If the Zhu Zhu Pets taught a lesson, it's that a bit of technology and a low price tag can go a long way. Toy makers are taking that experience to heart.
From a digital Scrabble game that checks the words to a hovering UFO to miniature radio-control cars, toy makers are amping up the tech quotient but not prices.
Zhu Zhu Pets, the furry mechanical hamsters that zoom around, were the runaway hit of the holiday season. One key to their success: a price tag under $10.
The American International Toy Fair begins Sunday. This is the annual event where toy makers show off new offerings that will make their way into next year's stockings. Previews from toymakers and interviews with analysts make clear that the focus is on innovation and price. Few toys will retail for more than $100, and most will be priced below $30.
"There's still going to be some hesitancy to raise prices too much," said Needham & Co. analyst Sean McGowan. "Last year the feeling was under $30 is where you needed to be. This year there may be more willingness to be $30 to $50. But I don't think we'll see a wave of $300 stuffed horses again."
The toy industry performed a bit better during the holidays than it did in 2008, but the season was far from a bonanza. The NPD Group, which does market research, said toy revenue was flat because of discounts during the fourth quarter, but the industry sold 4 percent more toys. For the year, sales edged down 1 percent to $21.47 billion.
Tough times can spawn creativity.
"I've seen some really innovative products," said Jim Silver, an analyst at Timetoplaymag.com. He pointed to radio-control vehicles as combining innovation and low prices. One reason they're cheap: The cars themselves have shrunk, Silver said.
"What the industry has learned is that kids don't necessarily want 'bigger.' It's about the features, not the size of the vehicles," he said.
For $24.99, Mattel is offering tiny Hot Wheels radio-control Stealth Rides cars that fit in a case that doubles as the remote control. Spin Master has several radio-controlled offerings, including the Air Hogs Vectron Wave UFO flying saucer that can sense objects below it and hover above them. That also costs $24.99.
"Consumers like radio control, they just didn't want to spend $70," Silver said.
Prices have fallen as technology has advanced, much like the price drops in flat-screen TVs or laptops.
Some other technology-infused toys planned for 2010:
-- Mattel is offering Sing-a-majigs, plush characters whose mouths move as they sing and who harmonize when activated together; available for $12.99 each; and a World Wrestling Entertainment Belt that contains a screen with animated light shows for $39.99.
-- Hasbro developed Scrabble Flash Cubes. The word game uses cubes that each display one letter digitally. When players fit cubes together, the game can recognize whether they form valid words. And it can keep score.
-- Hasbro also expands its Furreal Friends line with smaller Snuggimals that wag their tails and move when you pet them, retailing for about $7.99.
-- Jakks Pacific is offering some high-tech spying gear for kids in its Spy Net line, including a video spy watch for $54.99 and a Pen Audio Bug for $24.99. Yes, they're just what they sound like -- miniature video and audio recorders.
-- Wowwee has developed a line of guitars and drum sets that are only about 1 inch thick called Paper Jamz. They're also $24.99.