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

23 July 2015 ~ Comments Off on Why Hasbro Selling Board Game Factories Was Inevitable…

Why Hasbro Selling Board Game Factories Was Inevitable…

Why Hasbro Selling Board Game Factories Was Inevitable…

Steven Reece

Hasbro announced this week the sale of their board games factories in East Longmeadow, USA and Waterford, Ireland to Cartamundi.

Much has (already) been written about this and the reasons for it and various sources have attributed this to grand strategy along various lines. However, the number one reason why these plants were sold is because Hasbro has not been in the business of owning/running board game factories for a long time. Those manufacturing plants which could most easily and prudently be closed and production sent to China felt this effect way back e.g. exiting from the historic Kenner location in Cincinnati back in 2000-2001, or Hasbro’s other European manufacturing plants in Leeds, England and Valencia, Spain which are now effectively ancient history.

There are two reasons why Hasbro had retained East Longmeadow & Waterford for so long despite the overall strategy of focusing on development, distribution and marketing while leaving someone else to worry about the grind of production management:

1. These two factories have done a great job over time of delivering quality product at affordable cost with guaranteed capacity levels.

2. It’s very expensive to close factories down – if we look back at the closure of the Cincinnati location, reported costs of closure were between $70m-$170m! That’s a big chunk of money to take a hit on in any year.

(See this link for reference of costs of that closure)   http://www.enquirer.com/editions/2000/10/13/fin_hasbro_exits_home_of.html

So it’s not that Hasbro have suddenly changed direction/set in place a grand strategy that hasn’t been seen before or observed by outside analysts, rather this is the culmination of an exit strategy from manufacturing that started in their Toy business way back in time.

In hindsight, Cartamundi are one of only a very few candidates who could have taken these two sites on having the size to manage/finance the transaction and ongoing business, as well as being strategically committed to board game manufacturing. Additionally, as stated by Hasbro’s releases, the two companies do have a history of working together and have a similiar ethical approach to doing business.

On a personal note, I’m delighted that these two gods of the board game industry are going to be taken forward in the right way. If you were to look at how many classic games these two factories have manufactured over time, the numbers would be staggering. I’m going to guesstimate that it could be in the billions of copies of much loved games that have come from these plants. Viva East Longmeadow & Waterford games manufacturing!

P.S. If you’d like to be notified of new articles published on this site, please just fill in your details on the right hand side of this page and we’ll notify you when future articles are published…

by Steve Reece, CEO of Kids Brand Insight www.KidsBrandInsight.com,  a leading Consultancy to toy, game and kids entertainment companies around the world, which helps companies find the right toy & game factories, consumer research test their products with kids and parents and secure export distribution/market entry around the world

 

17 July 2015 ~ Comments Off on 5 Ways Mattel Can Return To Growth

5 Ways Mattel Can Return To Growth

5 Ways Mattel Can Return To Growth

Steven Reece

Much has been written about Mattel’s recent performance. With key brand Barbie apparently struggling and sales down, alongside changes in management these are comparatively turbulent times for Mattel.

The challenge in the toy industry is that it takes time to bring through new initiatives and developments, but I’m certain there are several thousand people beavering away on reversing the trend in Mattel’s case.

Here’s some thoughts on how Mattel can return to growth:

1. Reinvigorate And Reinvest In Icon Brands, Especially Barbie – clearly Barbie needs a boost when we look at recent sales trends, but we couldn’t accuse Mattel of inaction in this area. Between various entertainment content releases and new product initiatives there is plenty going on. When we consider that Frozen was so strong last year it would be unrealistic to expect Barbie to sail through such strong competitive winds with no impact. As Frozen frenzy calms down throughout this year and beyond, I’d expect Frozen to establish itself as an evergreen brands at lower levels of demand, opening up a clear bounce back opportunity for Barbie. As long as the product stream and entertainment content keeps on coming this would seem to be more or less a given based on the longevity of the Barbie brand and Mattel’s distribution strength.

