Some toys can burn fingers of grown-ups Toy: Speculators in the Sing & Snore Ernie doll found their overpriced supplies exceeded the demand.

December 27, 1997|By Laura Lippman | Laura Lippman,SUN STAFF

The sound you just heard was the crash of the Sing & Snore Ernie market.

In a very 1990s twist on O'Henry's "Gift of the Magi," some pre-Christmas speculators tried to corner the market on this season's putative hot toy, figuring to make a quick profit by selling the $30 doll at grossly inflated prices.

Instead, they learned a little lesson about supply and demand: Cornering the supply doesn't mean diddly if there's no demand. As Christmas approached, and newspapers filled with classified ads for the singing, snoring Muppet -- upward of 70 ads a day as the market bottomed out -- sellers who had once hoped to make as much as $500 slashed prices to $300, $200, $150, $60, even $39.

Even the day after Christmas, almost two dozen ads appeared in The Sun, many with pie-in-the-sky asking prices. But just as many carried the down-to-earth OBO -- classified shorthand for Or Best Offer.

Don't cry for the manufacturer, Mattel's Tyco Toys. Their projections show sales of Ernie exceeding last year's big hit, Tickle Me Elmo, by 20 percent. It's the small-timers, the Christmas capitalists with visions of dollars signs dancing in their heads, who got burned when the Ernie market plummeted.

What happened?

"It was clearly an artificial situation," says Joel Naroff, chief bank economist for First Union in Philadelphia. "Last year with Tickle Me Elmo, it was real, and three or four years ago, with some of the Power Ranger toys, it was real as well, [but] I don't think toymakers have gotten down to a science what it is that creates the real gotta-have toy." Stephen Davis, a Baltimore pawnbroker, was one of many caught up in the Sing & Snore frenzy. After hearing on the 11 o'clock news one November evening that Ernie was expected to be one of the top toys this season, he rushed to Wal-Mart at midnight and bought the last six on the shelf.

"I'm glad they didn't have more, because I would have bought them," he says now, sadder but wiser. His ad, which offered the dolls for $100 each, drew exactly one caller. He's out $180, plus the $14.95 he paid for the classified ad.

At least Davis was candid about his intentions. Many of those contacted about their advertised Ernies spoke vaguely about "unexpected surpluses," as if the dolls had simply appeared in their homes overnight, singing and snoring.

Others, like Scott Barker of Hamilton, panicked prematurely. He broke down and bought an Ernie for his nephew for $60, only to find that his wife had scored one at Target that very day. He simply wanted to cover his losses by selling the extra doll.

There were some winners. One classified advertiser (who declined to give his name) said he got $150 apiece for his two dolls. Asked why anyone would pay $150 for a commodity advertised for as little as $39 on the same page, he just chuckled and said his buyers weren't the brightest lights on the Christmas tree. Or words to that effect.

While Tyco officials have publicly tsked-tsked over the Ernie speculators, the New Jersey company put much effort into making Ernie the heir apparent to Elmo. Ernie was hyped heavily at the February Toy Fair, then "introduced" to journalists at a junket. He was crowned toy of the year by Family Fun magazine.

It was the same marketing path that Elmo traveled last year to hot toydom. But, for whatever reason, the public didn't go quite as crazy for Ernie.

"The American consumer just isn't as stupid as we think he or she is," is Naroff's explanation.

"Why didn't [the market forces] materialize? I don't know," said Sinan Cebenoyan, a University of Baltimore associate professor of finance. "All the stars have to line up the right way for this to hit, and this time they didn't. Something was missing."

Cebenoyan said it was unfortunate that Ernie investors couldn't hedge their position in the market, going short and long at the same time. An Ernie derivative, a la Orange County, might have been beneficial in this particular situation.

"There's this conception that derivatives are very bad, but it would have been nice for these people to have," he said. "These guys bet on an imaginary demand, and once it didn't materialize, they were out in the cold."

It is tempting here to remember Dr. Seuss' Grinch, who thought he could make off with Whoville's Christmas by stealing all the presents. As the Grinch stood on a mountaintop, ready to throw everything off the side -- stood for three hours "til his puzzler was sore" -- he finally had an epiphany.

" 'Maybe Christmas,' he thought, 'doesn't come from a store. Maybe Christmas perhaps means a little bit more!' "

Pawnbroker Davis certainly came to that conclusion. On

Christmas Eve, he gathered up his five unsold dolls -- his daughter, 23, wanted the sixth -- and sent them to Viva House, the Southwest Baltimore soup kitchen.

"I had one guy who wanted to buy one, but I just decided to give them all away," he said. "Hey, how much money can you take with you, anyway?"

Pub Date: 12/27/97

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