Wall Street Journal and Pittsburgh Post-Gazette

Mini Christmas: Retailers' big strategy is small stuff
Friday, November 18, 2005
By Jon Weinbach, The Wall Street Journal

It's an age-old holiday fantasy: Gathering with family, sharing good cheer and praying -- that your gifts will be really, really big.

But all the presents Dana Asher plans to give this year could fit into a tie box: a 5-inch Gucci BlackBerry case, a videogame player that weighs in at just over half a pound and an iPod the size of a cracker. The Los Angeles mom says her 13-year-old, Matthew, will actually be disappointed if he gets a bike. "He wants a small box," she says.

It's going to be a very tiny Christmas. Between palm-sized doll toys and cellphones that pack in MP3 players and video cameras, the word for the most sought-after gifts this holiday season is dinky. Some of this shrinkage is the continuation of a craze for minigoods that's been under way for a few years, particularly in consumer electronics. But for 2005, marketers in a variety of other industries are increasingly seizing on the notion that small is cool.

Gifts aren't the only thing getting downsized: Retailers have trimmed their sales expectations from 2004, in part because of concerns over oil prices. Even some Christmas-tree merchants say small is big this year, particularly among apartment dwellers and empty-nesters. Irwin Loiterstein, whose family has run a Christmas-tree business in St. Louis for more than 50 years, says sales of trees under 5 feet have grown roughly 30 percent over the last three years.

Many of the new Lilliputian gifts are scaled-down versions of previous models. Earlier this month, Nintendo introduced its Game Boy Micro, an inch-thick version of the original device that weighs in at 2.8 ounces, unwrapped. The latest from Mattel: a 4 1/4-inch electronic dollhouse with a miniature "girlfriend" who asks questions and throws temper tantrums at the push of a button. Hasbro has high hopes for a classic tiny toy -- the yo-yo -- that's updated with "auto-return technology" to help kids avoid string frustration.

"It's like the whole world is a stocking stuffer," says Lauren Freedman, president of e-tailing Group, an e-commerce consultancy in Chicago.

In part, the shift to small reflects how quickly grown-up gadgets are being restyled for kids. While the children's toy business has been in decline (sales fell 3 percent in 2003 and 2004 to a current total of $20 billion), sales of children's electronics -- a separate category -- soared 40 percent last year to $694 million, according to the NPD Group, a market-research firm in Port Washington, N.Y. That includes everything from kid-sized video cameras to this year's robot dogs that double as speakers.

Owning the smallest gadget is the latest "way of saying to those around you, 'I'm important because I have the technology,' " says Glenn Sparks, a communications professor at Purdue University.

Toy- and retail-industry analysts say manufacturers are pushing smaller sizes in everything from dollhouses to board games in part because Americans want items that are portable and easily returnable. That in turn may account for the soaring popularity of the ultimate small gift, the plastic gift card. According to the National Retail Federation, more than 52 percent of shoppers say they want to receive a gift card this year, up from 41 percent in 2002.

While it's still early to predict which gifts will sell, the national retail group says it expects lower growth in holiday retail sales this year. In 2004, Christmas retail sales rose 5.7 percent, the biggest increase since 1999. This year, the group is predicting a rise of 5 percent, to $435 billion. WSL Strategic Retail, a New York-based consulting firm, is even less confident. An online poll it conducted earlier this month indicates more than half of consumers will spend less this Christmas than last.

As for the going-small strategy, even toy makers say it might be a stretch. Unlike traditional Christmas toys such as Barbie clothes and board games, which analysts say the industry keeps at under $20, many of the littlest entries have an electronic element, and carry price tags of $80 or higher. With prices inching up, these toys aren't far from what the adult models cost. "Parents may say, 'Why don't I get the real thing?'" says Sean McGowan, toy-industry analyst at Harris Nesbitt, an investment banking firm.
But if makers try to keep the price down, the goods may seem too cheap. Kids "are pretty hip to what's real and what's fake," says Stephanie Cota, vice president of girls' marketing for Mattel.