2. Grow Recent Acquisitions – Mattel’s comparatively recent purchase of both the HIT Entertainment brand portfolio (including the Thomas and Friends powerhouse) and MEGA Brands is yet to pay full dividends. I see considerable growth potential ahead as Mattel does what they do so well in building and growing brands globally. I read a recent article in the UK’s excellent toy trade mag Toy News in which members of Mattel’s management highlighted the comparative lack of infrastructure MEGA Brands had in Europe versus Mattel. Click here to read that story: http://www.toynews-online.biz/interviews/read/building-bloks-mattel-on-making-mega-brands-a-serious-global-force/044895 Aside from the benefit to Mattel of selling MEGA Bloks via their hugely strong sales teams in North America and the UK, there is clear incremental opportunity to significantly grow distribution and therefore sales in Europe and further beyond. When we look at the fact that Europe as a whole has a roughly comparable market size to North America, it’s clear to see the upside. I see 3-5 years of growth ahead on the recently acquired brands.

3. New Product & Category Launches – this growth path may seem like the most obvious i.e. need more sales, why not just launch new products into categories not currently exploited. The challenge is that established competitors make this difficult. Global giants like Mattel (and Hasbro and others) don’t tend to do so well as the under dogs in a category/with a product because there structure works well for areas of strength (i.e. less trade margin, high TV/ad spend, full distribution with POS marketing investment). Where they have to negotiate support from a comparative position of weakness things get a little trickier, and as we work in a hit or miss business, our analysis suggests that you need to be willing to launch 3 or 4 new brands which fail to establish one which sticks. While Mattel have done that fantastically well in recent years with Monster High (arguably the best new brand launch of the decade in my view), many more fail than work, and based on where Mattel are right now, I’m not sure it’s a good bet to keep taking that punt versus the other growth options listed here!

4. New Acqusitions – while rebuilding Mattel’s core brands, especially Barbie is the single most critical priority to protect the foundations of Mattel’s business, the biggest upside potential appears to come from further acquisitions. Historically, this is THE way Mattel and Hasbro have grown. And there are some clearly attractive targets out there. Moreover, Mattel’s positive cash position and ongoing net cash generation provides the means to fund growth driving acquisitions. I’m not going to speculate on potential targets here, but there are clearly some companies of sufficient size owning either potentially incremental brands or significant market position in categories Mattel are not so strong in.

5. New Entertainment Driven Opportunities – Monster High was driven by entertainment content. In fact, as I understand it, TV networks are so over loaded with kids TV content that it would have been difficult/expensive/imprudent to get the show on TV. As such Mattel launched via YouTube, and the rest is history – Monster High is a massive global brand launched in a category in which Mattel already have the No. 1 brand. There are clearly other opportunities for Mattel here – between their own IP and 3rd party IP, Mattel could well benefit from looking towards a closer relationship with Hollywood and building a greater strength in terms of TV distribution as have their rivals Hasbro. Finally on this point, the Batman V Superman movie launches early next year, and with super hero movie franchises proven to drive substantial toy sales Mattel should feel the benefit in terms of a boost to 2016 revenues.

 

Disclaimer/admission: I own a small amount of Mattel shares bought recently as my amateur eye sees a turnaround play based on the above thoughts. Anyone who takes the views of one person too seriously with regards to investments, especially someone as unskilled & unqualified in the investment world as myself is setting themselves up for trouble!

P.S. In case you haven’t heard yet, we recently launched our own Toy Review service – The Toy Verdict. We are also happy to announce that entry to The Toy Verdict Awards 2015 is now open, for more details or to enter, just click here.

by Steve Reece, CEO of Kids Brand Insight www.KidsBrandInsight.com,  a leading Consultancy to toy, game and kids entertainment companies around the world, which helps companies find the right toy & game factories, consumer research test their products with kids and parents and secure export distribution/market entry around the world. 

13 July 2015 ~ Comments Off on

Why Toy Design is Special and What You Can Learn From It.

Richard Heayes

Traditional toy design covers a broad spectrum from infant and baby products, low price collectables, detailed action figures and dolls, construction systems, board & card games, electronic gadgets, outdoor sports – the list goes on and on and on…

From a purely design for manufacture point of view it covers all the bases of normal consumer goods design. However, there is something else that is absent from many normal consumer products. A magic that bubbles up from the inception of the first sketch and shines brightly as the idea evolves through models, testing and into prototypes and business meetings. It is the magic of Playfulness and Storytelling.

