Small Firm Finds Good Niches to Fill in Hot Toy Industry

By Powers, Gavin | THE JOURNAL RECORD, September 18, 1992 | Go to article overview

Small Firm Finds Good Niches to Fill in Hot Toy Industry


Powers, Gavin, THE JOURNAL RECORD


By Gavin Powers

San Francisco Chronicle

SAN FRANCISCO _ Retail sales may be sluggish, and consumer confidence low, but there's every indication that the 1992 Christmasopping season will be kind to the nation's $9 billion toy industry.

The nearly barren warehouse of San Francisco Bay Area toymaker Fred DaMert tells the story.

Until two weeks ago, "this place was piled high" with yos, puzzles and other playthings, he said. "It took three trucks to ship it all away." Last year at this time DaMert could only fill one truck.

"The appetite for toys is flourishing," said Jill Krutick, a toydustry analyst at Salomon Brothers in New York. "Orders are already exceeding last year's roaring levels, signaling a bright season ahead."

Toy Manufacturers of America, a New Yorksed trade group, reckons that toy companies will finish the year with shipments up 7 percent to around $9.68 billion. Last year toy shipments rose a healthy 5.6 percent despite the recession, which drove total U.S. factory shipments down 2 percent.

"It's largely a recessionoof industry," said Paul Valentine, a toy analyst at Standard Poor's in New York. "You can cut back on a lot of purchases without having a 4-yeard scream _ but not on toys."

The industry is dominated by four giants _ Fisherice Inc., Hasbro Inc., Mattel Inc. and Tyco Toys Inc. _ which enjoy huge economies of scale with bestllers such as Barbie dolls and Nerf products. The publicly traded shares of major toymakers tracked by Salomon Brothers were up an average of 15 percent through the first seven months of this year. Hasbro led the charge with Nerf, Puppy Surprise, Terminator and Batman.

But there is still plenty of opportunity for small firms with innovative, affordable products. One such toymaker is San Leandro, Calif.-based DaMert Co.

Founded in 1973 by company namesake and President Fred DaMert, the firm has carved out a profitable niche selling toys and gifts with science and natural history themes. DaMert expects to finish the year with record sales of $6.1 million, up 53 percent from $4 million last year.

The privately held company does not disclose profits, but DaMert said it has posted an average annual return-onuity of nearly 60 percent for the past five years.

He said that a key to the company's success is its emphasis on relatively inexpensive, educational playthings, which are sold through toy stores and specialty gift shops, as well as museums.

"We want our products to have a unique and special feeling," said DaMert, 46, whose wife, Gail, 41, is the company's chief executive officer.

Among DaMert's top sellers: Turbo Sparkler Yo-Yo. The yo-yo is equipped with defraction foil fins, which produce a turboke whirling sound and array of colors as it spins. …

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