D2C: The Growing Importance Of Selling Toys & Games Direct To Consumer

D2C: The Growing Importance of Selling Toys & Games Direct To Consumer

It has become ever easier for toy companies and even toy inventors to connect directly to their end consumer. This trend is both highly disruptive and arguably in the best interests of a vibrant toy business.

The closer product originators can get to commercially validating their products the better the variety of products on offer will be. In the old way of working, toy companies would screen out a lot of ‘risky’ concepts before developing a fraction of the concepts they looked at to begin with. Then risk averse retailers buying large amounts of stock at significant financial risk would filter out even more of the products which were deemed too risky or a bit ‘out there’. As a result, the whole toy business operated with more narrow parameters than they do today.

The difference today is that we can so much more easily develop a product and test the waters of consumer demand a long time before we need to consider talking to those larger organisations who can help us drive large sales volumes but who are structurally and inherently unlikely to take big risks.

Clearly crowd funding is one much vaunted method of validating and funding a new toy or game idea. If you don’t get it funded you drop it, but via platforms such as Kickstarter and Indiegogo the key decision makers are consumers of products, not all those distribution gateways which used to sit between an original concept and the consumer.

But even for toy businesses themselves, it has never been more important to have a direct to consumer offering alongside a community of fans of your company, products and brands. Needless to say, potentially cutting out your major retailer customers and selling directly to their customers is combustible (!) and needs to be handled strategically and with tact. The point though is that there should be an opportunity for win-win on that front. By interacting directly with the end consumer you can connect your company more closely to consumer demand, and in the end without consumer demand neither you nor your retail partners have a business.

Following on from our previous article looking at the opportunities and challenges offered by Amazon, we should also consider the question of what Amazon actually is (read that article here in case you missed it AMAZON – THE CHALLENGING POWERHOUSE OF TOY RETAILING …is it a retailer, or is it more of a search platform for consumers to find the products they want? Amazon’s massive product range and (comparatively) easy to access platform allows even the smallest of businesses to step up and start selling to consumers.

The reality of the toy business today is that we have never been closer to understanding consumer demand, which is a good thing. We now have platforms and media which allow us to test new products and perhaps more importantly let the consumer get closer to selecting our product lines and new directions for us. The challenge with selling direct to consumer is that it becomes even more of a marketing challenge. Amazon can be a powerful selling tool, but you need to understand and execute good marketing to avoid your product being lost. Successful crowdfunding requires a heavy marketing program to gain as much support as possible for the moment when you go live.

So D2C offers a significant opportunity and advantages for the toy and games business, but it requires a strong marketing driven approach.

 

We run a Consultancy business for toy companies. We work with major toy companies through to start ups and one person bands. For more information on how we help toy companies grow their distribution around the world: https://www.kidsbrandinsight.com/blog/toy-co-growth-booster-program/

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5 Key Elements Of A Successful Toy TV Commercial

5 Key Elements of A Successful Toy TV Commercial

Toy marketing campaigns are multi-faceted and multimedia, but at the core of most campaigns for hit toy products listed in national retail chains you will still find the TVC as the central marketing tactic. The reality is that while TV is not as effective as it once was, it is still effective for toy companies to pour $millions into buying TV media spots.

There are a number of reasons why TVCs were so powerful historically, and why they remain a much-used marketing tactic. Firstly, kids’ media spots on TV are substantially cheaper than adult targeted media spots, which gives our industry an advantage over other consumer product industries. Secondly targeting is easy because there are typically multiple specialist kids’ TV channels in most countries as well as timeslots for children’s programming on terrestrial TV. Thirdly, and this is the least palatable of the reasons for the effectiveness of TV advertising to children – children are very suggestable and don’t filter out advertising to quite the same extent as children. Finally, while TV audiences may not be quite what they once were, they can still be significant and tend to offer fairly good value in terms of cost versus reach overall.