I’ve developed dozens of ‘normal’ consumer products before I started in the toy business. A designer’s role on those products is very much seen as someone who can embody the brand character in a three dimensional form. Taking into account all the challenges of mass producing ANY product. Making sure the product stacks up and stands out against the competition and has good user appeal. The reality though for most product designers is that it is an iterative development from a previous product.

Toys however don’t always follow those same rules. The very banner of ‘TOY’ can mean anything that excites, creates or builds on a story or nurtures your imagination. As a designer this is a VERY engaging area to work in. What is more exciting that designing products that stretch a child’s imagination or inspire them with play memories that will carry on into adulthood? Many of my most vivid and happy memories as a child were when I was playing.

Building a huge Lego space port across a six foot trench that were the footings for an extension to my house. Finally beating my beat friend on his TCR racing set, stamping my gran repeatedly on the forehead with an ink pen in a game she was never going to win, at least not by my rules. Going six people across on two skateboards down a 1:6 hill without ANY kind of padding whatsoever (that didn’t go as we had planned)!

Working in toys lets you keep that creative ‘what if’ side alive. That constant ‘dreaming’ to find new ways to play, new ways to let kids unlock their imagination creates what I call Play Thinking. It is a way to take even mundane items and give them a sense of fun and hopefully in turn make then a little more memorable.

UI / UX is something you may not normally associate with toys and tabletop games. However it has ALWAYS been at the heart of their design, the terminology however has not. The best toys have great physical UI. They can be understood by young children who cannot read and just want it to work. Toys with digital components need Designing UX for tabletop games that have mostly been about multi-player. However, players like to change and bend the rules and so the designer has to work with this, in order to design a great experience without the benefits of guided play & patches.

Here are my top three tips to use Play Thinking in your next project

1. Does it have emotional appeal? The best toys hit you there first. They immediately put a smile on your face. No different from when you see a great product or cool service you want to engage with as a adult.

2. Does it have a reason to be? What is the story behind the project and does it capture people’s imagination? This is equally important when you are trying to sell the idea internally.

3. Does it match your consumer need? The best toys understand their market. Kids change fast in ability and taste and toy designers have to pay close attention to that. Sure, it has to be cool but it also has to be age appropriate. In a age where the average population is ageing, this is very relevant.

Why not use toy design in your next warm up session? A 15 minute ‘design your dream toy’ is a good way to shake out the everyday and start thinking more laterally even if it is a precursor to planning your next I.T budget!

Richard Heayes is founder of Heayes Design, a design and invention consultancy
with a playful spirit, helping the Play business innovate.
As a Designer & Design Director at Hasbro for over eighteen years Richard led creative
product development on dozens of brands from Monopoly, Scrabble, MB, Trivial Pursuit,
PlayDoh to name a few. He brings an insight and passion for blending design vision
with business insight to create breakthrough products that deliver.

13 July 2015 ~ Comments Off on Toy Development: Should We Take An Innovative Approach Versus Following The Formula

Toy Development: Should We Take An Innovative Approach Versus Following The Formula

Toy Development: Should We Take An Innovative Approach Versus Following The Formula

Steven Reece

Toy companies often speak of innovation, yet if you looked at the average toy aisle today and compared it with the toy aisle from 10 years ago, how much would actually have changed?

You’d still see action figures, playsets and collectibles from the latest hit kids movie.

You’d still see an array of board games, construction toys, plush, vehicles etc.

Furby was in market 15 years ago, and was fluffy and lovable back then as it is today.

So where does innovation fit in?

The reality is that there are only so many themes to go around, for instance this year dinosaurs have made a major comeback for obvious reasons, princesses are still more than performing at the checkouts, monsters and zombies still abound as do cutesy animals. (For more on perennial themes in toys check out this article I wrote for the UK’s excellent Toy News magazine: http://www.toynews-online.biz/opinion/read/timeless-toy-themes-perennial-goldmines/040251) ).

Anyone who thinks they are developing toys based on a completely new theme is probably misguided or mistaken!

However, what we do see is a product development on a massive scale. While we see some massively disruptive new categories emerge (Skylanders/Disney Infinity) and established brands update their products with the latest technologies just as Furby has done…as an industry we still develop a monstrous amount of products in established product categories each and every year. Every year the Spielwarenmesse (Nuremberg) International Toy Fair showcases over 75,000 new products, which averages out at 25 new products per exhibitor. That’s a huge volume of work for any company to contemplate.

