Leading industry journal covering the global toy industry including practical 'how to' articles, research, industry reports and insights.

07 November 2019 ~ 0 Comments

How To Secure Toy & Game Distribution Into North America

The USA is the single biggest toy market in the world by quite a long way, and when you add on Canada, which is perhaps a surprisingly good sized market in itself you reach a very significant distribution opportunity for toy and board game companies.

NORTH AMERICAN TOYS & BOARD GAMES – MARKET INSIGHTS

The USA retail marketplace is typically split between Specialty and Mass Market.

Mass market retail often gets most of the attention because just a few retailers can drive huge volumes. A listing in Walmart’s physical stores across their store network will often add up to significantly more than the total sales achievable in an entire European country, or even in several European countries. A single product listing can be worth $millions. The challenge though is that Walmart is not that accessible to smaller companies directly, and the difference between 3 or 5 listings from one year to the next can often make or break companies. It can also be very time consuming to handle logistics with such a large retailer across such a large geographical territory.

Specialty distribution in the USA tends to get far less attention, but can still drive what would be very respectable sales levels in any other country. More importantly, with Specialty distribution, the risk is spread across a broader distribution base typically, meaning that you are not so reliant on the whims or directions of a single retailer or single retail buyer. The USA is unique in that even a retailer trading across just a few states can have hundreds of stores. As such, we often advise our consultancy clients to begin with specialty and to build up towards mass market retail as a longer term objective.

In terms of routes to market, there are 4 main options:

  1. Direct selling to retailers – this is a lot of work to take on in such a vast country. We don’t recommend taking this on lightly!
  2. Selling via reps/agents – there is a large array of sales reps in the USA who can take your products to either a large spread of independent ‘mom & pop’ stores, right up to presenting your products to Walmart, Target etc. Clearly they take a %age, but they represent a much quicker way to grow your distribution as they have already established relationships.
  3. Distributors/wholesalers – these are companies who buy your stock & sell it to retailers. A distributor will often take a more strategic brand building approach and may sometimes invest in marketing. A wholesaler tends to just buy & sell stock.
  4. Direct to consumer – once a pretty much insignificant part of toy and board games sales, selling direct to consumer has grown both in terms of $sales and in terms of importance/influence on the overall industry. Going direct to consumer can justify development costs and open up direct distribution opportunities.

CANADA

Canada’s toy and board game market deserves a special mention. The retail landscape is somewhat different and the market is not insignificant. Often ignored by toy companies, sales to Canada can be significant. While it is quite common to find Canadian based companies or reps selling into the USA, beware that your USA partners have an eye on the Canadian opportunity if you grant them North America territory!

In summary, North America is a massive opportunity. We often come across clients who chase enquiries from small countries and markets, and then get lost in the minutiae of supplying to a new country with all that entails. Putting the biggest opportunity first is clearly more likely to deliver big rewards.

If you are interested in selling into North American markets we offer a Consultancy service to toy and board game companies across the world (past clients have come from countries as diverse as the USA, Australia, India, China, Bulgaria, Korea etc). Our brand, product and export sales management service allows us to get deep underneath the skin of toy companies and to help them sell more into North America & elsewhere both via effective selling using our extensive toy industry connections, but also by helping them to correctly align their brands and products to the market. We offer this service with a limited capacity with a maximum of 5 spaces at any one time. At the time of writing, we have only 2 spaces left heading into toy fair season. To find out more about working with us on this service & to get our help to grow your business please just drop us a line or visit here for more details: www.KidsBrandInsight.com/services/

07 November 2019 ~ 0 Comments

5 Must Haves For Toy Factories

Toy manufacturing is a critical part of what we do in the toy business, but because it is boring compared to new product development or less glamorous than glitzy awards and agency lunches, many toy companies fail to pay manufacturing enough attention.

We came up with 5 must haves for any toy factory your company works with:

Certifications – it should go without saying that many retailers will insist on ethical audit certification for factories e.g. ICTI, SEDEX etc. Other certifications which may be needed/which show a certain level of standards attained in the toy business would include Walmart or Disney certification. Normally most established toy factories will have an ISO certification also.

Established customer base – why would you ever want to be a factory’s first customer? New factories have to set up and then refine a bewildering array of processes, procedures and staff training. Why would you ever choose to take on such an unproven supplier, when there is no shortage of established toy factories out there? Unless your business model is to set up captive factories to focus on only your business (in which case, you would tend to start from scratch so you can set things up the way you are used to working) there is a lot of risk in working with an untried supplier. The first question asked should be which toy companies are you already supplying? If the answer doesn’t include a number of long standing established toy companies, then you are likely to be taking the factory on a learning curve at the expense of efficient and trouble free supply!

Matching Core Competence – if your main product lines are small metal cars, why would you work with a factory that supplies primarily large plastic items? Will they have the skills and capability to be a reliable and cost effective supplier? Possibly not! Your factory may be sub contracting production somewhere else, which is all well and good, but they will be adding a margin to the price you pay, so beware of over paying to a factory that has no core competence in the product area you are concerned with.

Competitive and Future Proofed Pricing – pricing is such a factor normally in toy companies moving production from one factory to another. Pricing is of course really important – when c. 30-35% of your sales value is in manufacturing, a few %age points saved can soon add up to big amounts of money. The challenge though is that many toy companies are attracted by ‘golden hello’ pricing, which then creeps up, either on the initial product lines or on subsequent product lines, due to either cut-throat pricing upfront to start the trading relationship or because of genuine cost inflation. If you are considering moving production at the time of writing, the best approach to future proofing pricing for toys is to consider alternative manufacturing regions with lower labour costs for your toy sourcing vs China e.g. Vietnam or India.

Matching Volume Aspirations – factories vary from huge plants set up to churn out massive volumes to smaller plants supplying lower quantities of really high quality products. One of the key considerations for a toy or board game company looking for new manufacturing is matching likely demand with the level of supply which is motivating for the factory. If your business is too small for a larger factory, focus will go elsewhere and you will be unsatisfied with the level of service/focus you get. If you take big volume business to a factory not set up to handle your volume you can run short of supply if they cannot meet demand.

Finding and selecting new toy and board game factories can be very time consuming and risky. We can help, via www.KidsBrandInsight.com/services we work with toy and board game companies to find cost effective factories. We also work on a consultancy retainer basis with a limited number of tried and trusted factories to help them grow their businesses, for more information on how we can help, just drop us a line.

31 October 2019 ~ 0 Comments

5 Tips To Grow Toy Export Sales

This article is the first in a series looking at Toy & Game export sales as we head into toy fair season.

Unless a toy company is fortunate enough to have the U.S.A. as home market, sales to other countries are likely to be an important component of justifying product development investment.