In terms of the TV advert itself, there are typically 5 key elements:

  1. A Great TV Advertisable Product – a really strong product feature or features is one of the fundamental features of successful toy TVCs. Something which can be made to look really ‘WOW’ to a child of the target age in a few seconds of footage is perfect. If your operating model is to TV advertise your major product launches, then you should be only selecting and developing those products which are well suited to TV advertising.
  2. Tonality & style fitting the product – if you look at a typical TV commercial for an action-oriented product you will observe a dynamic tone of voice and camera work. The whole impression the advert gives will be of speed, dynamism and excitement, which is exactly the type of feeling this type of toy is designed to give to children who are interested in this type of product (the target market for this type of product is normally boys, whether that is socially acceptable or not!). On the flip side, if you look at a Plush toy which is all about being soft and cuddly, then the entire feel of the TVC will be softer and will make you feel ‘fluffy’.
  3. Heavy focus on the product – ignore those advertising moguls looking to win awards for great story telling and avant garde production. For decades toys have been sold off the back of a simple formula: set the scene, show the WOW features of the product and communicate a few bullet points on top of additional ‘WOW’ features. Above all you need a strong product shot at the end of the advert clearly showing the product packaging and not just the toy itself so that people watching the advert can clearly recognise the product if they see it in your TVC first and then later see it on shelf.
  4. Where to buy/call to action – the key commercial call to action should include where the products can be bought, but manage the list of retailers with care, those who are not included may not thank you!
  5. Website & social media destinations for more information – it takes very little production effort and will not detract even a little from the core message of the advert to add a Brand URL or a social media identity. You can add a URL along the bottom of the advert throughout or put it all in the end scene. Why wouldn’t you draw your consumer further into your brand and your brand communication levels? You’re paying for hundreds of thousands of eyeballs to look at your TVC, why not maximise the impact? If you don’t drive a sale you may recruit a kid into your brand which can be more valuable over time.

 

We run a Consultancy business for toy companies. We work with major toy companies through to start ups and one person bands. For more information on how we help toy companies grow their distribution around the world: https://www.kidsbrandinsight.com/blog/toy-co-growth-booster-program/

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Amazon – The Challenging Powerhouse Of Toy Retailing

Amazon – The Challenging Powerhouse Of Toy Retailing

We all knew for a long time that Amazon was going to massively disrupt toy retailing and with disruption comes both opportunity and challenge. During the lockdowns around the world resulting from the pandemic, Amazon played a critically important role for the toy industry. While physical stores were closed (to varying degrees) in many major toy markets, Amazon remained mostly open for business barring a few short-term closures of their warehouse for anything other than ‘critical’ products.

Amazon’s being open for business at a time when global society was most challenged and when demand for many categories of toys and games soared was a major positive in a tough time. Without Amazon things would have been so much worse for the toy business. In a number of ways the pandemic has accelerated Amazon’s influence and growth, but in particular the deeper engraining in many more people of a search, click and receive shopping habit is going to pay dividends for Amazon on an ongoing basis regardless of how long it takes for the pandemic to end.

Amazon does though present some rather strong challenges for toy companies and for the toy industry as a whole. Firstly, Amazon’s pricing strategies and algorithms can cause carnage in a retail environment which has long been cutthroat with regards to pricing of both hot toy lines and evergreen toy brands. An army of people trading on an ad hoc basis from home with little overheads can buy toys at wholesale pricing and sell via Amazon’s platform on tiny margins to make some money on the side while causing large scale disruption to pricing across the internet.

Amazon also represents a technical challenge for toy companies. Essentially Amazon is a search engine for products, which means a different strategy and success formula versus traditional retail. Basically, you need to manage the algorithm and in-built advertising opportunities to get ahead of your competitors. This is not so much about building strong relationships with all powerful buyers, but more about understanding and managing an algorithm you don’t control. For all of us in the toy business who have bemoaned the power and subjectivity of all-powerful Buyers at our customers, this is a fairer and more objective distribution opportunity, but that doesn’t make it easy.