And while new tech driven products grab a disproportionate amount of the headlines, the vast majority of $sales i.e. 90%+ come via products in long established product categories.

So when we look at innovation in the toy industry, we’re mostly looking at innovative execution versus pure blue sky. The most successful toy companies tend to do the best job at blending proven formulas with executional innovations on an ongoing basis.

For sure there will always be those who try to reinvent the wheel and make it big, and good luck to them, but the analysis suggests that fresh thinking about traditional play patterns is most likely to deliver reliable long term success in the long term.

P.S. In case you haven’t heard yet, entry to The Toy Verdict Awards 2015 is now open, for more details or to enter, just go to http://www.thetoyverdict.com/the-toy-verdict-awards/

by Steve Reece, CEO of Kids Brand Insight www.KidsBrandInsight.com,  a leading Consultancy to toy, game and kids entertainment companies around the world, which helps companies find the right toy & game factories, consumer research test their products with kids and parents and secure export distribution/market entry around the world. 

06 July 2015 ~ Comments Off on Why The Toy Industry Needs The €uro

Why The Toy Industry Needs The €uro

Why The Toy Industry Needs The €uro

Steven Reece

The ongoing financial crisis in Greece has highlighted rather painfully the challenge of trying to have monetary union without full political union. More qualified macro financial commentators than me can inform you more about that, but this ongoing Greek drama has the potential to cause serious financial shockwaves.

However, I thought it worth remembering what it was like for toy companies before we had the €uro. Because it was frankly a real pain! I remember the grinding tedium and stress of trying to align list prices on a pan-European basis. There is after all no single factor more likely to kill a great product or even an average one than pricing which is out of kilter with the market. If you’re considerably more expensive than a directly comparable competitor product then forget it!

Back in the day (prior to the introduction of the €uro we had to use a complicated spreadsheet to work through translation variations in order to get pricing which worked for the £GBP, the Deutschmark, the Franc, Peseta and Lira…The phrase ‘herding cats’ seems to best describe the process of trying to get the right answer out of the spreadsheet for each major market in Europe, because no sooner had you set the list pricing for two or three markets, then you found one had slipped out of acceptable variance…aaargh! And god help you if you didn’t find the right formula, because the implications were very serious for the market you got wrong, with huge potential for ruinous cross border shipping.

And by the way, if that wasn’t stressful/contentious enough, don’t forget exchange rate variations, because all of those separate currencies had their own comparative value drivers i.e. different interest rates, inflation rates etc. So you could set pricing and think you had done it for the year, but several months later the exchange rates could be very different, and customers who thought they were set to buy at acceptable pricing might suddenly find that not to be the case.

Finally, the additional complication was that I only mentioned 5 European currencies above, but the €uro replaced 22 national currencies, so while the only way to sanely manage list pricing on a pan European basis was to focus on the major markets, and leave the rest to worry about later, there was an inherent stress point in doing this, because you still had those other currencies many of which were bound to end up wrong.

To put this in a modern context, those companies trying to sell into Europe on a $USD FOB basis in 2015 will most probably have encountered some challenges as the €uro has plummeted against the $USD (primarily due to the Greek crisis and threat of further issues from heavily debt laden €urozone countries). So pricing which looked good last year looks horrible for European companies buying in $USD in 2015. While this is a serious challenge for most (and a considerable opportunity for anyone manufacturing in Europe and selling in €uros), imagine if that was an ongoing problem, multiplied by many currencies – pure chaos!

So I for one am very much looking forward to seeing this crisis resolved in the best interests of all so that the €uro can move forward and continue to simplify things for the toy industry, because the alternative really doesn’t bear thinking about!

P.S. On a separate point, entry to The Toy Verdict Awards 2015 is now open, for more details or to enter, just go to http://www.thetoyverdict.com/the-toy-verdict-awards/

 

by Steve Reece, CEO of Kids Brand Insight www.KidsBrandInsight.com,  a leading Consultancy to toy, game and kids entertainment companies around the world, which helps companies find the right toy & game factories, consumer research test their products with kids and parents and secure export distribution/market entry around the world.

