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TOY DISTRIBUTORS: WHAT YOU NEED TO KNOW


Today we’re going to be talking about Toy distributors, how to find them, how to manage them and what to expect. We’ve been working with Toy distributors for about a quarter of a century. Today, our company is in touch with about 500 or 600 Toy & Game distributors around the world, and we have about 5,000 of them on our databases. So what we’re going to talk about on this video comes from a position of hard-earned experience.


Anyway, here’s the key things to know about distributors:


1.      You can work with global, regional, national or local distributors. The main point as far as territory is concerned is to make sure that your distributor can actually reach all the markets you grant them rights for. They may be No. 1 in one market, but only have a marginal footprint in some other markets, so don’t blindly grant them rights they won’t use.

 

2.      Distributors will inevitably always let you down eventually, or in some cases, instantly. But you need to understand the structural reason for that. In order to stay in business and provide some stability to their operations, they HAVE to work with multiple partners. They might distribute for a handful of Toy manufacturers, or they may work with hundreds or even thousands. As a result, they will never, ever put as much focus on your products as you do. I can think of one example where a distributor I rated highly insisted on having Amazon rights in their country, but then routinely failed to have our products in stock. This meant we were losing revenue on an account that we could manage as well as them, but where they were not paying attention to our products.

 

3.      Distributors choose from literally thousands, maybe even tens of thousands of products. So in order to persuade them to sell your products and to put any energy into selling them, you need to develop a really strong and compelling proposition. Be very clear on what your products are going to do for them – are you giving them something they can use to compete against their own competition, are you giving them something that’s a real safe bet? Work out what’s in it for them. If you have a range of nothing special, me too products, then you had better be very good at developing relationships, because you have a lot of competition!

 

4.      Don’t just rely on an annual Toy trade show meeting to manage your relationship. If you really want to get your distributor working maximally for your business, take time & spend money on going to see them at their offices, do a retail tour with them, listen to what challenges they express they are facing and help them to solve them. Don’t be a passive office dweller on this and you will get much more from your distributors.

 

5.      You also need to have some patience and to be realistic. It’s not uncommon for Toy & Game companies to sign up with a distributor, sack them before the end of year one and try to move onto a new distributor. It takes time to build up a product or brand in a market. And also, just remember, there are only so many good well established reputable Toy distributors in each country. If you go through a new one every year, after a few years you will have none left. Stay on good terms, and once you decide to work with a distributor give them a chance (with your full support and monitoring) to deliver for you both.

 

And that’s all for this time, but just before we go, my company has increased export Sales for 100+ companies around the world. If you want to find out more about how we do that, just check out www.KidsBrandInsight.com/services




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HOW TO ACCELERATE TOY COMPANY GROWTH

It’s been a great joy to jump on board successful growth stories in the Toy & Game business. Quite a few of our clients came to us from a position of havind already accomplished a successful startup process, and wanting to ‘press the fast forward’ button, with funding behind them and some degree of established distribution, product lines, staffing and infrastructure already.


Here’s some thoughts on the most obvious answers to how to accelerate Toy company growth:

 

SALES/DISTRIBUTION GROWTH

The most obvious place to start in terms of accelerating Toy company growth is in growing Sales. Often times, this is an inevitability – non-mature companies just need to keep plugging away, and if they have relatively competitive and attractive products then the sales will grow naturally and organically over time with persistence.


One of the most effective, and obvious, ways to ramp up your Sales is to hire in more effective Sales people. This is usually a mix of hiring someone with more experience than your first Sales hires, with existing Buyer relationships and with a strong track record of driving Sales growth. Sometimes you get to a level where you need to increase the number of Sales people to increase your Sales capacity. I have helped quite a few companies to hire new Sales people via our Recruitment service. While you can definitely mis recruit in terms of your company culture, or in terms of the suitability of the Sales person you hire, I have not seen many companies regret the decision to ramp up their Sales team. I have seen them regret exactly who they hired sometimes, and so that is why when we help to recruit Sales staff for our clients we make sure to really question and challenge the candidates in terms of the reality of their performance, buyer relationships and methods of selling.