In Europe, Amazon offers another very significant challenges for toy businesses to manage – that being the Treaty of Rome dating back to 1957, under which freedom of movement of goods between members of the European Economic Community (now European Union) was legally mandated. Basically, if you sell a product in one country in the European Union, you can’t prevent that product being shipped across borders by agents, wholesalers, distributors or retailers. There are some infamous examples of this ‘grey market’ shipping of goods which we will not detail here for legal reasons, but let’s just understand that the European Union is supposed to be just one market. The challenge with that when it comes to Amazon is that different countries often have different pricing norms, and so if you have an online platform which can almost automatically sell from one country to another it can again disrupt the market.

As a practical example of this, in 2020 our company has worked on 7 projects helping toy companies find export distribution for their products. When you speak to distributors across Europe, in any country where Amazon is present, the second question they usually ask (after asking about pricing!) is how are you managing Amazon. So, if you want to appoint a distributor in Spain for example, their level of interest in the product may depend on how your distributor in France or Germany is managing Amazon supply.

In conclusion, Amazon has revolutionised shopping and offers big opportunities for toy companies big and small, but this giant global retailer also brings several practical challenges for toy companies to manage. Effectively managing Amazon and the disruption it can cause for the market in general and your other retail customers across markets is already one of the major challenges and success factors for toy businesses, and the importance of effectively meeting this challenge is only likely to grow.

 

We run a Consultancy business for toy companies. We work with major toy companies through to start ups and one person bands. For more information on how we help toy companies grow their distribution around the world: https://www.kidsbrandinsight.com/blog/toy-co-growth-booster-program/

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How To Find & Secure Effective Distributors For Toys & Games

How To Find & Secure Effective Distributors For Toys & Games

The area where we are asked for help most often from toy & game companies is to help them speak to & close distribution deals with toy & game distributors in more markets outside their home markets. Over time we have developed several ways of increasing the chances of success for our clients in finding productive and mutually beneficial relationships with distributors:

  1. Trade Show attendance is the best & biggest way to meet new distributors

Virtual connections can lead to good results, but you can never meet face to face meeting. For this trade shows are a critical part of the process of finding and building relationships with toy distributors or board game distributors. Clearly this approach is not as viable during the Covid pandemic, but nevertheless the moment it is viable again it will come back to the fore as a primary method of meeting and recruiting new distributors.

  1. Understand the business model of the distributor

Being a distributor is a tough business. Distributors take significant inventory risk to run their business, and a few bad product line selections can seriously constrain cashflow, therefore distributors are equally if not more risk averse than the retailers they sell to. In order to reduce the risk of anyone product line failing, they tend to have a broad and diversified product line, and that brings in the biggest challenges with using distributors to get your product to market – FOCUS, if they put little focus into selling and pushing your product line your sales will disappoint. It is really important to understand this, because having a distributor and having a focused and effective distributor for your product line can be different things.

  1. Understand the marketplace

There are two elements of this: firstly, there is the local market situation in terms of retail structure, product culture, consumer preferences and other localised operating parameters. For instance, Germany has a very decentralised retail market, whereas France has a comparatively centralised retail buying structure. Therefore, you need to understand the differences to appreciate which distributor is going to have the best chance of being successful in the market.

Secondly, it is important to be aware of the general situation in the marketplace. In particular, product proliferation is a considerable challenge in trying to secure distribution for toys and board games. There are literally millions of products out there for distributors to chose from, and because they only have so much capacity, so much cashflow to fund stock purchases and so much time in front of each buyer, they will typically turn away many more product lines than they chose to distribute. This changes the balance of power somewhat in terms of negotiating and finalising a deal. In effect, it is a buyers’ market for distributors, they have considerable choice, and therefore the sales process and relationships should not be taken lightly.

  1. Build relationships with people

Building relationships with all your contacts at every distributor you want to work with can only assist your efforts. Aside from it being a source of great pleasure and warmth to build friendships around the world over time (and often over a beer or two!), in work terms it helps if you have god relationships with people you are working with. Sometimes difficult situations arise, and it is usually easier to work through challenges with people you already know and like.