30 June 2015 ~ Comments Off on How Toy Marketing Was Revolutionised…

How Toy Marketing Was Revolutionised…

How Toy Marketing Was Revolutionised…

In times gone by, marketing toys was much simpler, and if the truth to be told, easier! It was also potentially much more expensive than it needs to be today.

Back in the day we just had to tell the retailers the product was going to be TV advertised, and then once we were certain they had listed the product and pre-ordered enough stock to justify the budget, we TV advertised the hell out of the product, and some sold off the shelf and some didn’t, but as there is always another product development cycle ahead in the toy industry it didn’t matter all that much if there were a few prickly inventory issues as long as we’d amortised the TV we could mark down with the retailer and move on.

Even better, it actually didn’t really matter that much whether the product was any good. While retailers would moan if they had problems with returns, the key thing was to sell through as many products as possible pumped up by TV and hope retail inventory was clean enough to encourage re-orders next year.

In essence, what we had was a largely one way process of the toy industry and retailers flogging the hell out of a product, and  consumers taking the product to the tills and buying it in sufficient quantities as the only meaningful measure of success.

One (embarassing) example I feel honour bound to share with you at this point of just how one way that process was can be found in a particular product I launched some years ago. This product was a Bingo game, and for those not so aware of how Bingo works the key thing is that every player has their own distinctly different set of numbers to follow. Sadly, due to an error/omission the numbers printed in this particular Bingo game were all exactly the same printed sheet repeated. Which meant that the game was to all extents and purposes not playable and therefore not that useful! We shipped in 10,000 units of this product, and I know for a fact that 10,000 copies (more or less) were sold through. Astoundingly, the retailer only received 3 complaints from 10,000, despite the fact that the product was not playable. While I’m sure that at least half of those games were never opened, there really must have been at least a couple of thousand games opened and therefore a couple of thousand consumers would inevitably been disappointed (a fact which makes me feel shamed to this day!). But just three complaints !?!?…

This was the world before online consumer reviews, mums/moms blogs, product review sites and social media. Today I can just imagine the outraged Facebook posts which would be doing the rounds and the 1 out of 5 product rating with angry rants, but back in the day you could kind of get away with such ineptitude to a degree because people generally couldn’t be bothered to take something bought for such a throwaway price back to the store to complain.

Things have changed, in fact that understates things – Toy marketing has been revolutionised by online reviews and social media. Now while that may be no surprise to you or to your company, it still astounds me how susceptible toy companies are to bad reviews and unrepresentative/ludicrous reviews by people who online have power but who in person would not be listened to by the average savvy consumer. Doubtless you’ve seen some stupid feedback online – you know, someone who bought an action figure but can’t believe it can’t actually shoot real web from it’s fingers, or bought a trivia board game but then found it only involved asking and answering questions (!)…these people are out there, and they are adverseley affecting sales of your products right now!

That’s why Kids Brand Insight (our parent company) launched TheToyVerdict.com a product review website which guarantees to only add positive online word of mouth – if a product is tested and gets less than 7/10 we don’t post the review which protects you from bad PR online (although if you launch a crappy product someone out there is going to smash you, it just won’t be us!). From the consumers perspective, they know that TheToyVerdict.com will only post reviews for products which are either good, very good or excellent, in other words we aim to create a portal of cool stuff for consumers while helping toy companies effectively promote their products. All products reviewed and approved for posting on the site will feature product images and e-commerce sites to drive sell through for toy companies.

In addition, The Toy Verdict Awards 2015 are now open for entry to all categories of Toys. Research proves that award winning products sell more than they would have done without the awards, so long as award logos are featured in marketing, on pack, online etc. The 2015 winners will be featured extensively in PR in Q4 to further boost both real world and digital PR. To enter your products just click here.

For more information on The Toy Verdict, please go to www.TheToyVerdict.com

 

13 May 2015 ~ Comments Off on 5 Things Small Toy Companies Can Learn From Big Companies

5 Things Small Toy Companies Can Learn From Big Companies

5 Things Small Toy Companies Can Learn From Big Companies

Steven Reece

Apparently the grass is always greener on the other side. In working at major corporate companies and in working for toy companies with a handful of employees, there is often an over estimation of the advantages of being at the opposite end of the spectrum, and a lack of appreciation of the advantages from one’s current company size.