To counteract that, Mattel is trying to create adult-like details in the $79.99 Vidster. A pint-sized video-recording camera, the Vidster comes with a color viewfinder, built-in microphone and editing software. The company has also tried to give a more sophisticated spin to the old-fashioned dollhouse with the introduction of Pixel Chix, a small toy that comes in Miami-loft, Beverly-Hills-home or traditional cottage editions. To play, kids push buttons that activate a "virtual girlfriend" on a small screen. The character may play with a cat, brush her teeth, or -- if she hasn't been played with in a while -- get angry.

For adults, many of the most popular tiny gifts are accessories for electronics they already own. Stores and Web sites are bursting with fancy carrying cases, cord winders and docking stations. Gucci, Burberry and Dunhill, for example, have all introduced leather Blackberry cases, for $140 and up. Vessel, a design firm that makes stuff for the home, has a new, thumb-sized "time tag" watch that clips onto clothing and can be used like the time note on a PC screen.

To be sure, Christmas standards like clothing and jewelry aren't going out of style, and some big-box items -- especially flat-screen TVs -- are expected to sell well. Online retailer eToys says one of its most popular items so far has been Amazing Amanda, a 20-inch tall "interactive" doll that makes facial expressions and can recognize voices.

No need for big boxes under 13-year-old Melissa Cortez's tree. The eighth grader says all she wants for Christmas are an iPod and an ultrathin Motorola cellphone. Not even a trip to a Los Angeles Toys 'R' Us with her mom enticed her to sub in something big. "There's nothing here that I like any more," says Ms. Cortez.

Below are some of the small gifts that retailers, manufacturers and store buyers expect to be popular this season -- listed in approximate order of age appeal, from youngest to oldest:

V.Smile Pocket
Learning System
VTech, $79.99
FUNCTION: Educational videogame console to improve memory skills and vocabulary
DIMENSIONS/WEIGHT: 7.5 inches (width) x 2 inches (depth) x 5.1 inches (height)/1.1 pounds
FOR: Tech-savvy nursery school kids, ambitious parents
COMPETITORS: Leapster L-Max Learning Game System, Fisher-Price InteracTV Learning System
COMMENT: Apparently it's never too early for kids to start playing videogames. In the past couple of years, there's been considerable growth in the "edu-tainment" sphere, with dozens of new kid-friendly computers and hand-held games. The V.Smile "pocket" device, which can also hook up to a TV screen, is roughly the shape and size of a small go-kart steering wheel, and features a "left-handed" mode for southpaws. It's also the most expensive of the kid consoles, and we found the direction button surprisingly hard to use on Zayzoo, My Alien Classmate, the game that comes with the system. A VTech spokeswoman says the Zayzoo game "requires a little more dexterity" than other titles.

Pixel Chix
Mattel, $29.99
FUNCTION: "Virtual" doll house
DIMENSIONS/WEIGHT: 3.5 inches x 2.3 inches x 4.25 inches / 1 pound
FOR: Grade-school girls who like "sassy" dolls
COMPETITORS: Traditional doll houses
COMMENT: The dolls get a voice in this new take on make-believe play. An interesting hybrid of tech innovation and traditional toy, Pixel got a lot of buzz after the industry's big convention earlier this year, but it's unclear whether it will catch on with kids. "Consumers haven't voted for it yet," says John Taylor, a toy-industry analyst at Arcadia Investment Corp. in Portland, Ore. A marketing executive for Mattel, on the other hand, thinks it will be "a home run."

Robopet
Wow Wee, $89.95
FUNCTION: Entertainment
DIMENSIONS/WEIGHT: 9.8 inches x 4.7 inches x 6 inches / 14 ounces
FOR: Whimsical Dads, elementary school boys
COMPETITORS: Wow Wee's Roboraptor and Robosapien, i-Cybie from Outrageous International
COMMENT: Robots are now outpacing cars as the cool remote-controlled toy, and Robopet will attempt to build on the success Roboraptor enjoyed last year. This canine robot is no stiff, and like several other new toys this year, features "animatronic" technology that allows it to reproduce remarkably lifelike movements. Robopet lies down, rolls over, detects physical objects (like the edges of tables), and even makes whimpering noises. On the downside: There's no volume control, and between the robot and remote, you'll need seven AAA batteries.