Even if the USA is your home market, it accounts for less than one quarter of the global market opportunity. The reality is that selling outside your own country is an essential part of your sales opportunity and if you don’t effectively and efficiently maximise that opportunity you are far less likely to build a successful and sustainable toy business.

The challenge though is that there are a lot of countries and potential customers out there, so developing the right approach and strategy needs some thought.

Here are 5 quick tips on how to grow toy export sales:

A. Attend The Right Trade Shows

If we could only suggest one tip to help toy companies expand export sales it would be this one. Trying to cold sell to companies you have never met, whose first language is not your own can be really tough. Even if you are really good at selling it takes a great degree of time and grind. At trade shows you can access hundreds of potential customers in a relatively short time and often set up a whole years business in just a few days. For those who are newer to the industry, the key trade shows for export sales are:

Spielwarenmesse-Nuremberg: www.spielwarenmesse.de

New York: http://www.toyfairny.com/

Distoy (London): http://www.distoy.com/

B. Focus On Bigger Markets First

When you attend trade shows you tend to come back with a raft of new contacts and sales leads. It is of course human nature to follow up all of these to try to sell. The challenge though is that each new market you enter has local needs – regulations, languages, trading conditions etc. It is not possible to be an expert on every toy market in the world. The most common mistake we see in toy & game companies is trying to sell to every market in the world, but what tends to happen is that the smaller markets which get far less focus from everyone are often the easiest to get deals done, but then the need to service those customers takes up more and more time until your export team is spening a disproportionate amount of time chasing small orders. The biggest toy markets in the world tend to do the highest volumes, so sometimes less is more – forget global domination (at least for now!), picking 3-5 major markets & ensuring you have great partners in those markets will deliver way more than chasing every opportunity in small markets.

C. Follow Up

Conversations are often positive at trade shows, but the hard reality is in the purchase order, and the process from first positive conversatioons to purchase order can be long. Having invested in trade shows and spent all that time creating opportunities don’t let good opportunities drift away due to lack of follow up. At trade shows companies can review hundreds of opportunities, but back in the cold light of day they need to make choices and focus on what they will actually spend money on, and the reality is there are always far more opportunities than can be followed. So stay in touch when the customer is back in the office & keep things moving along in your direction otherwise your customer might choose someone else’s products instead of yours!

D. Network relentlessly

If there was one piece of advice we would give to a youngster just starting out in this industry it would be to network relentlessly. It is of course a cliché, but the saying ‘It’s not what you know but who you know’ is so very relevant in the toy industry. Investing time and effort in building good relationships with other people in the industry both makes your working life more fun as well as more effective. There are people you might have met 10 or 15 years ago who are perfectly positioned to benefit from your next project, but if you didn’t keep in touch or if you annoyed them along the way, then both you and they will lose an opportunity.

E. Accelerate Your Export Sales Via Agents/Consultants

Working with sales agents is standard practise in the toy business. Whether they sell to a specific retailer or to specific markets or regions, sales agents offer big sales opportunities for no or little upfront cost. You will eventually end up paying agents commissions though, which then comes out of every future sale you make. The challenge with working with agents is that they have to work hard and sell a lot of products to make a living, so they are inherently likely to push what is the easiest sell. If your product line is a harder or more complicated sell, or if the volumes are low, then they are far less likely to push your products. if you have a hot seling product range, agents should be able to do a good job for you (if you pick the right ones!).

Consultants are at first glance less attractive, in that you have to pay them upfront for their work with you. However, the benefit is twofold:

1. They do not cost you much larger sums if they are successful in selling your product like a sales agent would, as there are not future commissions to be paid

2. Rather than focusing on the easy wins to chase commission, a good Consultant should take a broader look at your business. For instance, you may think your export sales team are under performing, but it might be that your product is only culturally relevant in your market unless a few changes are made. It might be that your pricing is out for major export markets, or it might be that your competitive positioing is not strong enough. It could be many things – and a good Consultant can help you identify these issues for the cost of a few months of Consultancy retainer.

This article was written by Steve Reece on behalf of Kids Brand Insight. We have sold toys & games into more than 90 countries worldwide across a twenty year period. We work on a Consultancy retainer basis to help toy and games companies grow their exports. For more information, please drop us a line or go here for more information: http://www.kidsbrandinsight.com/services/

10 October 2019 ~ 0 Comments

Indian Toy Manufacturing Update – Capacity For 2020 Dwindling

Indian Toy Manufacturing Update – Capacity For 2020 Dwindling            

When our company first began connecting export ready and certified Indian toy factories with toy company customers around 5 years ago, it was frankly a hard sell. Although the major corporate companies like Hasbro had started to move into India in a big way, perceptions – or perhaps more accurately – preconceptions of India were a barrier to over come as was the long term habitual reliance on China’s fantastic reliability of supply and capacity to meet demand.

Today however, things have changed. India is a hot topic for toy companies right now. We have been arguing for 5 years that the only logical medium to long term alternative to China for toy manufacturing is India. In case you haven’t read previous articles, we have published on this topic, let’s follow our analysis through to this conclusion.

Firstly, let’s start with acknowledging how fantastic China’s toy production has been for the toy industry over the last 2 decades or more. The scale, efficiency and consistency of the toy manufacturing sector in China is not going to be easily or instantly replicated anywhere else. So why would we choose to move away from this proven hub of toy manufacturing? The reasons are more about China’s development than about anything we as the toy business can realistically influence. If you talk to people who have worked with Chinese toy factories for a couple of decades, they will tell you that originally the approach was to throw cheap labour at any issues. Over time, the ad hoc approach of throwing extra labour at any issues has been replaced by more efficiency. At the same time though, China’s working population has effectively started to move on from low end production line jobs for a low wage. The economy has been in the process of going beyond that for a decade. All those issues with lack of labour, manufacturing cost inflation and the working conditions caused by having to move a transient workforce in from far afield within China are a symptom of this that we all took for granted. Today, China is an increasingly modern economy, and that’s a great thing for their citizens, but it means that the country will not have the same advantages for low end labour intensive manual production line labour it had in the past. The Chinese government has a stated policy of seeking leadership in those disciplines which are higher end than toys. Because so many toys come and go every year, it is not viable to invest in automation on a product which could be gone a few months later. So, in conclusion on the direction of China’s toy manufacturing sector, we predict that China will keep the higher end toy manufacturing involving automation & technology, but the basic low-end toy manufacturing will go elsewhere.

Our analysis suggests that perhaps as much as half of all toy manufacturing currently in China could go elsewhere to find cheaper labour and to find the capacity at this low end which is going to start to dwindle in China.