Perhaps it’s human nature to bemoan the challenges we face on a daily basis until they build into mountains from mole hills!

Anyway, to help companies & people in companies keep perspective, here’s 5 things small toy companies can learn from big toy companies:

1. Ruthless stock discipline – big companies are ruthless on stock. They still experience product flops and over ordering on occasion, but they manage the process efficiently and without emotion, because excess stock holding kills margin, increases warehousing costs and ties up much needed cash…in effect, excess stock is like gunk sitting in someone’s bloodstream straining the heart from beating and pumping out vitality. Seriously, if you look at the ever more prevalent bargain stores selling clearance product, you will notice top brands in there. So kill that excess stock holding before it can harm your company.

2. Brand focus – if you analyse the approach of the major corporate toy companies they are not focused on products to the same degree that smaller companies are – they are more focused on building, nurturing and exploiting brands. Brands are key in the toy biz because proven brands drive retail listings and consumer sell through on an ongoing basis often, leading to greater long term stability and prosperity…more’s the point, brands get sold for big bucks in the toy business – ever year sees brand acquisitions for tens or even hundreds of millions of $$$.

3. Process driven – in smaller companies things tend to get done in a more ad hoc, less structured way. In big toy companies process drives everything, there are routine milestone meetings to ensure sufficient product is delivered, that the product is right for the market, that all markets buy in, that the TV advertising developed is fit for purpose, engineering is driven by a process, manufacturing etc. Sometimes all this process gets in the way of delivering great products to market, but overall it greats a systematic approach which is less likely to screw up. Clearly smaller companies don’t have so many products and people to point in the right direction, but still, in most cases in our experience from the Consulting side of our business, more process is usually a good thing for smaller toy companies!

4. Longer term focus – the toy business is cyclical, and the cycle runs around a calendar year. Yet one of the major differences with big toy companies is their longer term process – they will be more likely to be looking at least an extra year ahead versus a smaller company focused nearly 100% on the current cycle. Larger companies need to avoid one good selling cycle being followed by a bad one because: a). they are often accountable to the stock market where such a roller coaster effect is frowned upon and b). because a sales downturn means organisational upheaval/layoffs. When working with smaller toy & game companies we find that pulling together a 3-5 year plan can, and usually does, lead towards more stability and both short term and long term success. As the saying goes, if you don’t know where you’re going you aren’t going to get there!

5. Consumer Testing – the major corporate toy companies conduct ongoing testing of their products and brands with consumers (we know this for sure, as our Consultancy business conducts playtestiing and qualitiative consumer research for many of them!). Smaller companies have a tendency to ‘chuck things at the wall and see what sticks’. Which is not logical when you look at the facts…published research suggests that between 65-75% of all new toy skus in market are new every year. YET, published research also shows that new skus account for just over 1/3 of total sales i.e. carry forward products account for around 2/3rds of all sales, and critically they tend to deliver more profitability as they don’t need new R & D expenditure, tend to need less marketing and less trade marketing spend. Moreover, proven products which sell year after year make stock ordering considerably less risky! The big companies know this, and so they conduct consumer testing to increase the chances of their products working and to increase the chances of getting carry forward listings. (For more information on how toy research works, here’s details of how we go about doing it for reference: http://www.kidsbrandinsight.com/?page_id=169

So there you have it – next time we’ll look at what big companies can learn from smaller companies.

P.S. Our toy review service TheToyVerdict.com has just opened entries to The Toy Verdict Awards, for more information and to enter, just click here: http://www.thetoyverdict.com/the-toy-verdict-awards/

 

by Steve Reece, CEO of Kids Brand Insight www.KidsBrandInsight.com,  a leading Consultancy to toy, game and kids entertainment companies around the world, which helps companies find the right toy & game factories, consumer research test their products with kids and parents and secure export distribution/market entry around the world.

13 May 2015 ~ Comments Off on The Future Of Toys – Parts 1 & Part 2

The Future Of Toys – Parts 1 & Part 2

The Future Of Toys – Parts 1 & Part 2

We recently posted two new blog posts on Spielwarenmesse.de, the official blog of the world’s largest toy trade show – the Spielwarenmesse – Nuremberg International Toy Fair.

