K Is For Kenner, Karma, Korea, KB Toys & Ken – A To Z Of The Toy Business

K Is For Kenner, Karma, Korea, KB Toys & Ken – A To Z Of The Toy Business

Kenner

Kenner is best known for being the company who introduced Star Wars toys to the market, producing more than 100 unique figures and selling more than 300 million units between 1978 and 1985. Today nearly every family movie has licensed merchandise including toys. Star Wars started all that. While it seems an obvious opportunity today, back in the 1970s Mego (the prevailing figure toy company of the time) turned down the opportunity to produce toys based on the Star Wars franchise (possibly the biggest mistake in toy business history?).

Kenner stopped producing Star Wars toys after the initial trilogy of film releases faded away, but restarted again in 1995. Kenner also brought to market other iconic toys aside from Star Wars including Easy Bake Oven and Spirograph. Kenner Parker was acquired by Tonka in 1987, which in turn was purchased by Hasbro in 1991. Star Wars figures remain a key product line for Hasbro through to this day, making Star Wars toys one of the most important, commercially successful and iconic toy ranges of all time.

Karma

The toy industry is often a surprisingly small place. If you operate by screwing people over, it tends to be quite likely that you will get some kind of karmic payback. But also, if you are good to the people you meet over the years around the toy trade shows and in between, then you will build many lasting fruitful business relationships and friendships.

Korea

Korea is not normally an area of focus for toy & game companies, but with a population about the size of England, and with an advanced economy, consumer products sales in Korea can be strong. Obviously, there are some significant language and cultural barriers to doing business there, but nevertheless, for companies looking to grow their export sales, Korea deserves consideration.

KB Toys

KB Toys was a leading U.S. specialist toy store chain, which at one point in the 1990s had more than 1,300 stores. The company originally started as a wholesale ‘candy’ store back in 1922, and the chain lasted for just under 90 years, being in business for longer than Toys R Us in the USA. As such KB Toys was a pivotal player in the growth of the toy business, and many still mourn the loss of the 2^nd best known toy specialist retail chain.

Ken

Behind every great woman is a great man! Ken became part of Barbie’s world since 2 years after her own launch in the market. Although the pair separated for a spell in the noughties, Ken has been known and loved by generations of children. He also appeared in the third instalment of the Toy Story franchise playing a baddy. Not a lot of people know that Ken was named after the son of Mattel founders Ruth & Elliott Handler.

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Hasbro Report Incredible Q2 2021 Results & Are Well Set Up For A Turbulent 2nd Half

Hasbro Report Incredible Q2 2021 Results & Are Well Set For A Turbulent 2^nd Half

Hasbro just released their Q2 2021 results, and they are really, really good! Revenues were up by a massive 54% year on year, with Q2 revenue of a whopping $1.32 billion, with EBITDA (profits after various adjustments but before tax & some other accounting measures) more than doubled.

Hasbro also discussed on their earnings call the issues of cost inflation and stock availability in the midst of a major global shipping crisis where shipping costs have soared to as much as 5-10 times previous rates, and with a shortage of available containers. Hasbro identified that they have achieved price increases with their customers to reflect the heavy inflationary pressures they (& everyone else) are facing.

They also discussed that their stock availability looks like it will be ok towards peak season trading despite shortages of container shipments. This is not quite the picture we are seeing from many other toy companies out there who are predicting some out of stocks and lost sales this Christmas due to unreliable supply chain/logistics and difficulty financially justifying shipment costs. There is no secret that Hasbro have one of the most geographically diverse supply chains in the toy business currently. Hasbro publish their list of suppliers, and we counted 39 of them outside of China including numerous factories in India & Vietnam, as well as facilities closer to home and in other Asian countries. It seems like strategic supply chain diversification may well be working for Hasbro in the most turbulent year for logistics in living memory.

Supply Chain Diversification – The Second Biggest Toy Industry Trend

Supply Chain Diversification – The Second Biggest Toy Industry Trend

Aside from (the hopefully) short-term of impacts there are two massive trends having a massive effect on the toy business now and probably for the next decade. The first is sustainability. If your company isn’t in a sustainable product category or if your products are primarily made of plastic materials, then sustainable initiatives are becoming more and more important to keep consumer onside and buying toys.