Outside of China, the only viable alternative for at least the medium term is India. India has an educated, mostly English-speaking workforce. Labour costs are currently comparatively low. Existing industrial capacity is high, the automotive sector in India is developed and advanced, and injection moulded plastic components are a significant contributor to cars. Such injection moulding can be relatively easily adapted to produce toys. Above all though, India is the only nation in the world with a similar population size to China. There will be no shortage of workforce in India, and currently the urban population needs work and will take work like toy production line jobs.

No other country hits all these sweet spots like India. For sure there are challenges & shortcomings in India, as there would have been in China when toy production first started migrating there. The manufacturing transition process won’t go completely smoothly, but it is coming whether we like it or not and whether we are willing to act or not.

Those companies already sourcing from India may be achieving c. 10% manufacturing cost savings. Yes, those companies have a learning curve and some bumps along the way, this is not going to be as easy as sourcing from a country and sector which has been doing this already for 30 years! But bear in mind that manufacturing costs are usually the biggest cost for toy companies. We tend to spend c. 27-33% of sales value on manufacturing. So, forget corporate restructuring or cutting the advertising budget, the biggest area where a toy company can save money is manufacturing cost. A potential cost saving of 10% on the biggest cost area is likely to deliver both competitive advantage and also more profits.

This argument has been valid for the last 5 years at least, but the inertia caused by offices & infrastructure in or close to China has held toy companies back from migrating en masse elsewhere. Also, because annual cost increases are an annual drip, drip, drip of margin erosion there is no big shock to be the star to break the camel’s back. What has happened in the last year is that China’s economy is another year on from the time when it made economic sense to have low end manufacturing based there and of course we have the trade spat between the USA & China.

The tariff situation aside from all other consequences (intended or otherwise) has clearly accelerated the movement of toy manufacturing out of China. India has been a major beneficiary. The challenge for the toy industry (as we have been telling people for 5 years!) is that there are a limited number of export standard and certified toy factories in India. Those companies who were there first have established relationships and secured capacity, those who leave it to the last minute will mostly find that capacity is not there for them. India is on a major growth curve in terms of toy capacity, especially as the automotive sector both worldwide but especially in India have hit tough times, so the supply chain which contributes injection moulded parts for cars is increasingly looking elsewhere. The challenge though is that it takes time to build factories, to get certified and to build experience and toy specific supply chain, so demand is likely to outstrip supply for years to come. China has thousands of toy factories, and you just can’t replicate that in a hurry. New factories tend to launch with an ‘anchor’ customer to justify the investment required by the factory, so the reality is if you aren’t that anchor customer taking the capacity but also the pain of developing a completely new supplier then you are always picking up scraps left on the table by another toy company.

As we head into 2020, several factories in India of the highest quality are already full. Some of the up and coming factories definitely have capacity left but that is increasingly under pressure.

One of the other observations we would make about Indian toy manufacturing today is that it is not as fully developed in terms of product capabilities as China. This is to be expected based on one being completely mature and the other just developing. Hard plastics, basic electronics, packaging and Plush are all good in India. Soft ‘squishy’ type plastics & rubbers are less developed, complex electronics are harder to find at this point and some other categories are not yet available to the standards the toy industry needs, but this is developing constantly.

In conclusion, India is up and coming. The recent tariff situation has significantly increased pressure on existing factories. The sector is developing quickly but is not yet fully mature. India offers some different challenges to overcome and is not a perfect solution, but it is an amazing country and a vibrant and exciting country to visit, with great people. Sooner or later, if you are involved in sourcing and manufacturing of toys you are going to be heading to India, and so far it looks like the earlier you can do that the more of an advantage you can create versus your slower moving competitors.

13 September 2019 ~ 0 Comments

Why Brands Are So Important For Toy Companies…

The recent announcement that Hasbro are to acquire Entertainment One in a $multi-billion deal brings a number of benefits to Hasbro. The acquisition of further expertise and capacity for content production and management can only help Hasbro’s ongoing journey from pure toy maker to entertainment brand owner. Above all though, this deal brings Hasbro yet another major global ‘toyetic’ brand – Peppa Pig.

Toy companies that don’t have strong brands of their own tend to either have to fight very hard to secure listings at retail and to drive product off the shelf into the hands of consumers and/or have to license other people’s brands to build an attractive toy product line.

Above all, the toy industry is about brands. Such a large amount of toy sales globally are driven by known brands which parents and kids know, love and trust. As a toy company then, why wouldn’t you want to build up your own brands instead of paying a 10-14% royalty to use someone else’s brands under license?

The challenge of course is that it takes time, money and resources to build up your own brands. It is much harder to persuade retailers and consumers to buy unknown brands, so in the end the process of building successful long term toy brands is part creative inspiration and even larger part sheer grind and ‘elbow grease’.

It takes organisational committment to build brands. Maybe you will be one of the lucky few who manage to create a massive global brand without a great deal of effort or time, but that isn’t likely! In the end a toy company needs to decide if they are willing to commit to building their own brands and paying the appropriate cost in terms of resources, effort and investment versus the quick (but transient) win of licensing someone else’s brands.

The benefits of having your own brands are many, but the major ones are firstly the tangible asset value, as evidenced in the Hasbro – Entertainment One deal, established brands with global presence can be worth $billions in hard cash! Secondly though, and perhaps this should be of more interest to toy companies who want to continue to trade is the stability created by having your own established brands. If you are reliant on licenses you inevitably end up on a vicious hamster wheel where you spin your wheels frantically to try to stay on the ride, but every so often due to a poor movie or a gap in licenses you end up getting spat out & taking a major hit in topline revenue. Most of us in this business have seen or experienced this effect of the downside of a major sales boost from a hit license then dying off leaving a massive sales gap to fill. This can often lead to redundancies and other turmoil which we would all choose to avoid where possible.

It isn’t just the major global players though who can build their own brands. All these companies started somewhere, in the shape of just one or two individuals who built a business from scratch. Smaller less established businesses of course can and do build major brands, and should be constantly striving to build the next new brand which can catapult them onto the next level.

Our Consultancy business offers a brand and product management service to toy companies. We have worked with $20bn global brand companies through to start ups. For more information on what we do and how we help toy companies around the world build brands, just click here to find out more: http://www.kidsbrandinsight.com/services/

05 September 2019 ~ 0 Comments

Global Toy Industry: SWOT Analysis 2020-2025

These are interesting times for the global toy industry. In an industry which has over time proved to be remarkably resilient, there are arguably more threats and risks in the vicinity than at any other time in modern history.

The following SWOT analysis takes a holistic view of the medium term outlook for the toy business globally. The following toy market analysis has been conducted by toy experts who are actively involved in the business, this is not an academic exercise from our perspective:

STRENGTHS

The last decade or so since the global financial crisis has seen significant growth for the global toy business. The innate need of children to play, and the ongoing desire for parents to develop, educate, entertain, occupy and reward their children are the fundamental pillars of demand for toy products.

