Has The Pandemic Been Good For The Toy Business?

In writing this provocatively titled article, let’s first make one thing clear – things are very tough for some toy businesses right now, not everybody is winning. But overall, there is a viable argument to be made suggesting that the global toy business has benefited overall from the pandemic.

There are two primary ways in which the toy business has benefited from the pandemic (despite the stress, uncertainty and threat to health and wellness):

Firstly, in purely financial terms, in most major toy markets reports made by respected sources in the public domain suggest YTD sales growth. This is both seemingly miraculous but yet in some ways logical. The toy business growing during 2020 is miraculous because so many retail outlets were locked down at some point and because of the biggest disruption to human society and our way of life since World War 2. Some companies haven’t seen sales growth and in some categories things have been really tough. But overall, parents have bought more toys across the world because they want to gainfully occupy their children so they don’t feel so scared or depressed about their changed situation but also because lockdown means more home time which means more screen time, and toys are generally seen by parents as a potential antidote to screen time.

The second way though in which the toy business has benefited is in a shift in balance between sales of licensed and non-licensed toys. Historically we would occasionally see a year which was really light on blockbuster triple A movie releases, which would in turn see the toy market dip or at least fail to grow. In 2020 though, we’re seeing a lack of cinematic releases due to the pandemic lockdown closing movie theatres as well as reducing footfall, but yet we have still seen sales growth.

The great news for the toy business overall is that typically when movies aren’t driving toy sales the industry reverts to pushing evergreen brands and new products. The focus on selling more own brands generally leads to higher profits per unit sold, and if overall sales are still up that means someone somewhere in the toy industry is making more profit. The need for new product ranges without licenses should lead to more new toy product lines eventually turning into evergreen brands.

Above all though the toy business is enjoying a less damaging impact from the pandemic than many other industries, and for that we should be thankful. We can also be grateful in time for a rebalancing of the product mix towards our own non-licensed toys which should be to the long-term benefit of the industry.

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: www.KidsBrandInsight.com/services

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How Many Of This Year’s Big Toy Launches Will Make It To Year 2?

 The toy business is a very wasteful business. We have this huge churn of products each year and an annual massive product development effort which sees ongoing yearly investments in tooling, marketing materials, marketing media and manufacturing costs all spent before the product launches.

The holy grail of the toy business is to acquire or build perennial (i.e. selling every year on an ongoing basis) products and brands. These well-known products are easier to get listed by retailers, they are more likely to be bought by consumers and they are far more profitable as they need less marketing investment and far less development investment versus new products.

The challenge is that these products are not easy to come by. There are only so many established brands out there like Rubik’s Cube, Monopoly, Barbie, & Lego. Moreover, most toy companies who try to build their own brands fail to build meaningful brands with genuine consumer recognition. Those who find some degree of success in terms of evergreen products tend to have strong product formulas to keep on driving sales every year versus mass consumer brand awareness, but at least they have some element of recurring busines each year which can only be a good thing. The fact that it is hard to build massive brands or even just established perennial products shouldn’t stop us from trying.

After the investment of $billions in 2020’s toy product line, the global toy business will have to replace at least 60-70% of the product line again for 2021, which is both wasteful and imprudent if there is an opportunity to invest in new products with a better chance of hitting year 2 and beyond.

If we take a mid to long term view, over 5 to 10 years a reasonably sized toy company should be able to launch at least 1 or 2 potential perennial brands each year, and in doing so, over the course of a few years is fairly likely to find something which sticks and comes back again year after year. Then again this takes effort and commitment to creating solid foundations under your business despite the fact it’s a gruelling process.

The choice is yours – chase the quick easy wins each year and stick with the standard hamster wheel approach to the toy business or work really hard to create something permanent and recurring.

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: www.KidsBrandInsight.com/services

For more articles & insights on the toy and games business, sign up here for our free e-newsletter sent straight to your inbox: https://forms.aweber.com/form/54/1325077854.htm

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/

For more articles & insights on the toy and games business, sign up here for our free e-newsletter sent straight to your inbox: https://forms.aweber.com/form/54/1325077854.htm

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/

For more articles & insights on the toy and games business, sign up here for our free e-newsletter sent straight to your inbox: https://forms.aweber.com/form/54/1325077854.htm

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/

For more articles & insights on the toy and games business, sign up here for our free e-newsletter sent straight to your inbox: https://forms.aweber.com/form/54/1325077854.htm

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/