Aside from sustainability though there is one major shift happening which does not get the headlines but is nevertheless throwing up massive challenges for toy companies. The shift is coming in terms of manufacturing hubs. Whereas we once relied primarily, or often completely on China for manufacturing at affordable costs and with good efficiency, the situation has changed significantly in that a proportion of production is seeping away from China into other countries.

There are a number of drivers of this, which we have covered in detail in other articles, but perhaps the best way to share that with you is to watch this YouTube video explainer we published a year or so back:

This video explains why China is not going to remain the same primary source for toys as it once was.

The point of this article though is to discuss how toy companies can manage the ongoing change.

There have been ongoing problems in toy supply recently – from the initial shutdowns in China due to Covid-19 through to shipping problems, and before that Trump’s tariffs on China, rising costs and much more.

The bottom line here is that toy companies are going to move from a model of having a relatively easy and efficient sole manufacturing hub to needing to diversify their risk across more regions. We have been advising our clients to set up multi-hub capability.

This comes with some pain though – because there is no perfect solution to replacing what China has become. Despite occasional pain points, China has been very reliable and the easy option compared with many other manufacturing hubs. But what happens for companies who don’t set up the multi-hub set up is that when issues hit like they have in the last 18 months or so, supply gets threatened. By having at least small production already set up with vendors to diversify risk, companies can ramp up more quickly than those starting from scratch.

The reality toy companies need to accept though is that these hubs are not necessarily going to be easier. Moving from China’s vastly experienced factories to lesser experienced companies in areas with less mature supply chain can be painful & take a lot of work. But this is where the trend is heading to whether we like it or not. As per our video presentation above, we believe China will keep around half of the toy production they had at the start of this decade, but the rest is going to dissipate further afield with India, Vietnam, other Asian countries and ‘Near shoring’ taking up some of the slack.

The multi-hub sourcing strategy is going to be an ongoing major factor in the toy business for the next decade.

J Is For Japan – A To Z Of The Toy Business

J Is For Japan – A To Z Of The Toy Business

J IS FOR JAPAN

Japan has played a major role in the toy industry globally. At one point in time Japan was a major source of toy production (going back to the 1970s). Following the decline of toy sourcing from Japan as the economy soared and brought Japan to the forefront of the global economy heading into the 1980s, Japan built into one of the major toy markets of the world. For a long time, Japan was 2^nd in size only to the U.S. market, before being overtaken by China a few years back. Japan is still today though the 3^rd biggest toy market in the world, which is surprising to some people as most ‘Western’ toy companies spend so little time looking at Japan. Japan is so culturally different versus other markets that it can be quite confusing for companies looking to sell their products into Japan, but nevertheless the sales potential is significant if you can find a way to enter the market!

The other major contribution by Japan to the global toy industry is the wave of animation and product concepts which keep on coming out of Japan’s quirky companies. From Tamagotchi to Takara Tomy, and from Pokémon to Power Rangers, Japan has been a major contributor to kids’ entertainment content and toy development. Pokémon of course is one of the biggest toy franchises ever, and with Hasbro acquiring Power Rangers for around $500m there can be no doubting Japan is a good place for western toy companies to go hunting for opportunity.

Hybrid Movie Releases: Marvel’s Black Widow Delivers At The Box Office & Via Streaming

Hybrid Movie Releases: Marvel’s Black Widow Delivers At The Box Office & Via Streaming!

Marvel’s Black Widow has received a positive critical reception, but perhaps more tellingly, it has also wowed at the box office and simultaneously on streaming! One week on from release and the movie has grossed $173m worldwide already, including just under $100m in the USA. Simultaneously though, Disney+ reported an additional $60m+ in global streaming revenues.

Wow!

Ever since the advent of streaming cinema chains have protested against streaming as a massive cannibalistic factor which threatens their viability. Could Black Widow be the movie which shows that streaming can be an incremental opportunity for movie studios to recoup more money back against the hefty production costs they incur to produce films? It’s maybe too early to reach that conclusion, in a month or two we’ll have a fuller picture of what Black Widow has delivered, but at the very least Black Widow has proved a number of points.