The industry has a wide range of companies of varying sizes, from multi $billion global companies with iconic brands through to a vibrant start up scene. Therefore there are sufficient existing toy companies to ensure broad consumer choice as well as to take advantage of opportunities of all sizes.

There are a broad number of retail access points where consumers can purchase toy products. This includes both physical retail and online retail. In all major markets, a multitude of distribution opportunities abound.

There is a large capacity and capability for developing new toys, both from a creative standpoint between in house designers and toy inventors and from a production and engineering standpoint between the in house resources of toy companies and those working in the factories that produce toys.

There are also many certified, experienced toy factories offering toy production at commercially viable pricing, albeit primarily in China.

From a marketing perspective there are a number of global, regional and local marketing platforms offering cost effective marketing solutions for toy companies looking for marketing opportunities for their products.

There is a plethora of kids entertainment brands for toy companies to produce toys around, alongside this there are a number of major entertainment brand licensors actively pushing toy licensing opportunities and an ongoing move slate offering major global entertainment events around which to launch new toys. Licensing remains a major part of the global toy industry.

The toy industry is not far from being a $100bn category globally, with a large number of globally iconic brands which look certain to stand the test of time, in short the strengths of the global toy industry are many.

WEAKNESSES

The toy industry is arguably over reliant on a never ending cycle of product development. Each year in the region of 2/3rds of all toy products on shelf are ‘new’ in some way, yet this 2/3rds of all products only accounts for 1/3rd (approximately) of total sales. In other words, the same old products which were on sale the year before account forthe vast majority of sales. Therefore an inherent weakness of the global toy industry is the huge investment of focus, money and resources on products which deliver a minority of sales.

The development and selling cycle for toys tends to be quite slow e.g. between 10-24 months, which means it can be an industry which is slow to react sometimes. Certainly forecasting is notoriously difficult, with either too much stock or too little stock being common place when a toy performs better or worse than predicted. (For more on the difficulty of accurate forecasting, check out this interview conducted by the BBC in London back in 2014 where our CEO Steve Reece explains why there was such a shortage of toys for the surprise hit ‘Frozen’) https://www.bbc.co.uk/programmes/p022bk27

Toy companies and toy retailers are very reliant on stock to sell, and as such the business is inherently risky as a large proportion of annual turnover can be held in stock which can be dependent on a comparatively narrow selling window (toys sell disproportionately higher amounts during peak season from late October to mid December).

OPPORTUNITIES

Toy demand is increasing globally. Strong opportunities exist in the fast developing economies of Asia, especially China and India, which have traditionally and historically been of lesser importance but are now offering major growth opportunity for the toy industry. These two markets look likely to see annual double figure growth for the foreseeable future. Major toy companies are investing heavily in these markets to position themselves for future growth and market share.

We see an ongoing opportunity in terms of increasing need and demand for toys as the trend to device obsession continues. Parents are increasingly seeing toys as a vehicle towards prying tablets and phones from the hard gripping hands of their children.

The toy industry has opportunity to reduce manufacturing costs and therefore profitability by moving some toy production from China where wages have been rising for some time to other Asian countries where wages are significantly lower e.g. India and Vietnam. (For more on the Indian toy manufacturing scene, we run a venture in this space) https://www.toyteamindia.com/


THREATS

We see 2 major threats to the global toy industry at this point:

Firstly, we’re starting to see a consumer backlash to excessive and needless plastic consumption and waste, which in turn has lead to polluted oceans and other environmental damage. This backlash is in the early stages, but we see the risk of a future threat to demand for toys since somewhere between 80-90% of all toys sold are either entirely made of plastic or contain a significant amount of plastic. We see this as a major short to medium term threat, although longer term we expect other materials to come to the fore to lessen the risk for the toy business. We also expect toy companies to get better at utilising other existing materials over time.

Secondly, we see the over reliance on China as a toy manufacturing hub as a threat, as it is not easy to move the vast majority of production capacity in a hurry. This has been exacerbated by the Trump-China tariff situation. Some major companies have been strategically relocating production for some years, but as the top 10 toy companies account for only around a quarter of the total market, the risk is that the thousands of smaller companies who make up the bulk of the market fail to relocate in time to avoid cost inflation as China’s economy develops further leading to even higher wages and labour shortages. This could lead to price rises, supply shortages and lost revenues for the global toy industry.

At the time of writing (Sept 2019), we appear to be heading towards a cooling off of the global economy caused by a number of factors, lessening consumer demand, uncertainty over Brexit, the USA-China tariff spat and other factors. However, we don’t see this as a major risk to the global toy market because the toy category has proven itself to be recession resistant during previous economic downturns.

An additional complication/change factor affecting the toy business is the ever changing face of retail. Over time we have seen a big shift from physical to online retail, with Amazon becoming a major global player in the toy category. Yet the toy market has adapted comparatively easily to this change, and we expect to see this trend continue. The bigger risk we see is an over reliance on a limited number of mass market retailers in the bigger markets. As per the failure of Toys R Us in the USA previously, any issues with a major national retailer in a major toy market can have a very disruptive effect on the toy market around the world. We don’t see any issues on the immediate horizon, but post Toys R Us we would be amiss not to mention this risk factor.

CONCLUSIONS

While there are many change factors ongoing affecting the global toy industry we are optimistic about demand in the short and medium term.

This article is written by Steve Reece & the team from Kids Brand Insight, a world leading toy business consultancy offering the following services:

  • Toy Business Consultancy
  • Export Sales Consultancy
  • Sourcing Consultancy (India & China)

For more information on Kids Brand Insight/our services, please visit our website here: http://www.kidsbrandinsight.com/services/

07 August 2019 ~ 0 Comments

The Future Of Toys – Part 4, Toy Manufacturing Evolution

In the final part of our series looking at ‘The Future Of Toys’, we move onto the potentially dull, but nevertheless essential topic of manufacturing.

There are a number of disruptive factors/trends relating to toy manufacturing whiich are discussed below:

FACTORS DISRUPTING TOY MANUFACTURING

China’s Rapidly Advancing Economy – toy business old timers can tell you of the pre-China era of toy manufacturing, but for most of us in the business, the major source of manufacturing has been China for decades. The reason why China originally attracted toy manufacturing was low labour costs. In recent years, China has maintained the bulk of toy manufacturing due to relative ease of doing business, reliability and capacity. Labour costs in China have been rising constantly though, and today we are reaching a point where the living wage in toy manufacturing hubs in China is moving beyond what is viable for cost effective manufacturing. Our prediction is that China will keep a substantial share of toy manufacturing long term, because a). Evergreen items which can be automated will reduce the need for labour b). China will retain a large amount of tech heavy/high end toy manufacturing which supports higher labour costs c). China will retain manufacturing for the Chinese domestic market which is now the 2nd biggest in the world & growing. However, most toy companies need to start to look outside China for low labour cost manufacturing on standard toy items which aren’t suitable for automation/robots on the production line.