Bratz Plugged In Liptunes
MP3 Player
MGA Entertainment, $79.99
FUNCTION: Digital music player
DIMENSIONS/WEIGHT: 1.25 inches x 1.03 inches x 3.75 inches / 1.45 pounds
FOR: Kids whose parents don't want to spring for their iPod ... yet
COMPETITORS: Disney Mix Sticks, Hasbro I-Dog, Zizzle iZ, Tek Nek Cool P3 Player, Apple iPod
COMMENT: In a crowded field, the Bratz MP3 player gets style points for its funky design. The device truly looks like a lipstick case, and its headphones are smartly chained to the player -- eliminating the possibility for temper tantrums over lost earplugs. It cannot, however, download songs purchased from iTunes, and Liptunes has relatively limited memory: just 256 megabytes, enough for about 80 songs. (The cheapest iPod shuffle, by contrast, is just $20 more and can store 120 songs.)

Game Boy Micro
Nintendo, $99.99
FUNCTION: Portable game console
DIMENSIONS/WEIGHT: 4 inches x .7 inches x 2 inches / 2.8 ounces
FOR: Style-conscious gamers, nostalgic twentysomethings
COMPETITORS: Sony PSP, Nintendo Game Boy Advance, Nintendo DS
COMMENT: Curious timing: Nintendo, once the videogame leader, already has two hand-held devices on the market, as well as the GameCube console system, but says there's a niche for this one, too. At less than an inch thick, the Micro sets a new standard for portability, and it plays any of the 700 games available for the Game Boy Advance. It also has an optional wireless component that allows up to five players to play the same game at once.

VCam Now
Digital Video Camera
Hasbro, $79.99
FUNCTION: Digital video and
still camera,
DIMENSIONS/WEIGHT: 3.25 inches x 1.25 inch x 2.5 inches / 5.3 ounces
FOR: Pre-teen movie-makers
COMPETITORS: Mattel Vidster
COMMENT: This camera and the Vidster represent a leap forward from the old kiddie play cameras. Both take still and moving images, with enough memory to store 480 photos. The VCam is smaller, with a slick (and tiny) flip-out screen to help review footage and direct the action. Attention adolescent artistes: The Vidster also comes with a tripod and editing software.

Check BlackBerry case
Burberry, $165
FUNCTION: Protection for the omnipresent communication device.
DIMENSIONS/WEIGHT: 3 inches x 1 inch x 5 inches / 2 ounces
FOR: Ladies who lunch, well-groomed business execs
COMPETITORS: Gucci BlackBerry case, Dunhill BlackBerry case
COMMENT: The British luxury brand makes at least four versions of this case, including one with an image of knight on a horse, available at Neiman-Marcus. According to Ms. Asher, the mom in Los Angeles, the Gucci BlackBerry case is already gaining popularity as a holiday gift among Hollywood executives. But be prepared to buy a replacement next season: The cases are being marketed as a fashion accessory, and styles are already changing as fast as handbag prices are rising.

Photo Gift Card
Gap, available in multiple denominations up to $200
FUNCTION: Provides money for purchases at stores or online.
DIMENSIONS/WEIGHT: 2 inches x 3.3 inches / 1 ounce
FOR: Picky shoppers
COMPETITORS: Regular Gap gift cards, and similar cards from hundreds of retailers, including multivendor models available at supermarkets
COMMENT: The new card has a slot for small photos -- either the giver's or the recipient's -- and comes in five colors. "We wanted to take the 'ick' factor out of giving plastic," says Eden Gershgol, Gap's director of brand management. Our only quibble: You can't download photos and get them printed on the card, so you'll have to cut existing pics, or print new wallet-size shots, to fit them onto the card.

N90 phone
Nokia, $900
FUNCTION: Cellphone, MP3 player, video camera
DIMENSIONS/WEIGHT: 2 inches x .94 inch x 4.4 inches / 6.1 ounces
FOR: Gear geeks who have everything
COMPETITORS: Motorola Razr V3 series, Sony Ericsson K750i
COMMENT: Is it worth the price? The downside is that all of the features add up to a heavier-than-average handset. But we were impressed by the rotating top of the phone -- it can turn 90 degrees for a more natural hand position when the device is in camera mode. Photo snobs will appreciate the Carl Zeiss optic system, and the N90 comes loaded with Adobe Photoshop and a host of wireless connectivity application. And we almost forgot: It also makes phone calls.