Beyond personnel, we can break down the ways to grow Sales into the following sections:


1.      GROW DISTRIBUTION IN DOMESTIC MARKET

This is often the lowest hanging fruit to accelerate growth for Toy companies. Are there any sizable Retailers you are yet to open up accounts with in your home country? Are there any other domestic Distribution channels you have not yet reached? Are there key product lines which some Retailers are not listing, and if so, why not? Are there Sales Reps, or local distributors/wholesalers who can help you reach all the ‘nooks & crannies’ of your market?


2.      GROW DISTRIBUTION IN EXISTING EXPORT MARKETS

Again, some of the same questions and tactics apply here. If you are working with Distributors in a particular market, do you have enough information to know how well they are performing? I know a lot of distributors, and count many of them as friends I love to catch up with at Trade shows – but let’s be clear, Distributors are inherently likely to disappoint you, because the structure of their business necessitates working with multiple suppliers, and so you will never get as much focus and energy invested into your products and brands by Distributors as you would want. What you do get though is to tap into the Distributor’s strong Retailer relationships and knowledge of the market, and you get a proportion of the time and focus of their Sales team.


The difficulty though is that there is always something new and shiny to sell in the Toy business, and so you have to constantly monitor the performance and the focus of your Distributors. It is perfectly normal to transition between Distributors if they don’t perform for you or give enough of a push to your products, although there are normally only so many qualified and suitable options in each market, do don’t take this step lightly.


The other alternative is to look to set up a new subsidiary in a market you have previously serviced via Distributors. This is not a small step though, if you’re going to start registering a company, hiring staff and offices in an overseas country, you need to be aware of the commercial and legal requirements of the country, as well as the commercial challenges. In fact, arguably the biggest value add I have made for clients seeking to set up one or more new subsidiaries is to guide them in which countries to go direct to retail in first, and in how to approach that market.


One observation I often make is this – I WORKED FOR Hasbro in the noughties, and at that stage, Hasbro as a company was around 80 years old at that stage, and yet still didn’t have subsidiaries in every market in Europe. Another twenty years on, and I believe they have more Sales offices than when I was working for them, but still, just consider that – one of the Top 3 Toy companies in the world did not have all countries covered with direct distribution after 80 YEARS!


So it takes time to build distribution, and when you are tyring to grow quickly you need to balance the growth ambition with the commercial and practical reality that it is difficult and risky to open new Sales offices. So taking advice from those who know the market, and carefully analysing which market gives you the best chance of success for going direct is really important.


3.      SET UP DISTRIBUTION INTO NEW EXPORT MARKETS

Very few Toy & Game companies can truly claim to be present in every country on the planet. Now admittedly, outside the Top 20 or 30 markets, the total available Sales are not so high. In effect then we’re looking at an ever-diminishing returns scenario once we get past the Top 20 or so countries in the Global Toy market. The key point here is that there are nearly always some sticky markets which take longer to crack open. Let’s start with this startling fact – most Western Toy companies have little or no presence in the 2nd and 3rd biggest Toy markets in the world. The 2nd biggest Toy market in the world is China, and the 3rd biggest is Japan. China is difficult to break into for cultural reasons, but also because the vast majority of the world’s Toys are manufactured in China, meaning that supply for the domestic Chinese market is vast. Japan is hard to get into due to almost impenetrable cultural barriers. After 25 years of working in the Toy business, I can genuinely say that I haven’t met many Toy companies who tell me they have distribution into Japan.


So there are reasons why the No. 2 and No. 3 market in the world are difficult to enter, but there is really no excuse not to break open North America and the bigger European markets, and for most countries, filling in the gaps in your distribution matrix in those regions is the quickest and most efficient way to ramp up growth. There are still cultural barriers – if you compare Europe’s 3 biggest toy markets: Germany, UK & France, there are massive cultural, commercial and regulatory differences. Yet for most product categories, you should be able to find some products in your portfolio which fit all three markets (if not maybe you need to review your product selection and development strategies), so if you are in 2 out of 3, or one out of 3 of those markets, then your next focus should be entering the remaining market/s.