But also, the better your relationship with your distributors the more they will share the details and challenges of selling your product in your market, which should lead to both of you having a better chance of success in each market.

  1. Distribute your distributors product into your home country

One really effective way to bind yourself closer to your distributors is to help them to sell their products into your own market. Most distributors will have at least a few product lines that they themselves have developed or have exclusive distribution for. By helping them to sell more of their products, you quite often build a stronger relationship and then their focus on your products tends to become stronger because they will feel a reciprocal obligation.

 

We run a Consultancy business for toy companies. We work with major toy companies through to start ups and one person bands. For more information on how we help toy companies grow their distribution around the world: https://www.kidsbrandinsight.com/blog/toy-co-growth-booster-program/

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The Two Fundamental Features Of Successful Tech Toys

The Two Fundamental Features Of Successful Tech Toys

Every year we see a flood of new tech driven toys come onto the market. These products are not cheap to develop – versus a basic mechanical or static toy, tech toys featuring electronics are often much more costly & risky to launch.

Commercially speaking, the key success factor in the first instance for toys featuring technology is usually the same as it always has been – that classic TV advertisable feature. Something that looks ‘Wow’ in a quick 30 or 20 second TV commercial, or YouTube video. Children are really impacted by and attracted to a highly impactful ‘WOW’ feature, and technology can help to build a compelling offer in this regard.

That can help to both sell in and sell out of retail enough stock to justify the development and launch marketing costs for this kind of toy.

The difference though between a toy with technology inside which is a big hit versus one which recoups costs is all about the experience that the product delivers. Whether the technology is driven by electronics entirely inside the toy or by additional interactive or audio-visual content via phone, tablet or computer, the key success factor is delivering a great experience where the technology has the effect of making the play experience more immersive and more compelling.

Children do not care how many patents are in a product. They don’t care if the product breaks new ground in terms of using new tech for the first time in toys. They care about whether it is fun.

Furby is a classic example of a toy bristling with technology, but it is not the technology which attracted children to Furby – it was the fact that the technology brought Furby to life, creating a seemingly real character or animal friend.

It should be obvious that technology needs to deliver an enhanced experience in toys but judging by many products out there that don’t quite get it right, somewhere between starting with a great concept and actually delivering the product and the technology within or without, the delivery of a compelling experience fades away in a world of technical complications.

Going back a few years, Skylanders was a massive success for Activision, because they managed to deliver both compelling video gameplay in conjunction with an added element (the toy) which really worked and added major value and collectability for kids.

The challenge though for Activision was that a business model which combines exceedingly high upfront development costs with high product costs is a very risky model! One bad wave which doesn’t sell can prove ruinous for this type of business model. For example, THQ the video games company were heavily hit by the failure of their uDraw product, to the tune of a $30m loss derived from this one product launch failure: https://www.gamasutra.com/view/news/129452/Just_how_badly_did_uDraw_hurt_THQ_anyway.php

And therein lies the major challenge for this type of toy, bearing in mind how many toys don’t last beyond year one in the market, and based on the far lower costs and risks of more basic toys, committing to develop and launch a full on tech driven toy can be an existential risk for a smaller company, and should be considered very carefully. It’s critical to consider, what would the implications of a launch failure be.

On a more positive note, technology is advancing at a startling pace, and much of it has potential for inclusion in some way in toy products, in ever more accessible ways in terms of investment costs.

But whether the product is cheap or expensive to develop, the critical point is to deliver genuine WOW factor and to deliver a truly compelling experience were the tech element enhances the play process and delivers more fun, more lifelike toys and/or deeper immersion.

We run a Consultancy business for toy companies. We work with major toy companies through to start ups and one person bands. For more information on how we help toy companies grow their distribution around the world: https://www.kidsbrandinsight.com/blog/toy-co-growth-booster-program/

How The World’s Biggest Toy Companies Grew Their Distribution

How The World’s Biggest Toy Companies Grew Their Distribution

The world’s biggest toy companies are $multi-billion corporate behemoths with subsidiaries and employees all around the world. They didn’t necessarily get there quickly though. In fact, the one word which could best be used to describe how these massive toy companies grew distribution in terms of a global footprint would be SLOWLY.