Firstly, that a Marvel movie based on a story about a female lead character can smash the box office, just like Black Panther proved that a movie focused primarily on people of colour could be a $billion+ movie. Secondly, cinema is back – albeit different and not in all places, but cinema as a major commercial force is back. Thirdly, it is possible to release movies simultaneously in movie theatres and to streaming and not to annihilate the box office takings. Perhaps the cannibalistic effect will come later after those real cinema devotees have been to see the movie. Perhaps streaming will capture some of the casual movie goers, but in reality we suspect that what is more likely is that streaming will have only a marginal impact on cinema attendance. Our analysis suggests that simultaneous release – the hybrid model, whereby cinemas and streaming go live at the same time – will just increase consumption.

From the perspective of the toy industry, it will be interesting to see if Black Widow sees a big toy success and creates out of stocks on key lines. But from a broader perspective, one of the biggest media driving toy sales seems to be heading successfully towards a hybrid distribution method which promises to future proof toy demand both in terms of any resurgence of COVID-19 but also in terms of any future crises affecting mankind.

I Is For Innovation & Inventors – A To Z Of The Toy Business

I Is For Innovation & Inventors – A To Z of The Toy Business

INNOVATION

If you look back at old toy catalogues or watch old toy adverts on YouTube, there is an awful lot of similarities between today’s toys and the toys of yesteryear. So much so in fact, that some people in the toy business focus more on sales and marketing spend than they do on innovation and genuinely trying to find something that hasn’t been done before.

What innovation does though is to create more compelling play experiences, and incremental sales opportunities.

Thinking about how innovation applies to the toy business, the most obvious example appears to be Furby. Your very own electronic furry pal, capable of interacting with children and of seemingly coming to life. But innovation is not always about whizzy technology.

An area of the toy business which was once unfashionable for major companies but which now drives the industry overall is pocket money and collectable toys. Before the global financial crisis of the late noughties, major toy companies tended to pooh-pooh selling toys at such low-price points, as it is so much harder to justify product development and marketing against lower priced products…that is unless the lower priced products sell in ridiculous quantities, which is what has been happening for some time now in this category. As such, the ability to deliver great play based on a much more limited spec has led to wave after wave of innovation from Shopkins through to L.O.L. Surprise!

INVENTORS

We can’t discuss innovation in the toy & game business without also talking about the mighty role of Inventors in our industry. Those outside the toy business don’t realise the critical role that independent inventors play. The fact that major toy & game companies have teams of Inventor Liaison staff shows just how important external concepts & ideas are in terms of feeding the everlasting churn of product development. With more than two thirds of toys being new on shelf each year, there is a huge volume of concepts needed. Inventing though isn’t a career path for the light-hearted, with many great concepts not finding their way to market, and royalty payments coming a long time after the original work was done by the inventors. We estimate though that there are around 100-200 full time toy & game inventors globally making a full time living from creating toy & game concepts…and after all there are certainly worse ways to earn a living!

The 5 Biggest Toy Packaging Mistakes

The 5 Biggest Toy Packaging Mistakes

Our team has worked on literally thousands of individual toys & games, and across all these products the area where we have seen the most mistakes is most definitely in the packaging.

Packaging is a crucial part of the marketing mix, because often consumers won’t see your advertising. But in store and online they will see your packaging, and therefore, packaging is the fundamental foundational pillar of all toy & game marketing.

Good packaging doesn’t make a bad product good, but it does make it more likely to sell!

Here are the 5 most common mistakes we have observed over time with toy & game packaging:

Functional failure

Often times toy companies spend a lot of time on the graphic design of their packaging, but typically leave the structural engineering of the packaging to the factory. This can be a costly mistake. In the last 12 months we have worked on about a dozen toys & games that had a fundamental packaging structural design issue. Issues observed have included packaging that is supposed to stand up on shelf, so that the store can just put product free standing on shelf. Due to either too small a base footprint or due to an inherently unstable packaging structure, several products would not stand up on shelf, which means that they would fall over on shelf either falling off shelf or sprawling over the display space looking bad. This is such an easy thing to fix! Packaging should have a solid base so it can stand up if that is how the product is to be merchandised. #basics!

