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Safety checks will push toy prices up

Buyers can expect 10% increase in 2008

NEW YORK — Someone is going to have to pay all the extra costs of making toys safer.

For now, toy makers and retailers are sharing the burden, but that's only expected to last until the holiday season. Next year, American consumers will be facing price increases of up to 10 percent to pay for the industry's increased vigilance after more than 3 million lead-tainted toys from China were recalled worldwide since June.

That means a $6.99 Barbie doll could go up to about $7.70, or a $70 child-friendly digital camera could retail next year for almost $80.

A 10 percent average increase would be the biggest one-time price hike in toys in several years, analysts say. And it's more than twice the government's measure of consumer inflation of 4.7 percent during the first seven months of this year.

Consumers could also see higher prices on other Chinese imports like fish and children's apparel, but the big price gains in toys could be more jolting.

Shoppers have become accustomed to cheap playthings from China because Wal-Mart Stores and other discounters have waged cost-cutting campaigns. Critics say real safeguards were sacrificed to keep prices low.

Analysts said the price increases are unlikely to hit until at least January because manufacturers and sellers already ordered the toys for Christmas. That's no consolation for parents, though.

"I will pay more (for toys) because I know it will ensure safety," said Lisa Sallese, a Wilton, Conn., mother of a 7-month-old boy and a 2-year-old girl. "But it stinks. It should have been safe to begin with."

Most of the rising costs come from emergency third-party testing by both makers and sellers as they root out any unsafe products, analysts say.

Mattel's three high profile recalls of lead painted toys since the beginning of August have pushed product testing to a frenzied pace. Companies are removing playthings from shelves and sending them to independent laboratories to be examined. The price of labor, overtime and testing will drive up costs in the short term, analysts said. Increased regulation will likely keep them higher.

Anita Frazier, toy analyst at market research company NPD Group, added that higher prices will stick around because some toy makers will shift a portion of their production from China to the U.S. or Europe, where labor is more expensive.

This week, Toys "R" Us, the nation's second-largest toy seller, said it would be using an independent laboratory to test every branded product. The retailer will be absorbing the extra costs for now, but company spokeswoman Kathleen Waugh said she believes "pricing could increase" next year.

The Walt Disney Co. — hit by Mattel's recall of 436,000 cars that were believed to contain lead paint — will independently test toys featuring its characters. The tests will include all categories of products from about 2,000 licensees.

Disney consumer products spokesman Gary Foster said Disney will absorb the additional costs, which he estimated to be about several million dollars this year. It's unclear whether future costs will be shared by licensees, he said.

Some shoppers say they are postponing toy buying until they are comfortable that the toys are safe.

"I am open to price increases as long as they are going to do their job," said Jenny McMorow of Buffalo, N.Y. "We've been spoiled enough by the low prices."

For her twin sons' birthday next month, she will avoid traditional toys and looking at playswings or a sand box. "Nothing they can chew on or swallow," she said.

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