The warning follows a similar forecast from CEO Bob Eckert who blamed rising costs in manufacturing, raw materials and currency appreciation.
He said: “I think it will be a challenging year for costs this year. As a result we will work very hard on reducing our controllable costs, not related to commodity costs, and we will have to raise our prices as well.”
In the UK, David Allmark says the rises could be a watershed moment for the industry.
He said: “As an organisation we are simply passing on the costs that are being passed on to us. This year will see probably the most significant change in pricing policy in the last 20 years of the history of this business.
“I anticipate an eight per cent increase in the second half of the year. Clearly we need to give retailers time to adjust and the first half orders have already been written, but around four to six weeks from shipping in June, prices will start to increase.”
The view from other suppliers is mixed but most view some sort of price rise as inevitable.
Nick Austin, MD of Vivid Imaginations offered: “Vivid are hoping we won't need to increase prices mid-year but all costs continue to rise in China and there is a limit to how much more we can absorb.
“Toys are great value already so any modest rise in retail prices this year should not adversely affect demand levels. Retail inflation in the toy market, if modest, is probably not bad for retailers or manufacturers. A £4.99 toy cannot stay £4.99 forever because everybody loses.”
Flair boss Peter Brown believes the increases might be an opportunity to bring the value of toys up and increase profits.
He said: “Our vendors need to be profitable and perhaps some of the safety issues of 2008 were as a result of vendors being pressed too hard to cut costs. At the same time UK distributors need to similarly enjoy healthy profits as do our retail partners. In that context I actually think that this is a really good opportunity for the industry to raise levels of profitable across all sectors.
“In this way perhaps retailers will come to realise that heavy retail discounting is actually harmful to their business and that consumers will pay a fair price for a safe quality product. At the same time we as suppliers should actually encourage our retail partners to move price points up from established price points not only to cover cost increases but also to take higher retail margins. As they say ‘you never know what a bad thing is good for’.”
“In the current UK climate we have unremitting price increases across all areas of everyday necessities emptying the consumers pockets, said Bandai’s UK MD Julian Boyers. “Further increase in the price of fashion related items such as toys certainly will not help to grow the business.
“There is a remote possibility that retailers will think twice about deep discounting when their next purchase from a supplier could be at a higher cost but I somehow doubt it.
“Unfortunately, a number of retailers are more concerned with their market share than actually sustaining and building brands and making them profitable. Selling toys certainly does not get any easier. I guess the retailers would say the same about buying.”
At retail, there’s a certain amount of caginess on the subject. Toymaster MD Roger Dyson was keeping his powder dry saying only “Mattel will not act alone”, seemingly expecting widespread rises.