It takes years to build up distribution around the world via sales agents and distributors. And then it typically takes decades for toy companies to set up subsidiaries even in the major toy markets in the world.

There are several reasons why distribution growth is seemingly so slow. The first factor to consider is that we work in an industry with an annual selling cycle, so whatever momentum you can create through the course of the selling cycle can only be built on for the following year. Bearing in mind that many (most!) toy product launches flop or at least fail to succeed well enough to come back the following year, we can see why it takes time to build a compelling must list portfolio of toy products.

Aside from the slow and laborious selling cycle, the process of finding premises for a new office and hiring staff to run them is innately risky and time consuming. For this reason, many toy companies seeking to grow enter new markets via acquisition. By buying an established company with good reputation in the country they seek to enter, with existing and strong relationships with buyers and with a good understanding of the market many years of costly trial and error can be avoided. Needless to say though, while acquisition is usually less risky as you are buying an established business you do have to pay a hefty price, and sometimes things still don’t work out. And to find good companies acquire at a realistic cost is also not easy – this also takes times, often years.

So, the reality is that even the biggest toy companies in the toy business today took decades to grow their distribution capability and capacity to the current levels. Therefore, for toy companies which are far less mature, you have to expect it to take time, and that time is measured in years. There are ways to accelerate distribution growth via sales agents or consultants for instance. This can take years off the process, but even then it will still take time!

 

We run a Consultancy business for toy companies. We work with major toy companies through to start ups and one person bands. For more information on how we help toy companies grow their distribution around the world: https://www.kidsbrandinsight.com/blog/toy-co-growth-booster-program/

Toy Market News – What’s The Global Toy Business Outlook For 2021…?

TOY MARKET NEWS – WHAT’S THE GLOBAL TOY BUSINESS OUTLOOK FOR 2021…?

September is typically the time when the toy business starts to look forward & begin the process of selling in the product line for the following year. The one thing we can guarantee at this point is that this will be a selling cycle no other we have experienced before.

Who knows whether Covid is going to fade away, be vaccinated out of relevance or whether we will need to manage our lives forever more with this dreadful virus in mind. What we do know at this point is that the selling cycle for 2021 will be disrupted in a way that 2020’s wasn’t. By the time Covid went global, 2020 was  already sold in.

Looking forward to 2021, we already know that Dallas & New York toy fairs in the USA will not take place this time round (although there will be some kind of event planned for Spring 2021 in the USA). Spielwarenmesse in Nuremberg (the world’s largest toy trade show) is at this stage still set to happen, although with a revised program of events. It’s harder to know what will happen with regards to Hong Kong in January because so much of the real toy business is done on a closed door basis in the showrooms up and down Mody Road in Tsim Sha Tsui. So while toy business people do not have to make a decision about attending Dallas or New York, they will have to decide on a micro basis about whether or not they visit Hong Kong this time round, which means it is likely to go ahead in some form, but with significantly reduced international visitors.

What we can presume is that every toy company now has (surely?!) established alternative methods to preview their product ranges to buyers around the world, whether this be a virtual showroom, a video montage or a travelling (socially distanced) sales effort.

The good news for all in the toy business is that overall there is no evidence (at least not that we have seen) about any reduction in consumer demand. So far in 2020 demand has been higher than usual overall, and yet again on a macro basis the toy business on a global level has proved itself to be highly resilient.

On a category by category basis we can see tailwinds in some cases of course, but whereas we were blindsided by Covid in 2020, at least we and the major Hollywood content businesses can now plan for how to get around social distancing requirements to deliver global blockbuster movie releases again in 2021. Anecdotally we’ve seen a substantial trend towards outdoor cinema (whether drive-in or not), and this seems likely to play a big part in delivering audience numbers for 2021, alongside adapted movie theaters. We can also plan to deliver across every toy category in 2021.

