Christmas is coming. Retailers are beginning to push their offers hard. The first page of a search on Google for ‘Christmas Toys 2012’ is full of sites announcing the ones which will be ‘hot’ or ‘top’. In total, there are over 75 million results available to be perused.
Last year it was Mishling Tree Monsters, Doggie Doo, and the like which proved the most popular. Readers of a certain age will recall such stupendous commercial triumphs as Teletubbies, Buzz Lightyear and Teenage Mutant Ninja Turtles.
Fond though these memories might be, the runaway successes bring tears as well as joy. Every year, the cult toys of the year become hard, or even impossible, to acquire as the great day approaches.
Perhaps we should look to Nick Clegg and Vince Cable for inspiration, for a pledge to eliminate the failure to anticipate trends. Market short-termism is spoiling Christmas for many of our poorest and most excluded citizens. Reform of the House of Lords and of the voting system itself are an integral part of the change of mindset required to combat the Christmas toy shortage. An urgent review must be undertaken of measures which will prevent shortages arising in future, including legislation to force the banks to lend.
Or is there something deeper involved? Uncertainty is in fact inherent in industries in which fashion plays an important part. The film industry is an obvious example. Even the presence of big stars and huge advertising budgets is no guarantee of success. If the first wave of audiences does not like a big release, the information will spread rapidly, and the studio will be left with a flop, like the $200 million loss-maker John Carter earlier this year. Similarly, low budget movies can become hits.
Markets such as those for films or for Christmas toys raise serious problems for conventional, economic theory. In the orthodox theory of consumer behaviour, the tastes of individuals are given; and the market acts to communicate them to producers, so that appropriate quantities of the relevant product can be supplied.
But when a new release or product is issued by the film or Christmas toy industries it is not subject to given tastes. Consumers do not know in advance whether they will like it or loathe it. In the case of toys, this produces a problem for buyers from the retail chains who are trying to second-guess preferences which are not yet formed. Further, one consumer’s attitude depends critically on another’s. Your child wants the number 1 toy because every other child wants them too. As soon as such preferences do begin to emerge, they can compound with great speed and leave producers lagging behind.
The world as a whole is becoming less like the economics textbooks and more like Ninja Turtles. Think of the clamour for Apple’s iPhone 5. Policy makers in both the public and private sectors need to alter their mindsets to cope.
by Paul Ormerod
As published in City AM on Wednesday 3rd October 2012