Environmental Concerns – The current plastic backlash we are seeing around the world is a major disruptive threat to the toy business and to toy manufacturing. There are tens of millions of jobs if not more in the manufacturing of plastic products globally. It is likely that we will see either a). Reduction in demand for plastic items and/or b). A move towards more sustainable materials for toys. Lego for instance now has some products featuring materials sourced from sugar cane, but the toy business is likely to need to seriously ramp up utilisation of materials which are bio degradable. The other environmental factor to consider is the carbon footprint of the supply chain, manufacturing at home may be more expensive but clearly transportation of goods from Asia has a negative impact from an environmental perspective and this will push some to ‘nearshore’ manufacturing.

Automation, Robotisation and Artifical Intelligence – One of the biggest disruptors of the coming 2 decades as far as the human species is concerned will be the loss of low end jobs to automation, robots and artifical intelligence. Automation has always been a part of toy manufacturing, but what has prevented automated production lines as standard is the uncertainty of the toy business. With around two thirds of all toy items on shelf each year being ‘new’, that means we have a huge product churn each year, and automation tends to need long term production to be justifiable. It is much easier and more cost effective to throw cheap human labour at toy production lines for products which may fail after a brief 3 month production run. Going forward while it is inevitable some parts of the factory will be taken over by non human labour, it is at this point hard to see the end of humans on the production line for toys when the demand is so variable and potentially short term! The implication of this is that we will still need low cost human labour at the core of toy manufacturing for the foreseeable future.

Trade Wars – the current friction between the USA & China over unbalanced goods shipments and trading practises has definitely accelerated North American toy companies moving some production away from China to other countries. We run a company which helps toy brands find contract manufacturing in India – www.ToyTeamIndia.com and every time there is a new announcement/new threat to shipping toys from China, new customers approach us for help moving production. Longer term though, it seems likely that this issue and the confrontational approach to addressing it is mostly driven by the incumbent President of the USA. Once he moves on, we suspect the focus will shift elsewhere, but in the meantime there is no doubt that the current situation is accelerating some toy production moving elsewhere.

The Growth Of India & Vietnam As Toy Manufacturing Hubs – we have written elsewhere extensively about the growth of Vietnam & India for toy manufacturing. In summary, Vietnam is the easier place for Chinese factory owners to set up new factories for cultural and geographical reasons, and as such many of the major China based manufacturing groups have set up plants in Vietnam. India however, has far more scale potential, in fact it is the only country in the world with similiar population to China, and is currently around 1/3 the labour cost on average. This combined with the existing industrial capacity, especially for plastics manufacturing means that India is likely to become the 2nd biggest toy manufacturing hub in the world in the next 5 years.

Technology has revolutionised business in general in the past decade or more. Currently though the majority of toys are still manufactured with human labour using similiar if evolved injection moulded plastic machines as have been used for a long time. The next wave of technology and the next evolution of toy manufacturing looks set to be an interesting journey for all of us!

For more information on how to find toy manufacturing in India, please refer to our Toy Team India website: www.ToyTeamIndia.com, or feel free to get in touch via the Contact page.

25 July 2019 ~ 0 Comments

Our Indian Toy Manufacturing Journey

In their recent earnings announcement (Q2 2019) Hasbro reconfirmed their committment to moving to 50% of their manufacturing being outside China. They highlight a significant chunk of their manufacturing being from within the USA, but India remains a key part of their outside China manufacturing strategy.

Our business has been working to help toy companies find manufacturing in India since 2014. And it has been quite an exciting if occasionally challenging journey.

India itself is an amazingly vibrant but seemingly chaotic country. There are just so many people! On my first visit to India I found myself in a city I had never even heard of which had a population of 6 million people! I had been told to expect roaming dogs in the streets, crazy traffic with crazy driving to match as well as extreme poverty…all of which I have seen. However, what I hadn’t expected or been informed about in advance of visiting was the other side of the coin, the extremes of wealth that can be found in India and perhaps most pertinently for this article – the very advanced, high end manufacturing I discovered. On my first visit to India I drove past a vast Mercedes Benz plant, and knowing that company I knew inside would be a plant running to typical German standards of efficiency and effectiveness. I also visited food standard toy factories where you could literally eat your dinner off the floor – not something you can normally say of toy factories!

Since that first visit, I have visited dozens of factories across India, from Pune to Kolkata, and from Nasik to Aurangabad and Bengaluru. I’ve seen super high end facilities and super low end facilities, and my overall opinion is that you can find manufacturing to any level you require in India. The only gap I have found is experience – you can find all the engineers you would want, and can normally find someone to manufacture anything, the challenge is in experience of quoting, costing, designing, engineering and designing toys. This experience based has grown significantly though since we first started working with Indian toy factories in 2014 and today, as Vietnam’s established toy factories sit at full capacity, India remains the toy industry’s only mid to long term alternative to the super low cost manufacturing which is becoming harder and harder to find in China as China goes from being a developing country to being the world leading economy.

India is a major automotive manufacturing hub – with all of the following car makers having plants in India: Mercedes Benz, VW, Fiat, GM, Tata, Piaggio, John Deere, JCB, BMW, Ford, Honda, Hyundai, Renautlt Nissan, Toyota etc. And in case you think these are all for domestic Indian supply, around half of all cars manufactured in India are exported around the world – India exports around 12.5 million cars each and every year!

The automotive sector is really important to India’s toy manufacturing sector, because so much of the supply chain and indeed so many of the toy factories come from a background of automotive supply chain manufacturing. When you look at the interior of a modern day car you can see that most of the interior is made from plastic, as such there is a significant plastic supply chain in India accordingly. If you consider these factories are making a component to fit in a machine with 10,000 or more additional components, and work together without causing a crash, then producing a toy with 5-10 components is not going to be that difficult!

I have also investigated other materials being produced in India – the packaging suppliers in India are top notch, in fact when I toured the Head of Sourcing of a top global toy company around a toy packaging production plant in India they themselves told me that the standard of packaging being produced was at least on a par with if not better quality as packaging in China.

An additional area of expertise in India is Plush. There are a number of high end/competitively priced Plush toy fatcories across India supplying toy companies who are then shipping into Walmart, Target, Argos, Tesco, Carrefour etc. around the world.

