Safe toys to cost more — but not this Christmas

updated 8:08 a.m. ET Sept. 14, 2007

NEW YORK - Someone is going to have to pay all the extra costs of making toys safer.

For now, toy makers and retailers are sharing the burden, but that’s only expected to last until the holiday season. Next year, American consumers will be facing price increases of up to 10 percent to pay for the industry’s increased vigilance after more than 3 million lead-tainted toys from China were recalled worldwide since June.

That means a $6.99 Barbie doll could go up to about $7.70, or a $70 child-friendly digital camera could retail next year for almost $80.

A 10 percent average increase would be the biggest one-time price hike in toys in several years, analysts say. And it’s more than twice the government’s measure of consumer inflation of 4.7 percent during the first seven months of this year.

Consumers could also see higher prices on other Chinese imports like fish and children’s apparel, but the big price gains in toys could be more jolting.

Shoppers have become accustomed to cheap playthings from China because Wal-Mart Stores Inc. and other discounters have waged cost-cutting campaigns. Critics say real safeguards were sacrificed to keep prices low.

Analysts said the price increases are unlikely to hit until at least January because manufacturers and sellers already ordered the toys for Christmas. That’s no consolation for parents, though.

“I will pay more (for toys) because I know it will ensure safety,” said Lisa Sallese, a Wilton, Conn., mother of a 7-month-old boy and a 2-year-old girl. “But it stinks. It should have been safe to begin with.”

Most of the rising costs come from emergency third-party testing in the U.S. by both makers and sellers as they aim to root out any unsafe products, analysts say.

Mattel Inc.’s three high profile recalls of lead painted toys since the beginning of August have pushed product testing to a frenzied pace. Companies are removing playthings from shelves and sending them to independent laboratories to be examined. The price of labor, overtime and testing will drive up costs in the short term, analysts said, but increased regulation will likely keep them higher.

The U.S. Toy Industry Association supports a federal requirement to make safety testing and inspection mandatory and is working with the American National Standards Institute to develop industrywide safety procedures. But during Wednesday’s Congressional hearing on toy safety, senators urged even more stringent measures including stepping up fines for selling or failing to report dangerous items.

This year, “both retailers and manufacturers will share the costs,” said Eric Johnson, professor of operations management at Dartmouth’s Tuck School of Business. “But in the longer term, costs will have to go somewhere. And consumers will see it.”

Johnson estimated toy prices will rise by 10 percent next year. He said most vulnerable are mass-market toys, including die-cast vehicles, which run the risk of containing lead.

Anita Frazier, toy analyst at market research company NPD Group Inc., added that higher prices will stick around because some toy makers will shift a portion of their production from China to the U.S. or Europe, where labor is more expensive.

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