tough conditions over the five years to 2011. Falling consumer sentiment and disposable income have led consumers to cut back on all discretionary spending, including on toy and hobby goods. In addition, heightened external competition from discount department stores exacerbated the already-significant decline in industry demand. Discount retailers have begun to offer lower prices during tough economic times, allowing them to erode the sales of operators and emerge as leading retailers for hobby and toy goods. According to IBISWorld analyst, Janet Shim, revenue is expected to decline at an average annual rate of 1.5% in the five years to 2011 to total $17.4 billion, despite an estimated 3.1% gain from 2010 to 2011.
Some of the Hobby and Toy Stores industry’s growth has been held back by the implementation of the Consumer Product Safety Improvement Act (CPSIA) of 2008, which bans all sales of children's products that do not meet new lead and phthalates regulations. In compliance with this law, many toy and hobby retailers have disposed of all affected inventory, incurring huge losses. This additional cost, combined with poor industry performance, has caused profitability to fall. IBISWorld estimates that profit margins have declined from about 2.8% of revenue in 2006 to about 2.2% in 2011. “Because of faltering profitability, many underperforming operators have been forced to exit the industry or merge with other operations,” says Shim. “The number of enterprises is expected to decrease at an average annual rate of 3.0% to 19,351 over the five-year period.”
Led by rising consumer confidence and disposable income, the industry is projected to experience increased sales in the five years to 2016. Armed with deeper pockets, consumers are expected to increase their expenditure on toys for their children. Furthermore, the aging baby boomer population will likely increase its participation in hobby projects and drive up sales, benefiting companies like, Toys 'R' Us Inc., one of the largest toy retailers in the world, Michaels Stores Inc., and Jo-Ann Stores Inc. Michaels Stores Inc. is the leading arts and craft retailer in North America and Jo-Ann Stores, which was established in 1943 under the name Cleveland Fabric Shops, is second-largest crafts retailer in the United States. However, continued pressures from discount department stores and online retailers will likely limit the industry's growth. IBISWorld projects that revenue will remain relatively flat over the five years, rising only 0.6% annually to reach $18.0 billion.
For more information, download the full report from IBISWorld on the Hobby and Toy Stores industry
IBISWorld Industry Market Research Reports Contain:
About this Industry
Industry at a Glance
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalisation & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
Jargon & Glossary
Follow IBISWorld on Twitter: https://twitter.com/#!/IBISWorld
Friend IBISWorld on Facebook: http://www.facebook.com/pages/IBISWorld/121347533189
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.