The article below has been reproduced here for educational purposes
Wall Street Journal 2 May 1997 Pages B-1 and B-5 by Joseph Pereira, staff reporter
Frustrated by their inability to get enough Beanie Babies, giggling Elmos and other hot items from toy manufacturers this past year, retailers are stocking up on what they hope will be the next big toy craze -- a menagerie of "virtual pets" attached to key chains.
The "pets," egg-size gadgets that play out the lives of cats, dogs, dinosaurs, chimps and aliens on liquid crystal screens, were rolled out at some stores Thursday after heavy promotion by their makers, Tiger Electronics Inc. and Japan's Bandai Ltd. Most retailers are expected to receive shipments by mid-May.
"We're trying to order every piece we can get," says Michael Goldstein, chief executive of Toys "R" Us Inc., the nation's largest toy retailer. "We could be wrong on this, but we're betting the pets are going to be right up there with Elmo this year."
But retailers are taking a big risk by betting so heavily on virtual pets. Preorders have totaled about six million units, translating into about $80 million in possible retail sales, far surpassing the $30 million that Elmo did last year. If the gadgets sink like Pet Rocks, their failure could revive the buying caution that manufacturers dread.
Retailers are optimistic partly because the gizmos have been so popular in Japan, where crowded living conditions don't always allow for live pets and the fascination with gadgetry is keen. Gene Morra, vice president of marketing for Bandai's U.S. unit, says four million of the critters have been bought in Japan -- often minutes after they hit the shelves -- in the past four months. Illegal copies are showing up on the black market, and some desperate parents are reportedly shelling out $600 for the toy, which sells for $25 in Japan.
Toys 'R' Us, which recently test-marketed the gadgets in Los Angeles, says shipments there sold out in a couple of days. When FAO Schwarz introduced the gizmos at its store in New York Thursday, at least 100 anxious shoppers were waiting for the store to open.
The pets have a microchip heart and a simulated biological clock that requires frequent watching. After the toy is turned on, an egg hatches on the tiny video screen. It then takes about 10 days to develop into an adult. Owners can feed the critter by logging on to a menu and clicking on various foods. Tiger's virtual monkey, named Microchimp, gets bananas and coconuts, while Compu Kitty, its virtual cat, gets fish tails and milk. Bandai's line is called Tamagotchi, or "cute little egg" in Japanese, and it was selling for $14.99 at Toys 'R' Us yesterday. Tiger's is called Giga Pets, and it was going for $9.99 at Toys 'R' Us.
"If you feed it too much or you don't exercise it enough, your pet will turn out fat and lazy, and if you don't give it any attention your pet could look mean and nasty," says Bandai's Mr. Morra.
Tamagotchi comes in six different colors, giving Bandai the option to create shortages of certain colors to help spur consumer interest. The company, which also makes the Mighty Morphin Power Rangers action figures, profited from massive hunts among consumers for certain hard-to-find Rangers. At a Toys 'R' Us in Manhattan yesterday, Teresa Soto, a sales clerk, said the boxes she was opening had significantly fewer blue and white eggs in them.
Some toy-industry skeptics point out that virtual pets could be classified as a "nurturing toy" -- a category that traditionally turns off boys, whose parents are by far the largest toy buyers. But with enough neglect of their needs, the pets will die -- and that's a characteristic that boys may like. "I hear there are contests in Japan on who can kill the pet off the quickest," says Sean McGowan, an analyst at Gerard Klauer Mattison Inc.
Most kids, though, compete to see who can keep the pets alive the longest. The record is 26 days, with an average life span of about two weeks. The demand for attention is so constant that one Japanese woman crashed her car while reaching into the backseat for her beeping pet. Mr. Morra says the gizmos can live 50 or 60 different lives depending on how the pets are nurtured by their owners.
The large orders for virtual pets represent a big shift in the thinking of retailers, who lost a lot of sales in the last two Christmas seasons by keeping inventories lean and not having enough hot items on their shelves to satisfy customers' demands. The merchants had been spooked by a slew of duds in the early 1990s, when swollen inventories helped wipe out some chains.
A bullish toy market -- boosted by an unusual number of hot-sellers -- is making retailers more gutsy. Tickle Me Elmo, last Christmas's sensation, is still hard to find. The Star Wars craze, fueled by the rerelease of the George Lucas film trilogy, has spurred sales of the toys to new heights. And the newest Nintendo system, along with the Sony Playstation, continue to be hot tickets among video-game players.
But a craze in Japan doesn't necessarily spell success in the U.S. Some Japanese crazes have translated rather well. Among them: Nintendo video games in the late 1980s and, more recently, Bandai's Rangers. But U.S. toy makers were left red-faced a few years ago after they rushed out racing cars patterned after Japan's hit Hyper Cars. Sailor Moon, a popular line of Japanese dolls, were also a dud when they were brought to the U.S. two years ago.
If virtual pets do flop, "I can just see the headlines," says Stephen Sandberg, a New England toy buyer: "Tamagotchi Gotcha."
Copyright © 1997 Dow Jones & Company, Inc. All Rights Reserved.
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