Failure to effectively, clearly and overtly communicate key product features & benefits

Packaging is a marketing tool. The packaging should clearly show a cool product with emphasis on compelling features and benefits. On a recent project we purchased some competitor samples to compare with the products of our client. One of the products from a major toy company (who shall remain nameless to spare their blushes!) was a really good product with a best-in-class TVC. However, the product was completely cocooned in a weird packaging design which probably meant to be intriguing like an upscale blind bag, but with the only text aside from the logo being a multitude of copyright lines and legal lines in different languages it was not clear what the product was, what it did or why the child should want it! That scores 0/10. Before trying to be too clever, packaging designers should be distilling down the key selling points to communicate clearly what they are – either in text or with images. Children are very basic creatures compared with adults – subtlety is not a formula for success typically with toy & game packaging aimed at children.

Failing to protect the product inside sufficiently

Packaging exists in the first place to protect the product inside from damage and wear and tear in transit/while on display in retail. Therefore, above all packaging should protect the product inside. There are plenty of examples of packaging which has failed to protect the product, just go into any retail store and you will find examples of someone getting this wrong. Sometimes it is due to cost stripping, but the bigger picture view makes it clear that there is no point saving a couple of cents if the product is not then saleable.

Failing to use all the space available

The prevailing merchandising of products varies from country to country. For instance, I was greatly surprised the first time I visited a department store in Germany because due to the number of board games on sale, the products were not merchandised showing the major space & communication point of the front of the box. Instead, just the end or the side of the box was on display, and therefore those games which communicated more on the end and sides of the box sold better!

Failing to stand out on shelf

One of the greatest challenges in a market full of competitive products is achieving standout. When you walk an aisle in a toy specialist retail store you are met with a visual explosion of colour. It takes skill and design nous to create packaging which stands out in such a ‘loud’ visual setting.

H Is For Hasbro & Hot Wheels – A To Z Of The Toy Industry

H Is For Hasbro & Hot Wheels – A To Z Of The Toy Industry

HASBRO is one of the giants of the toy business and has been for a long time. Not that many people though know that the first iteration of the company started life way back in 1923, when three brothers – Henry, Herman and Hillel – started the company then known as Hassenfeld Brothers. The company began by selling textile pieces, before developing the business into pencil cases and school supplies, and then setting up their own pencil manufacturing facility. The first toy products created were modelling clay and doctor/nurses’ outfits, and the company had effectively become a toy company by the 1940s.

Fast forward to today and Hasbro has a massive presence and impact across the toy business. The array of iconic brands they own or control is vast, including: Play-Doh, Monopoly, Transformers, My Little Pony, Nerf, Kenner, Tonka, Milton Bradley, Parker Brothers, Magic: The Gathering, Furby, Mr. Potato Head and we could go on (and on!).

Today Hasbro is much more than just a toy company – the Rhode Island headquartered business which started out selling textile odds and ends is now a global entertainment content powerhouse, with ongoing interests in movies, TV and other forms of video content.

HOT WHEELS is the major market leader in vehicle toys. Over 6 billion Hot Wheels die cast vehicles have been sold since Mattel first launched the brand back in 1968, with more than 800 models and over 11,000 variations of cars produced. Mattel co-founder Elliott Handler instigated Mattel’s move into this space after seeing his son playing with Matchbox cars. Despite the lack of enthusiasm of his wife and fellow co-founder of Mattel, Ruth Handler (most famous for her origination of Barbie), Elliott developed Hot Wheels in conjunction with Jack Ryan and the first Hot Wheels product line hit shelves in 1968. Hot Wheels enjoyed staggering success from launch. Today Hot Wheels is a massive toy brand, with brand extensions a plenty, from track sets to garages for cars, and much more. Hot Wheels is one of the most iconic and commercially successful toy brands of all time.

China’s Societal Shift: Increasing The Birth Rate & Impact On The Toy Business

China’s Societal Shift: How To Increase The Birth Rate & What This Means For The Toy Business

In China’s recently released census, it became obvious that China has a decreasing birth rate, and therefore a structural demographic challenge is looming. Needless to say, China’s government is working to change this situation and to stimulate birth rates.