Anyway, back to our learning journey in India. The funniest/most exhausting India experience I had was following a visit to a rubber factory about 4 hours drive North of Mumbai. Just before the return drive to Mumbai airport, the factory owner insisted on having a drink to celebrate a successful visit. Needless to say ‘a drink’ became about 10, and as my mind got less and less lucid, I eventually had to insist on leaving to give me a chance of making my late flight from Mumbai to Kolkata. On the way back to Mumbai, the driver became increasingly concerned about the time of my flight and was driving at speeds which India’s roads and the volume of cars, people, animals and other things were not meant to experience. About half way there just as it seemed like we might make it, the monsoon started. In case you haven’t experienced the monsoon, it is a heavy seasonal downpour which can lead to deep water and floods sitting on the road. The last hour of the journey was completed at breakneck speed through about 6 inches of standing water on the road – terrified does not even come close to explaining my emotions. Anyway, we arrived at the airport & I made a dash into the terminal just in time versus the scheduled departure.

Shortly after I arrived back at the airport we had an announcement that the airport was closed – due to the monsoon a plane had skidded off the end of the runway, and I believe the passengers were evacuated by emergency slides! As time dragged on into the night it became more and more obvious that flights were going to be cancelled. I then booked onto an early morning flight as a precaution, which gave me a headstart as soon after the flights were cancelled and chaos arrived. I then sat in the airport for 6 hours before getting the early morning flight once the monsoon abated, eventually arriving at my hotel in Kolkata, checking in, having a shower, then checking out 30 minutes later to go onto visit the next factory!

Thankfully most of my travels within India have been much easier than this with very cheap internal flights e.g. a 2,000 mile flight across India can cost as little as $70. I have also benefited from eating some amazing Indian food along the way – my favourite experience being a visit to a Thali restaurant, where around 15 waiters wandered round each dishing out some different exotic Indian dish or accompaniment. I even on one visit managed to rack up 21 Indian meals out of 22 in a week, which is a personal record I’m not sure my innards would ever thank me for repeating as the amazing spices and flavours eventually took their toll on my western body which is so used to bland food!

Anyway, back to work – to date we have introduced around 60 toy companies to toy manufacturing in India. Many customers have saved money, some have made once unviable lines viable again. Typically, with it’s low labour rate, India offers around 10% savings vs China based on current pricing. The recent trade/tariff spat between Trump’s USA and China have accelerated interest and transfer of manufacturing to India. Whereas we spent the first three or four years working with India on a hard sell job persuading toy companies of the merits and strengths of India, we are now in a position where some of the established Indian factories are turning away work.

Our policy is only to introduce our clients to tried and trusted suppliers, so currently this has cut down the potential list of suppliers as the major corporate companies accelerate their plans to move at least some production out of China they have filled much of the available experienced capacity. However, there is still some capacity with plastics manufacturing (for now) where we have good relationships with long established factories.

For those looking for an insurance option outside of China, or just looking to save money on manufacturing, we will be happy to advise on the options if you want to get in touch with us via the Contact Us page on this site: http://www.toyindustryjournal.com/?page_id=11

For more about our business and experience in sourcing from India: www.ToyTeamIndia.com

26 June 2019 ~ 0 Comments

The Future Of Toys – Part 3, Retail Evolution

The internet has disrupted, transformed and revolutionised the business of retail. Mamy mighty behemoths of retail have fallen by the wayside over the last 15 years or so as they failed to adapt and embrace the opportunities the internet has brought, along with addressing the challenges it poses.

This narrative can become overwhelming – everything needs to be online, physical retail is dead etc., this hyperbolic perspective can distort both modern reality but also predictions of the future trend.

In reality there are still many retail businesses doing well in physical retail, albeit most probably alongside an equally well managed online business. People still like to try & buy products, sometimes we need customer service or advice, sometimes we need to touch and feel a product and other times we visit stores for something to do.

Physical retail is far from dead, but to succeed in this space you need to be capable of adapting your approach and to be constantly pushing forward and ruthlessly managing your in store environment, customer experience, stock holding and marketing activity. The days of chucking some boxes out onto a shop floor and leaving them there and presuming customers will flock are definitely gone (if they ever existed).

Much has been written of failed retailers in the last decade and a half as mass market adoption of the internet has made its mark, in our case most notably (and painfully) the failure of Toys R Us looms largest and most recently.

But before we lament too strongly let’s take a look back to take a look forward. When I entered the toy industry at the turn of the millennium, Woolworths was one of two major toy retailers in the UK. Woolworths demise over ten years ago sent shockwaves through the UK toy industry. Yet a decade later, the UK toy retail market has in some ways never been healthier, despite the impact and growth of online shopping in the same period. The UK has two great examples of toy specialists who have thrived in a tough trading climate, from the global financial crisis through to the erosion of physical retail market share.

Smyths Toys Superstores – when I first joined the toy industry, Smyths was a small retail chain on the island of Ireland, with (if my dusty memory is right) about 5 or 6 stores. I remember our Irish sales team at the time being very insistent that we take the meetings with their biggest customer very seriously, although we generally paid far more notice to Woolworths and Argos who had (again from memory) in the vicinity of 500-600 stores each at that time. Fast forward to today, and Smyths have positively flourished in the vacuum created by Woolworths failure and by the failure of Toys R Us to modernise and adapt in the UK market. Smyths are now a major player in the UK market and perhaps more ominously for their competition are growing across Europe, having taken on a number of stores from Toys R Us in mainland Europe.

The Entertainer – perhaps the biggest direct gainer from the demise of Woolworths, The Entertainer has gone from strength to strength in the UK, providing a high street option for those wanting to buy toys. Again, despite the growth of online retail, The Entertainer’s store count has significantly increased over just the same amount of time as it has taken other business to fail to adapt and to fall by the wayside. The Entertainer’s smaller store formats allow them to vary their product mix to allow them to blend hot must have items as well as higher margin items, versus having a vast warehouse which needs to be filled with stock much of which mostly sells in just a few months of the year.

Both The Entertainer and Smyths also have successful online businesses we should note.

So in order to predict the future of retail, we can first look at these two examples of success in tough times, and extrapolate that forward. There are some fundamental principles of retail which haven’t changed in principle, only in how successful retailers execute them:

RETAIL IS DETAILS – fundamentally retail is about selling many individual items, and so each transaction needs to be supported by a thoroughly managed environment and consumer shopping experience. For instance, if you go into a Smyths store you will find in most instances perfectly merchandised shelves. On the flip side, if you ever go into a store and you can’t find prices for the products routinely that’s often an example of a poorly managed store with poor attention to detail because if a customer doesn’t know how much something will cost they generally won’t buy it. The same applies online e.g. if product images are missing or are unflattering you won’t sell the product.

CUSTOMERS NEED TO BE MOTIVATED TO COME INTO STORE – one of the things that has really contributed to the demise of some retail stores is the failure to effectively draw footfall into stores, because in the end the store needs footfall and it needs sales conversion from that footfall, if you don’t get the footfall you definitely won’t get the sales. The most perfectly merchandised store will not get success unless a). visitors leave feeling satisfied and wishing to come again and b). new customers are attracted or pushed in on an ongoing basis. (The same point applies to online e.g. you still have to drive traffic to the online store).

