World Class Faculty & Research / December 8, 2016

Toy Craze in an Egg: Why the Hatchimal Is Hot

SMITH BRAIN TRUST — Why do we want the things we can't have? In the toy market, especially in the holiday season, it's sometimes because demand just takes off like a flying reindeer, surprising Santa, and toy makers and everyone in between. We're referring, of course, to the Hatchimal, the small, furry, motorized creature that pecks its way out of its colorful plastic egg and sings "Happy Birthday." Store shelves and online retail sites have been widely cleared of the little coveted creatures, leaving parents scrambling.

"Scarcity — whether it is manufactured scarcity or genuine scarcity — makes people go nuts for an item," says Rebecca Ratner, professor at the University of Maryland's Robert H. Smith School of Business. "Even for kids, it adds excitement for getting that toy in the holiday season."

Similar holiday hype surrounded Cabbage Patch Kids, Tickle Me Elmo and the Furby. It's a story that plays out every year, a holiday phenomenon so common that it's even made its way into American pop culture, as with 1996's "Jingle All the Way," in which Arnold Schwarzenegger plays a dad on the hunt for a Turbo Man action figure.

Smith School professor Oliver Schlake has been that dad, even though he knows the game. One Christmas season, he stalked eBay in search of a sold-out Lego set for his kids. "I really overpaid on that toy," he says. "I don't know if it was pride for me getting it done as Dad or if it really was a cool toy."

Hatchimal-creator Spin Master, which also makes Etch A Sketch and Air Hogs, debuted the toy in October and didn't anticipate how popular the product would be. Now, with stores sold out, online auction sites and other secondary sellers are offering eggs at more than four times the $59 retail price.

"There are decades of data and research that shows that people like things more when they are scarce," says Ratner, who has also conducted research on scarcity effects. "As soon as you make things hard to get, people want it more, particularly when the item is already attractive to consumers."

Toys 'R' Us, Target, Walmart and some other retailers say another Hatchimal shipment is expected before Christmas, but Toronto-based toy maker Spin Master is warning that even with the new batch, there won't be enough hatching egg toys ready to meet the colossal demand. "It's the good old life cycle toy," Schlake says. "Kids really love the lifecycle- and caretaking-themed toys, like Tamagotchi."

Another caretaking toy, the Tamagotchi handheld digital toy, was wildly popular in the 1990s. The concept was this: The alien space egg was left on planet Earth. Its owner had to keep the egg alive and nurture it into adulthood by doting on it with frequent button taps. "It required a lot of attention, like a pet," Schlake says. "Sometimes it's the gift when the kids want to have a real pet but their parents say no."

It's relatable, Schlake says. "My daughters, they wanted a dog, begged us for a dog," he says of his daughters, ages 11 and 14. "We compromised. They get to get a guinea pig. Actually two, since they like company."

In years gone by, other parents would have opted for the former fad Pet Rock, introduced in 1975. It came with a manual titled, "The Care and Training of Your Pet Rock." "It was basically a rock in a box," Schlake says. "It was a total hoax. That's not a pet; a rock is the most inanimate object I can think of." 

Like the Pet Rocks and Hatchimals, American Girl dolls tap into the caregiving instincts of the kids who own them. And the company has its own strategy for managing demand. American Girl stores sell out of certain dolls each year, in part because the company creates heightened demand by announcing its "Girl of the Year," Schlake says.

Hatchimals come in five made-up species — Draggles (dragon-like) and Pengualas (penguin-like), Bearakeets (bear-like), Owlicorns (um, owl-like but with a unicorn horn), and Burtles (unclear). The creatures coo, gurgle, light up and tap back at kids from inside the egg, and after about 30 minutes of interaction, the wee baby-pet creature will gradually peck its way through the plastic shell.

Forecasting demand for new toys is never easy.  While shortages can build enthusiasm during the critical Christmas season, falling short of demand means falling short on sales. Many manufacturers also fall for the illusion that the demand for their toy extends beyond the hyped Christmas crowd. But "bridging the chasm" from hyped crowd to mainstream toy is a feat that few toy makers can achieve, Schlake says.

"If I'm the toy maker, I would take pre-orders and print certificates," Schlake says, "maybe have a countdown. Because if you don't get people to buy it now, something else will come along. People will move on to something else."

Spin Master appears to get that. It's offering a way to order a Hatchimal online, with online tracking from Santa's workshop. Think about the "it" toys of years past, Schlake says. This year, none of those would do.  "If you buy a hoverboard now, that's an absolute no. No go. Who wants to have a hoverboard now? It's not the cool toy this year," he says. 

The same fate may await those squeaky Burtles and Owlicorns. "Next year," Schlake says, "it's going to be a different toy."



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About the University of Maryland's Robert H. Smith School of Business

The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and flex MBA, executive MBA, online MBA, business master’s, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.

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