In the last week we have seen a number of media articles looking at this issue. The Wall Street Journal, for instance, highlighted an initiative to reduce education costs. Many interviews have been published with Chinese people stating that it is too expensive to have children, so over time the society has become used to having just one child and putting everything they can into that child’s education and development. This has in turn led to a situation where private and supplemental education has become a major cost for Chinese parents. As such, we anticipate many more initiatives across the board to reduce the cost of raising children across China. Here’s the link to the Wall Street Journal article:

China Takes Aim at Educational Costs as It Seeks to Reverse Birthrate Decline – WSJ

We also came across another article talking about ‘Chicken Parenting’ in China, which highlights how intense and pushy some parents have become in China. Included in this article is a sample daily schedule for a child which basically is all about education and very little about fun and play. In many ways this is concerning because of course we know that playing is an important part of the development of children. More specifically though this suggests that the Chinese toy market would offer a lot of potential for toy & game companies offering educational products. Here’s the article referenced:

Chicken parenting is China’s helicopter parenting on steroids – SupChina

The outlook for the toy business in China looks positive overall. Despite decreasing birth rates, it is clear that action is ongoing to incentivise more births and to reduce barriers or discouraging factors to families having more children. We can’t be sure when all these measures will take effect, but it is clear that significant action is under way to reverse the trend. Moreover though, China’s parents are increasingly investing very heavily in their children’s development, and as the relatively recent advent of consumer society continues to mature, it looks likely that toys with educational and developmental benefits have increasing opportunity in China, especially as disposable income continues to develop alongside further economic growth.

G Is For G.I. Joe, Giochi Preziosi & Gender

G Is For G.I. Joe, Giochi Preziosi & Gender

G.I Joe is the iconic toy which created the action figure category. And G.I. Joe has been a major presence in the toy business ever since it launched in 1964. Originally, toy executives were not convinced that boys (in the 1960s) would want to play with ‘Dolls’, and this perception led to the invention of the phrase ‘action figure’. An African American figure was introduced the following year, and over the years there have been many different iterations of the G.I. Joe brand. Movies based on the franchise released in 2009 and 2013 performed ok at the box office. Snake Eyes, a G.I. Joe spin-off is due to launch within 3 weeks of the publishing of this article. Generations of children (primarily boys, see GENDER section below!) have grown up playing with G.I. Joe, and the brand looks set to enjoy success in the future.

Giochi Preziosi – founded in 1978 in Italy by Enrico Preziosi, Giochi Preziosi is a powerhouse of the toy industry, especially in Southern Europe. The company owns brands including Gormiti (monster like figures) and Cicciobello dolls. Following on from the acquisition of UK toy company Flair Leisure back in 2008, recent acquisitions of Spanish toy company Famosa and Trudi (a Plush toy company) have increased the presence and power of the company. All those doing toy business in Europe will know that Giochi Preziosi is a company with substantial and growing presence.

Gender as a topic in relation to toys is a very contentious area these days. To try to explain this as succinctly as possible: rightly or wrongly over time toys have been used by parents to help children explain traditional gender roles. Historically speaking, these were perceived to be as follows: boys/men – aggressive, physical play to reflect aggressive, physical persona. Girls/women – a softer, more nurturing outlook. We aren’t going to get into why and how those traditional perspectives of gender roles are right or wrong, but what we can be sure of is that media and social perceptions of prescribed gender roles have changed massively over the last few decades. Toy stores once labelled aisles in store as ‘Boys’ or ‘Girls’, and some toy companies still report their business on these gender specific grounds. Today though the best approach for toy companies is to create toys which they feel the market wants, but without telling people that a particular toy is for one gender or another. That isn’t always easy, but therein lies the challenge for modern day toy people – we are trying to meet the needs of traditionalists and those who are more progressive and finding that balance is really hard. In more than a decade of writing articles on the toy business, this topic of gender and toys is the only one which has consistently delivered angry backlash, so for that reason we’re going to leave this one here for now!

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News and analysis from the Toy and Game industry across the world