PRODUCT SELECTION – increasingly we’re seeing physical retail stores seeking point of difference in terms of product on offer. Some of the mass market box shifting retailers are happy to play the game of selling the same as everybody else but just cheaper, but for specialists or for those who can’t rely on footfall driven by the necessity of a weekly grocery shop for instance, product differentiation gives a different offer which can be intriguing and motivating for customers. (Again the same applies to online retailers).

BUSINESS MODEL – underlying every successful business is a clear business model encompassing margin mix, logistics & warehousing, success formula for stores including location, rent and footfall potential etc. One of the things which is very evident about Smyths & The Entertainer is that they both have a clear business model/strategy which has contributed to their ongoing success and growth.

SYSTEMS – Good systems are vital for retail – stock holding systems, replenishment systems, staff management and communication systems etc.

CUSTOMER SERVICE – effective customer service is critical, whether for physical or online retail.

So when we come to predict the future of retail, we can look at the fundamentals of retail listed above – these have arguably not changed and in our opinion won’t change for the foreseeable future, also the fundamental factors are the same in principle for physical or online retail. Well managed retail businesses with a sound and clear business model, great systems and good customer service will continue to be successful, poorly managed businesses without these fundamentals in place won’t!

Normally when predicting the future, writers of such articles focus on everything that is going to change, but ignore what is unlikely to change, hopefully we’ve avoided falling into that trap!

But now that’s out of the way we can get the crystal ball out & try to predict what will change. Here are the key areas where we see change on the horizon:

ARTIFICIAL INTELLIGENCE (AI) – already today when you order your groceries online, most retailers will offer you the same or similiar basket next time round i.e. will remember what you ordered before, but imagine if you could overlay advanced artifical intelligence e.g. let’s say you bought ice, cold drinks and salads last week because it was baking hot outside, will you want the same when the weather is cold, or should they be offering you hot soups etc. The same can apply to toy shopping, let’s say last Christmas you ordered toys for your 6 year old, then next Christmas the child will be a year older, in 3 years time maybe moved on beyond normal toys but maybe technical or outdoor toys may still be appropriate. AI can process and analyse all factors involved and recommend what you should buy this time round. As always with such technologies it starts out flawed and over time will be tweaked until it can spookily predict exactly what your child might want.

FROM KEYBOARD CONTROLLED TO VOICE CONTROLLED ONLINE RETAIL – Amazon’s Alexa has to date been the biggest landmark product in the space of voice recognition. Currently (at the time of writing) it has not had a huge impact on shopping habits, but that trend is developing and as the technology gets better and better inevitably more and more retail will be conducted without physical contact with a computer or device.

PLASTIC BACKLASH – today we are focused as a society on minimising use of plastic carrier bags and one use plastic items like drinks bottles. Looking forward this trend seems only likely to continue. At some point humankind will discover a different material to fulfil the same purposes/functionality. But in the meantime until that comes the lens is only going to get tighter and tighter on plastic, so we can expect more and more pressure on retailers and therefore from retailers to cut out plastic usage in packaging and products etc. wherever possible.

DELIVERY REVOLUTION – we can already order on Amazon and have the product delivered on the same day we buy. But currently this is delivered by hand by human. We’re already at the point where aerial drones can deliver shopping, and this aerial drone trend is only going to grow. This might affect the size and style of toys which sell the most going forward, which is not really a consideration currently.

AUTOMATION/ROBOTISATION – futurists are already predicting mass job losses in sectors such as manufacturing, customer service and retail due to cost savings resulting from automation/robotisation. This is going to take a while I believe, but in the end we will see a significant loss of (human) labour. On the positive side though, the same futurists are predicting that while basic manual jobs will be lost, the need for creative skills and inputs will grow, and that more of the human race should be working in such areas in the future. The great thing about this trend from the perspective of the toy industry is that playing with toys can have a large role to play in developing creativity in children.

SOCIAL MEDIA FOR KIDS – currently nobody has really cracked safe social media for kids. Over time this will become easier and better as technology advances and new methods of screening out inappropriate content/people will inevitably be developed as the cost of not doing so will be far worse. This will allow for more targeted marketing for toys, driving more targeted traffic to retail.

In summary then, change is inevitable, but some fundamental principles of retail are unlikely to change, the key to success is learning how to apply them in an ever changing environment.

Tune in soon for Part 4 in this ‘Future Of Toys’ series, in Part 4 we’ll look at toy manufacturing, how it changed and how it will continue to change going forward.

Steve Reece, the writer of this article, runs a toy industry consultancy which helps people get ahead in the toy business. The most popular service is our brand & product management service which supplies hands on, experienced resources to toy companies for brand, marketing and product development projects. Our Export Sales package can also be included. We’re normally booked for a few months in advance, but have one space just come free. More details can be found here: http://www.kidsbrandinsight.com/services/

02 May 2019 ~ 0 Comments

The Future Of Toys – Part 2, The Changing Marketing Landscape

In this latest instalment in our series on the future of toys, we take a look at marketing, how it has changed over time and where we seem to be headed. Needless to say, any predictions or forecasts we make for how toy marketing will be done in the future will be wrong in some ways, but this should at least be thought provoking for those toy companies looking to get and stay ahead of the pack…

WHERE WE’VE COME FROM

The Toy industry has benefited fantastically from a 2 levelled approach to marketing over time:

  1. ‘Hero’ items – i.e. big hit items with lots of focus and volume potential have traditionally been either TV advertised or have been licensed from a major blockbuster movie with all the resultant marketing noise that goes with that.
  2. Retail margin opportunities – those items which were likely to sell in lower quantities have typically been priced with more retail margin so that while the retailer doesn’t get the benefit of high sales volume, they do get higher margin per item. You could argue this isn’t really ‘marketing’, but last time we looked at the classic ‘5 P’s Of Marketing’, Price was one of them!

Over the last decade, the impact of TV advertising has been eroded as the media landscape has fragmented, and children move their viewing attention online via YouTube or to streaming services like Netflix. They have also moved to double or even triple screen content consumption. So whereas historically we could bang up the TV spend and be close to guaranteed to get a heavierweight impact & resulting sales uplift, things aren’t as simple today.

These days, ever major toy company is also a major content production and content marketing company. That completely changes things in many ways – it is in some ways more empowering, as the toy company now has control versus handing the baton to a TV network. The challenge is how to get ‘standout’ in an environment of content proliferation – 300 hours of video are added to YouTube EVERY MINUTE (that isn’t a typo!). There is a huge and growing array of content out there, hence companies need to be both content production experts AND content marketing experts, as well as having all the necessary toy domain expertise. Today’s global toy companies also need to know how to fully integrate a really compelling product concept into the content. Huge rewards await those toy companies that get this right, but it isn’t always easy!

