The Hatchanimal craze during the 2016 holiday season one of the year’s best supply and demand examples.
A hatching plastic egg launched thousands of panicked searches worldwide in 2016, as parents scoured the Internet and forked over hundreds of dollars in an attempt to secure the “it” toy of the holiday season.
By November those who failed to foresee that Hatchanimals would be the only toy their children wanted to find under the Christmas tree lamented feeling like unfit parents, while civic-minded moms took to Facebook to post news of additional shipments.
People like Mike and Stan Zappa, two brothers from Arizona who bought 100 Hatchanimals in October hoping to re-sell them, made a killing on Black Friday.
Amid this shopping frenzy, few people stopped to ask themselves why they were going to such trouble. The answer, experts say, lies partly in psychology and partly in the simple economic principle of supply and demand.
“We know from a psychological perspective scarcity is hugely motivating,” said June Cotte, a consumer behaviour researcher and marketing professor at the Ivey Business School at Western University.
“The idea that something is rare or time-limited is definitely a motivator.”
A toy maker like Spin Master, which created Hatchanimals, makes dozens of different toys and will try to estimate demand for them, but it’s not always easy to know when a toy will become a major fad.
While Hatchanimals are a fun toy the company had hoped would do well, no one expected these hatching stuffies to take off the way they did.
They were successful, in part, because of how they were launched. The company gave Hatchanimals to several social media influencers and asked them to post YouTube videos of their kids opening them. Parents started seeing these videos and talking about them online, pushing demand into the stratosphere.
“It’s a real social media story in some ways,” said Cotte.
“That’s the difference if you think about older fads like Cabbage Patch Kids … there just wasn’t social media spin (then) so you just didn’t see this fast, frenzied growth so quickly and so explosively. A lot of it is parents sharing and seeing how great they are … and fuelling it.”
But while a company will benefit from the high demand for its toys, this kind of divide between supply and demand isn’t great for business either – with every Hatchanimal a parent can’t find, Spin Masters loses out on potential revenue.
It’s a phenomenon that’s happened before and will happen again, as our very own Uncle Pipeline explained at the height of the Elmo craze in a 1998 article titled Tickle Me Elmo Economics:
“Speculative demand is pure and raw emotion,” he wrote. “It combines healthy doses of fear and greed. Think it over for a minute. You’re at Wal-Mart. The announcer machine-guns over the PA system that Tickle Me Elmo has arrived. You don’t particularly need one, you might not even have kids. But you’ve heard the buzz. You know Elmo is in short supply. Greed consumes you! You rush to the toy section.”
As Cotte points out, this happens with everything from toys to groceries to stocks.
“We tend to flock the things that everybody thinks other people think are important, or good, or valuable,” she said.
“There are a lot of fads that are driven by other people buying them and thinking, ‘That must be good then, if that many people are buying it.’”
I myself have two young kids, and I’m sure my daughter would love to unwrap a Hatchanimal on Christmas morning.
But I’m not planning to get into a bidding war with other parents over something that will be forgotten by Boxing Day, because as tempting as it is to join the madness, it usually pays to go against the grain.