Humanity has proven over millions of years to be adaptable and durable, and the massive global pivoting towards the different world we now find ourselves in shows just how resilient humankind is. We therefore expect that with the opportunity to plan for a Covid restricted world, the toy business will continue to grow in 2021, and that buyers can feel reassured that of all their product categories their toy departments deliver year after year despite massive challenges.

We don’t just offer toy market news and analysis. We run a Consultancy business to toy and game companies around the world, from Asia to America and from Sweden to South Africa, we help toy & game companies grow their businesses, build brands and achieve their goals. For more information on how our Consultancy service has delivered $tens of millions in sales and increased profitability just click here: www.KidsBrandInsight.com/services 

The 21st Century Is Asia’s Century: Implications For The Toy Business

The 21st Century Is Asia’s Century: Implications For The Toy Business

Those of us ‘Westerners’ in the toy business who have lived our entire lives believing that the USA and Europe were the centre of the world are heading for a rude awakening, and if we don’t prepare them for the change our children and their children will miss many opportunities in the remainder of the 21st Century.

The reason for this is the unstoppable economic growth of the most populous continent on the planet – ASIA. Let’s not look at this in generalities though, let’s get specific – the following stats have been taken from a combination of the IMF, the World Economic Forum & the World Bank. Some of these stats are projections, as any one who has ever tried to forecast toy sales in terms of units and shipment phasing will know – future projections are nearly always wrong in some direction! Having said that though, even if some of the projected statistics don’t get to exactly where predicted they nevertheless represent major trends and shifts in the global economy.

So let’s cut to the chase, here’s the projected Top 10 economies in the world in 2024, in order of size:

  1. China
  2. USA
  3. India
  4. Japan
  5. Indonesia
  6. Russia
  7. Germany
  8. Brazil
  9. UK
  10. France

Source: https://www.weforum.org/agenda/2020/07/largest-global-economies-1992-2008-2024/

This means that four of the five biggest economies in the world will be in Asia by 2024 – that’s not very far in the future! To be specific about the toy business though, GDP doesn’t necessarily correlate exactly with toy market size and ranking by country, but having a far larger number of people with higher disposable income is likely to lead to higher toy sales.

This then is a massive growth opportunity for the toy business, but in some cases we will have to work hard on our marketing to make sure our toy ranges are relevant to consumers with newly found spending power.

The reality we have to take from these projections is that while we are not likely to lose significant opportunity in the USA & Europe, we should be turning our eyes and ears eastwards to capitalise on the opportunities which are going to abound across the next decade in Asia. It will take work, it will take effort & it will probably take a willingness to get things wrong a few times. It may also take patience as society, economic behaviour and consumer spending take time to adapt, but if you are still focused only on the USA & Europe right now you may be left behind.

The sheer speed of economic advancement in the up and coming powerhouses of Asia (most notably China, Indonesia & India) has to offer growth opportunities to toy businesses from outside Asia, the question is how many of us will be flexible enough to pivot East and to trailblaze new opportunities?

We run a Consultancy business advising toy companies on how to grow their business by a combination of strategic analysis and export sales facilitation. We have helped more than 100 toy and game companies grow. For more information on our process and methodology for growing toy sales: https://www.kidsbrandinsight.com/blog/toy-co-growth-booster-program/

We also run a venture helping Asian toy companies to find more customers and to build their own toy brands, for more information: www.ToyTeamAsia.com 

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Plush Toys: Consumer Insights & Trends

Plush Toys: Consumer Insights & Trends

The Plush toys category is one of the most timeless and Plush toys are among the most common toys to be found in a child’s bedroom. One of the key consumer insights we have seen with children is that the younger they are the more important their sense of touch is. Whilst adults tend to use their sense of sights first, and all else comes after that, for children that isn’t necessarily the case. For sure children look at toys, but above all they want to touch them.

Plush toys are above all a tactile experience for children. The reason why children often take soft toys to bed with them is because soft toys made from soft fabrics are so cuddly, which is reassuring and calming for children.

