Toy prices set to rise

Soaring prices for energy and raw materials, coupled with rising labour costs, will compel U.S. toy makers to charge more for their wares later this year, according to industry experts.

Consumers could face anywhere from a five- to 10-per-cent price increase on many toys, says Eric Johnson, a professor at the Tuck School of Business in Hanover, N.H.

He says the cost of plastics, a key component of toys, has risen by up to 25 per cent industry wide over the past two years because of higher petroleum prices.

Some companies are turning to corn-based plastic in their packaging and products to cut down on costs and address concerns about the health risks of polyvinyl chloride, or PVC, a plastic believed to be a carcinogen.

Kathleen Waugh, a spokeswoman at Toys "R" Us Inc., agrees that consumers will see price increases in single-digit percentages across the board, starting this summer.

Wages up 20 per cent in some areas of China

Analysts say increased safety controls, which some experts feared would drive up prices, are the least of the industry's problems. They instead blame soaring wages, which have increased 20 per cent in certain coastal areas in China over the last two years because of labour shortages.

A new Chinese workers' rights law enacted in January pushes more costs onto employers with such mandates as severance pay.

The expected price hikes would reverse a trend of deflation that has lasted about a decade. U.S. toy prices dropped 4.7 per cent in 2007 alone, compared to the previous year.

Price hikes to be discussed at weekend toy fair

The topic is expected to be a hot issue at the American International Toy Fair, the industry's annual trade expo, which officially starts in New York City on Sunday and features 2008 holiday products.

Across the board, toy companies are scrutinizing their lines, even eliminating some perennials if price increases are not justified. Others are adding accessories to products such as action figure dolls to justify price increases.

Isaac Larian, president and CEO of MGA Entertainment Inc., the maker of Bratz dolls and Little Tikes, says he's cutting the number of toys for his holiday collection.

He estimates that Bratz dolls, priced at $20 US, will retail for $22 US, while a $55 US Little Tikes toy car, which relies heavily on plastic, will see up to a 15 per cent price increase at stores.