By the same type of analysis, if you are selling into France, there is no reason why you should not be selling into Spain & Italy, which are also good-sized markets.

Looking at North America, if you have some U.S. Sales already, then you should be able to achieve distribution in Canada, which is often ignored as it’s so much smaller a market than the USA, but anywhere else in the world, Canada’s c. $2bn USD to $2.5bn market (data according to Canada Toy Association website) would be considered significant.


So the first step is to identify the gaps in terms of countries reached, and then to work out a market-by-market plan to enter.


4.      SET UP AMAZON IN MORE COUNTRIES

Amazon has bene a massively disruptive force in the Toy business for a decade or more at this stage. In some markets and in some categories, Amazon may capture more than a quarter or even as much as one third of the total Toy market. That can’t be ignored. In modern times, you will never a). Maximise distribution and b). Find a bigger opportunity than accessing consumers around the world via Amazon’s platforms.


There are significant challenges inherent with Amazon though – their pricing policies & practises cause significant commercial challenges for other players in the market, and your Amazon business is not that likely to be the most profitable part of your operations.

Fundamentally, the biggest challenge for Toy companies in managing Amazon is that you are in effect managing a tech platform interface, so you need to have the skills, experience and resources to manage the platform and to effectively compete with your competitors.

The advice I normally offer to people asking me about how to do more on Amazon is this: talk to someone much younger than me! There are some really good Amazon agencies – you need specialist help to advance in this specialist space, so identify well renowned agencies and work out a plan with them. Or hire the best Amazon management people directly out from your more established competitors, this won’t make you popular, but is likely to make you successful!


5.      SET UP D2C BUSINESS IN ONE OR MORE COUNTRIES

I remember back in time when Toy company Sales teams would cause great friction if you tried to launch Direct to Consumer initiatives. They would argue why are we competing with our own customers? Things have long since moved on from that perspective prevailing though. Don’t take my word for it – just check out the 3 biggest Toy Cos:  Lego just reported D2C sales increased by 14% in H1 2024. In addition, Hasbro’s Pulse and Mattel Creations are now well established and selling bespoke exclusive products direct to consumer.


We should put this in context though – all 3 of those massive Toy companies have access to extremely aspirational I.P. that they own, control or license, and most Toy companies don’t have that. As such, I usually own recommend D2C based on particular needs and advantages our clients may have.

 

6.      SET UP ALTERNATIVE DISTRIBUTION EFFORTS

One of my favourite things to do in the Toy business is to be told that it is really hard and doesn’t pay back much to focus on alternative distribution channels versus existing major customers, and then to prove those doubters wrong by delivering big incremental Sales revenues via just this type of non-traditional Retail channels. The size of opportunity here and the directions you can head into does somewhat depend on your product category, but for a simple example – much of the Toy category does not sell in to Gift channels in some major markets, as the margin structure is more generous to the Retailer versus traditional Toys. But it’s quite easy to re-spec, and restructure margin offerings to access these distribution channels.


Wherever a Retailer (of any type), venue, organisation or visitor attraction has heavy footfall or eyeball traffic, there is a chance to sell, you just have to think outside of the box. From product promotion on TV to influencer exclusive products through to promotional product opportunities, there is a world of opportunity off Toy shelves and Toy related e-commerce sites. It takes flexibility of approach, and an inquisitive not easily dissuaded mindset to find these opportunities.


ENTER NEW PRODUCT CATEGORIES

Once we get beyond the simple answer to growing Toy sales – i.e. just sell more, then we can start to look at more strategic angles. One of the most obvious ploys is to expand your product offering into new (normally adjacent) product categories. The most successful path here is to work out why you have been a success so far, and to identify your competitive strengths, and then work out which product categories suit your strengths.

Let’s start here with a basic and hard to disagree with premise: there is no Retail Buyer on earth desperately waiting for new vendors to come and sell to them. There are literally millions of existing Toy products out there for Buyers to choose from. Therefore to succeed in the Toy business you fundamentally have to embrace competition. It is your products against the other guy or gals products.