In the first article we look at what is unlikely to change in the toy industry in the coming decades. To read this article, please click here: http://www.spielwarenmesse.de/article-detail/the-future-of-toys-part-1/?L=1

In the second article, we look at current toy technologies and how they will help to shape the future. To read this article, just click here: http://www.spielwarenmesse.de/article-detail/the-future-of-toys-part-2/?L=1&cHash=8991d244dd08889d6c67940cd269a057

More articles to come, watch this space!

P.S. Our toy product review site: TheToyVerdict.com has just opened this years awards for entry, for more information or to enter, just click here: The Toy Verdict Awards

08 May 2015 ~ Comments Off on Stock Management In The Toy Industry…Or The Importance Of A Clear Garage!

Stock Management In The Toy Industry…Or The Importance Of A Clear Garage!

Stock Management In The Toy Industry…Or The Importance Of A Clear Garage!

Steven Reece

Recently I’ve noticed my garage getting more and more full. Upon closer analysis, it seems everything has a reason of some kind for being there. There are tools which need to be there, car related stuff e.g. oil, screen wash etc., and an ever increasing mound of junk heading for charity/schools/the dump, or to be used for some mystical future purpose that most likely will never come to fruition. The reality is I need to be more ruthless clearing out the old crap.

It seems like the situation in my garage has something in common with the warehouses of some toy companies! Of late we’ve been asked to help a number of clients to add new, reliable factories to their supplier base. Yet in a couple of cases, when we’ve done this the client has been reticent to actually place orders, and when we looked at reasons for this, in several cases it was due to full warehouses, over budget storage costs or too much money already tied up in inventory.

Let’s be clear on one hugely critical truth – excess inventory literally kills toy companies, because it clogs up warehouse space/racks up storage costs and ties up cash. Moreover clearing it under pressure at the last minute destroys margin/profit. A number of times we’ve performed due diligence for clients looking to buy struggling toy companies, and in many cases those toy companies have inventory issues which directly contributed to their demise.

If you look at the companies with the most robust risk management procedures i.e. the major corporate companies, they have ratios and measurable metrics for everything. When it comes to inventory, these companies have stock holding targets for each month of the year, allowing for peak trading spikes, but creating rigid operating parameters for inventory. In practical terms, and as a very rough rule of thumb, if your year-end stock holding is below 10% of your annual sales you’re doing well, 15% is par for most non corporate companies, and anything over 20% is a problem to address.

These objective measurements are in place to overcome all the lightweight reasons we have for keeping the ‘junk in the garage’ that loiters for spurious reasons. There is no place for sentiment or dithering, clearing stock is critical to ensure the health & onward prosperity of your company.

So take a good look, does your ‘garage’ need emptying of junk?

P.S. Our toy review site ‘ The Toy Verdict’ has now opened entry to the 2015 The Toy Verdict Awards, for more details, just click here: http://www.thetoyverdict.com/the-toy-verdict-awards/

 

by Steve Reece, CEO of Kids Brand Insight www.KidsBrandInsight.com,  a leading Consultancy to toy, game and kids entertainment companies around the world, which helps companies find the right toy & game factories, consumer research test their products with kids and parents and secure export distribution/market entry around the world. 

01 May 2015 ~ Comments Off on How Toy Markets Differ – The Difference Between Baseball And Cricket Explains All!

How Toy Markets Differ – The Difference Between Baseball And Cricket Explains All!

How Toy Markets Differ – The Difference Between Baseball And Cricket Explains It!

Steven Reece

Regular readers of my blog posts will know of my near obsession with the importance of understanding market by market differences in order to maximise export sales potential. However, such theoretical rantings don’t always register as well as a more colloquial explanation…so here goes!

Firstly a brief bit of dry theory – the USA and UK appear to have much in common – very similiar language, cultural influences, mass market license driven toy markets etc. Yet we can see distinct and large differences between the two – while the Hollywood machine dominates kid targeted movies, the UK has it’s own distinct brand of kid targeted TV and the hugely influential BBC, the retail structure and chains are fairly different and certain product types work better in one market or the other. Now when we consider the huge historical and cultural links between these two nations, and when we add in the more or less common language, we can see that still the toy markets in the UK & USA are different…so when you change the language, the culture, the retail structure, the regulatory frameworks, the hstory and more, we can see why for instance so few UK or US toy companies manage to sell in Japan, China or Brazil for example.