Movies are not quite the surefire volume driver that they once were. While some continue to sell big volumes, there has been a tendency to over saturate sequels and prequels, and to release movies based on the same franchise so close together that toy merchandise from the previous installment may not have fully cleared retail yet, which makes things messy/less likely to be successful generally speaking.

Kids (and parents) are watching informal/self created content as much as, if not more than, professionally produced footage. Along with this has come the massive growth in ‘Influencers’. Influencers are particularly effective in toys because they show how a product works, which is really important in an industry where products come in and out so fast that it is often not deemed worth creating infomercial style content for every product – for the sake of a few boxes of free products, and comparatively cheap fees, YouTube channels/influencers with huge following can do more for your marketing in some instances than an expensive TV advertising campaign!

So that’s where we came from, and where we have got to. The big question though is where are we going, and how will that further disrupt toy marketing? Here’s our thoughts:

WHERE WE’RE (POSSIBLY) GOING

  1. The Future Of TV Advertising – we don’t see TV advertising going away. There are some types of products which TV is still really effective for. The toy industry is often quite slow moving/backward looking, so for some companies, where there is a continued audience, TV advertising will still make sense at least in terms of ‘if it isn’t entirely broken why fix it!’. The reality though is that we expect TV ad spend to wane in coming years although not disappear.
  2. Influencers/Regulation of Influencers – any new technology or media format tends to launch with hope, and should it be fortunate/good enough to achieve mass adoption, they tend to get a ‘honeymoon’ period of good will and importantly, lack of regulation. Because if you can accuse the toy industry of sometimes being slow to change, then the political system/machine in most countries is even slower. YouTube has been mass adopted for more than a decade, yet politicans in major toy markets are still debating and arguing over what level of oversight and regulation is needed! It has become increasingly clear that we, as civil society, can’t rely on these companies/platforms to responsibly regulate themselves, so further regulation is inevitable. And aside from the safety concerns of cyber criminals, unsuitable content and other negative concerns, there is a clear trend towards a lack of trust with influencers. The one prediction in this article we believe is most likely to come to fruition is regulation of influencers on social media platforms. Whereas influencers have operated in a kind of digital wild west so far, this period is heading towards a reckoning! If you are a child, a parent or other interested party, and your preferred influencer promotes a product which turns out to be crap, you are likely to lose some faith and especially likely not to buy again whatever they promote. Good influencers will begin to realise that elsewhere, long term success depends on having a good brand and a sustainable model, and at the same time will therefore benefit by a more ethical approach promoting product which fits the brand. This needs to be done in a transparent way which avoids the draconian punishments for infringing the inevitable regulation which is on the horizon & definitely coming one way or another.
  3. Toy Companies As Content Creators – we already looked at the idea that most major toy companies are now content creators as much as toy companies. The thing is though the top 10 toy companies account for c. one quarter of the total sales in the toy business. Despite all the noise, and shelf space, and marketing spend, the top 10 toy companies are far less dominant in terms of market share versus some industries. There are somewhere in the region of 15,000 toy companies in the world, so in that case 14,990 (approx) toy companies account for c. 75% of the total sales. And what we haven’t seen so far is those $5m-50m toy companies really embracing content as the driving force behind toy marketing. That inevitably has to come, as these toy companies realise that spending 10-15% of turnover on a fading media format (TV advertising) is not that prudent. If you are one of the 14,990 toy companies outside thee top 10, you do need to consider your future strategy to compete against the bigger companies with their teams of people, in-house studios and straight to cinema content production capabilities.
  4. Global (Non-Language) Content Will Become Ever More Important – Asia is set to grow hugely in importance, commercial impact and purchasing power over the next decade or two. This offers huge opportunity for toy companies, but also a major challenge – because culture is so different. Conceiving a product/content offering which can work universally is really hard. We’ve all seen those ‘funny’ screw ups where a car company launches a car with a universal name which means something rude in a non English speaking market (!). We shouldn’t be too snooty in our perception of these errors though, as there are plenty of these mistakes made in the toy business and childrens content industry. To put this in practical terms, the number 2 toy market in the world today is China, and surprise, surprise – China is culturally very different to Europe & North America. There is a reason why the genre of ‘Hollywood’ movies which tends to work best in China is action – because action needs little words! And having a fight against an evil baddie is a fight in any language, a punch is a punch, an explosion is an explosion, and a toy based on this is to most extents just a toy. There are of course some characters which are more easily understood in one country over another, and bearing in mind how many toys are based on the animal kingdom, there are some animals which are seen as revolting or not suitable in other key countries. As ever, cultural understanding and market by market insights are key.

So far we have avoided talk of bots, robots & AI, but we would be remiss not to cover this, as this area is likely to have a huge part to play in toy marketing in the future!

Firstly, there is no doubt that further automation is on the way for online marketing. Once the parameters of an online campaign are fixed, all the tinkering, testing and frankly farting about (!), can easily be done by bots these days. Hallelujah, please remove all humans from having to use those horrible online dashboards! More seriously though, the more marketing becomes automated, the less of an advantage/difference we can find.

Could AI plan and execute ALL marketing campaigns in the future? I.e. bearing in mind how formulaic the toy business can be, could AI not work out how to create a toy franchise based on a proven formula – all you need is a rough & tough animal or a super cutesy one, with a fitting content/advertising direction and an array of online marketing driving traffic to key retail partners? This is certainly possible, but I don’t think we’re getting there in a hurry.

I read an article recently about how AI can actually already do a pretty good job of analysing all movie scripts ever, and coming up with ‘new’ movie scripts based on this analysis. So in our opinion, AI will be able to conceive of and to a degree deliver toy and marketing development and execution long in advance of humans being willing to let them! Already toy companies can access a huge array of professional toy inventors and of advertising mind power, but in general, they don’t or at least they don’t do it effectively. AI will be hugely disruptive to the toy business as much as anywhere else, but I expect the inertia and intransigence of the human mind to prevent that happening in the next 5 to 10 years at least!

However you see the future though these are interesting times, and could get even more interesting in the years ahead!

Steve Reece runs a toy industry consultancy which helps people get ahead in the toy business. To sign up for our newsletters, sign up on the right hand side of this page, or go to the website below. Following the trend to toy companies becoming content creators, we offer a service producing compelling content for YouTube and other platforms. Most production agencies can make you something that looks good, but does it hit the right mark? Do they know the consumer and what the consumer is looking for? Have they interviewed thousands of kids and parents about toys? Probably not, so if you would like to discuss your content production needs with people who know both production AND toys, feel free to send us a brief or get in touch to discuss. More details can be found here: http://www.kidsbrandinsight.com/services/

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