One question we are often asked about Plush toys is why feature Plush is attractive to children since the tactile experience is often compromised by the addition of a big electronics unit. The secret to successful interactive Plush products is that the technology needs to be used to bring the toy to life, so that what is lost in terms of cuddliness is made up for by a toy which seems as close to lifelike as a toy can be. Children are often fascinated by animals, how they move and how they behave. Good feature Plush appears to bring the toy to life.

The current pandemic crisis has not been good for the Plush toy category for a number of reasons. For one thing, licensed Plush is a major segment of the overall category, with a large amount of volume driven by soft toy versions of movie characters from current or recent cinematic releases. Clearly this key driver of the category overall has been heavily disrupted by the closure of movie theatres across the world due to the need for social isolation to avoid the spreading of COVID-19.

Another issue this year has been (hopefully temporary) retail closures. This is particularly an issue for Plush toys – because children want to touch, feel and cuddle soft toys, this has been difficult with stores closed, and even when children can access Plush toys in Grocery and other essential retail channels, parents are most probably reticent to allow them to pick up products around the store for fear of coronavirus. Moreover, some stores have limited the number of family members who can go into a retail outlet, further reducing impulse purchase opportunities.

This ‘double whammy’ of a disrupted movie release schedule combined with retail closures has definitely had a negative effect on the Plush category short term. The good news though is that these should be temporary effects. There is simply too big a business behind the movie world for that not to rise again, and retail stores are already re-opened in much of the world. While the short-term impact on the soft toys business is harder than for some toy categories, the fundamental consumer drivers behind the longevity of this end of the toy business have not disappeared. Therefore, while the short-term outlook is tough, longer term we would expect the return of the Plush category to historical levels and beyond.

We run a Consultancy business advising toy companies on how to grow their business by a combination of strategic analysis and export sales facilitation. We have helped more than 100 toy and game companies grow. For more information on our process and methodology for growing toy sales: https://www.kidsbrandinsight.com/blog/toy-co-growth-booster-program/

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Q2 2020 Results Are In – Here’s Our Analysis

Q2 2020 Results Are In – Here’s Our Analysis

Hasbro, Mattel & Jakks Pacific have all reported Q2 2020 results in the past week. The picture from all 3 of these major toy companies is clear – revenues are down for Q2 year on year. We reported last week that sales in the US toy market were actually up for the quarter overall, so how can this be if 3 of the bigger U.S. headquartered toy companies had a tough quarter?

The answer to this question is product mix. The two categories which have understandably had a really tough time this year are action figures (due to disruption in terms of movie releases) and plush (which is often a purchased driven by a child picking up and cuddling a toy, and aside from stores being closed, where stores were open parents may not have wanted the child to pick up a toy which has been touched by other people already in light of the current pandemic situation).

The categories which have performed well have been those parentally driven categories which parents will tend to ‘deploy’ to entertain locked down kids i.e. board games, arts & crafts and other ‘worthy’ categories. This makes Hasbro’s downturn all the more impactful as they in particular have a large market share in some of these categories including obviously games & puzzles as well as compounds/creative play with Play-Doh and other product lines. Hasbro & Mattel both have strategies based on entertainment franchises and content, which is going to be tougher to execute for sales growth in the short term, although it may well be reimagined in terms of home entertainment as the primary launch platform, at least for the short term.

So, what are the implications of a tough quarter for Hasbro, Mattel & Jakks? For all three it can be expected that they will seek to enhance their offerings in categories which have done well so far in 2020 – those categories named above, plus more outdoor play perhaps. The industry in general is likely to have an abundance of offerings for 2021 in those categories which have performed well this year.

The challenges aren’t over for the toy business, but in terms of quarterly results we should start to see from the next quarterly results onwards the effectiveness of each companies’ reaction and counter measures to the pandemic.

 

We run a Consultancy business advising toy companies on how to grow their business by a combination of strategic analysis and export sales facilitation. We have helped more than 100 toy and game companies grow. For more information on our process and methodology for growing toy sales: https://www.kidsbrandinsight.com/blog/toy-co-growth-booster-program/

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