Now that may all be a little dry and remote for some, or you may have stopped listening to my point on this market difference, so here’s an analogy I like to use – let’s compare cricket and baseball:

For a start, I imagine there are many people reading this who don’t know what cricket is. There will be some that don’t know what baseball is. So let me briefly explain – both are sports where one person propels a hard ball towards their opponent, and whereby the opponent must try to hit the ball far enough to allow him/his team mates to score ‘runs’ i.e. to run to certain points. With me so far? Good! The interesting part though is just how different the format and process of both games is when compared to the other, despite the overall idea being very similar…for instance, baseball scoring is driven by running between bases set out in a diamond shape, in cricket players run in straight lines back and forth. In baseball, the ‘pitcher’ throws the ball without bouncing it through a set space which is deemed hittable, in cricket the bowler runs in, and using a strictly straight armed motion (i.e. not throwing, no whip or bending of the elbow allowed) propels the ball towards three wooden ‘stumps’ with 2 wooden ‘bails’ on top. In baseball you can be out via: 3 strikes, caught or run out, in cricket you can be out bowled, caught, run out, lbw (leg before wicket when the ball hits your legs), because you hit your own wicket, because you took too long to get to the wicket etc.

Hopefully you’re still awake at this juncture…because the point is not to talk about these two venerable games, the point is how two nations can take the same idea i.e. one player propelling a ball at the other and the other trying to hit it with a bat, and create such a different execution?

The reality is that the same similarity of overall purpose can still be executed in a very different way i.e. even within the same category product formats can change – action figures in Germany for instance are more likely to be high quality fixed animal figurines than the traditional movie driven action figures we might find in the UK or USA, a Chinese board game may be very different to an American game etc.

And this doesn’t just apply to product, it also applies to retail – for instance, only the UK has ‘Argos’ – the biggest toy retailer in the UK for as long as I have worked in toys at least – imagine a catalogue driven retailer which prints over 20 million catalogues (one for each UK household roughly) as the leading toy retaiiler…it’s a bit different from Walmart, or Carrefour etc. In Germany, we have thousands of independent toy retailers, and no single dominant retailer, it’s a very fragmented market in terms of retail…whereas the mighty Walmart & Target in the USA hold a hefty market share and therefore have a much greater impact/power base with suppliers. Furthermore, while Toys R Us may offer a mostly homogenous approach to toy specialist retail on a global basis, each market tends to have its own specialist chains with different characteristics – from The Entertainer in the UK to La Grand Recre in France, things are similar but different in the same way as baseball is different from cricket!

The bottom line is this – you will often get away with selling some of the same stuff in multiple markets, but actually you will be better placed in the long term if you first take steps to understand, and then exploit market by market differences.

We work with companies in countries around the world to help them grow their export/international business, and the major finding from our experience is that companies usually need help with ‘tweaking’ their product line and changing product direction to account for the global opportunity…in actual fact in many cases where companies have struggled to establish significant international sales, it’s often because their product lines/approach is the issue. Clearly it helps if you know the right people/companies in each market (our database holds nearly 5,000 toy companies for instance, and we are regular contact with around 100-150…clearly this is advantageous), but actually most often a good product which fits the needs of a particular market will sell itself.

In terms of benchmarks, bearing in mind that the USA accounts for around a quarter of the global toy market, US companies who have domestic sales of $50m for instance should have export sales of at least $5m-10m. For European companies, a good rule of thumb would be that export sales should be at least the same as domestic sales, albeit with a different margin structure.

So if your export sales aren’t hitting these standards, perhaps it’s time you thought about the difference between baseball and cricket, and whether it’s your selling efforts which are holding you back, your product or your lack of knowledge about market by market difference

P.S. More ridiculous analogies will feature in future articles – watch this space!

 

by Steve Reece, CEO of Kids Brand Insight www.KidsBrandInsight.com,  a leading Consultancy to toy, game and kids entertainment companies around the world, which helps companies find the right toy & game factories, consumer research test their products with kids and parents and secure export distribution/market entry around the world.

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