Santa Shopped Early in Spain Amid Supply-Chain Disruptions and Virus Fears

“The strong growth in toy sales at the start of the Christmas season reflects an almost complete return to normality, with consumers returning to stores after a sad Christmas in 2020,” Fernando Perez, country manager at NPD Spain, told The Wall Street Journal.

The jump in sales in October and November is also the result of consumers bringing forward their purchases due to fears of a scarcity of goods amid logistic issues, as well as of a rebound in coronavirus cases, Mr. Perez added.

He doesn’t expect a shortage of products, but he forecasts some arrival delays, which could result in some toys being out of stock at certain moments.

“The toy sector needs to work with a lot of anticipation,” Jose Antonio Pastor, president of the Spanish toy makers’ association, told The Wall Street Journal. Due to the high seasonality of the sector, toys need to be in stores in October.

However, the problem this year is that the time it takes containers shipped from Asia to arrive to Europe has doubled, he said. Furthermore, demand for shipping containers has leaped, and shortages are pushing prices higher. According to Mr. Pastor, the price of shipping a container from Asia to Europe has multiplied by five in one year.

Rising raw-material and energy prices, and surging shipping costs are raising expenses for producers. This year, the increase in toy producers’ costs reduced their margins, as producers didn’t want to pass the price increase to consumers, Mr. Pastor said.

Falomir Juguetes, a Spanish company focused on board games with an educational component, didn’t raise toys’ prices.

“We believe educational games should be affordable for every household,” said Fernando Falomir, marketing director at Falomir Juguetes. The Valencia-based company’s games cost between 10 and 25 euros ($11.28-$28.20). Falomir had to squeeze their margins.

Mr. Falomir is part of the third generation in this family-owned company founded by his grandfather in 1945. When the pandemic started, he feared that the family business would sink. But that wasn’t the case, thanks to online sales.

With children having to spend so much time at home, Falomir’s sales of classic games like chess and domino jumped.

“Parents were also very interested in the educational component. We want children to learn by playing with our games,” he said.

Mr. Falomir said the company didn’t have many supply problems because 75% of its production takes place in Spain, which gives it greater flexibility. This year, he said consumers brought forward their purchases and they also showed an increasing preference for smaller and specialized stores.

“People like to go to small stores where they can receive advice on what to buy and they prefer avoiding big crowd stores where they can expose themselves to the virus,” Mr. Falomir said.

Following a strong start to the holiday season, Spain’s toy sector still faces its biggest test, the month of December, which accounts for 50% of total revenue every year.

“We are the most seasonal toy market in the world,” Mr. Pastor, president of the Spanish toy makers’ association, said.

In Spain, the toy sector generated revenue of roughly 1.6 billion euros ($1.94 billion) in 2019, Mr. Pastor said. The country is the second-largest toy producer in the eurozone after Germany.

Spain’s domestic market was timidly recovering from the pandemic, while toy sales in other countries were posting double-digit growth. The recovery has been much slower than in other European countries, said Mr. Perez, country manager at NPD Spain.

Nonetheless, exports represent 40% of the sector’s revenue, and growth in exports was impressive in 2021. Between January and September, exports rose more than 16% compared with the same period in 2020, data from the Spanish Ministry of Industry, Trade and Tourism showed. Toy exports are almost 13% above their pre-pandemic level in September 2019.

Accumulated revenues between January and November are 9% above their 2019 level, data from NPD Group shows. The sector could finally recover to pre-pandemic levels in 2021 if December’s data is positive. But the rapid spread of the Omicron variant and the threat of new restrictions is dashing the hopes of a merry Christmas for the Spanish toy sector.

Amid the recent surge in coronavirus cases in Spain, NPD forecasts a 2% decline in revenues in December compared with the same month last year. This means the toy sector would finish the year 3.6% below pre-pandemic levels.