One key self-reflection you need to make before choosing to enter a new product category is why you were successful so far in your existing categories. Was it something specific to that product category, was it something within your innate corporate DNA? Was it a trend insight? A gap analysis?


You don’t normally want to base your business plan on a me-too approach. You should ideally start with a key insight or competitive difference/advantage where you can sustain your advantage. It is true that once you are an established vendor, your Buyers will often look for more products and more categories from you so that they can maximise their vendor operations and get more products from a company group of people they now trust. But if that’s all you have, those very same Buyers will soon drop your products when someone else comes in offering something new and different.

 

ACQUISITION

The Acquisition strategy can be joined with the previous strategy. Often acquisitions occur in order to add a new raft of product and product category opportunities to an established company’s offering. The best example of this might be Spin Master’s acquisition of Melissa & Doug, as Spin Master’s corporate release at the time claimed: “The highly strategic and complementary acquisition will bolster Spin Master's position in the children's entertainment industry.”


The chance to buy into an existing and complimentary market adjacent to Spin Master’s existing Retail focused offerings was too good to miss.


Acquisitions are not always merely about adding new products and categories. Sometimes they are about buying access to distribution that would otherwise take too many Sales cycles to build up. Often times when a Toy company successfully secures growth funding from investment firms, they need to progress quickly in order to meet the requirements of their investors. Sometimes the founders may see their shareholding diluted if they fail to meet growth expectations. Investors normally seek a 3-to-5-year payback, which is not that long in an industry where there is an annual selling cycle. So if they buy another company which has established trading accounts with key retail targets, the company can then leverage those trading accounts for more listings of the core product lines and grow much more quickly than they would do otherwise.


The acquisition process can be very involved though, and there are many mistakes and omissions that can be made, so thorough due diligence is required. We have consulted on some of these transactions, and the biggest mistake can be to fail to recognise how much value is in key members of the Sales team. It is therefore normal practise to offer a golden handcuffs deal to the Sales people in the acquired company for at least 2 or 3 Sales cycles.

 

MARKETING ACTIONS (including Consumer & Trade Marketing, plus Trade shows)

If you have managed to establish your company, products & brands without any significant marketing, then there is an argument for not pursuing marketing as a growth driver, because there is a risk that you could achieve similar revenues and sales per sku with an added investment and therefore lower margin.


But it depends on how quickly you want to grow and how you can adapt your business model as you grow. The start point for marketing should normally be meaningful investment at the point of sale where it can make the most obvious and direct difference to Sales. This can be quite difficult to achieve in bricks and mortar retail, because Retailer compliance is not always guaranteed. There are plenty of trade ‘campaigns’ or ‘activities’ I have been persuaded to sign off which never happened but were more just an injection of extra funding to the Retailer. Meaningful investment and campaigns at trade level are things which allow your products to stand out and to be more prominent i.e. end caps, pallet displays or counter displays.


The same principle actually applies online. If you can invest your marketing $£€ on driving motivated traffic to somewhere to buy the product, you will get measured and tangible return on your marketing investment. There is no doubt that today you can find Influencers with a big reach who can help to promote your stuff, but that should be secondary to driving tangibly measured sales via whichever e-commerce sites suits your model. For example, you may have some of your budget deployed on Amazon, but you might be better off to invest in driving sales via Walmart.com, on the basis that strong sellers on Walmart.com are more likely (generally speaking) to lead to the in-store listings which have the potential to drive huge volumes.


Speaking as someone who has spent $tens of millions on consumer marketing, I have a few fundamentals before I recommend spending a dime. Strategy comes before execution. What does that mean practically speaking – start with this: who is your consumer and purchaser target demographic, what message do you want them to receive and what action do you want them to take. Once you are clear on those points you might be ready to invest money in consumer marketing.


In terms of media and what %age of your budget to spend where, I can no longer recommend TV advertising. There has been a long period of time where the pay back and impact on sell through was difficult to justify, but where Retailers still demanded TV investment. We have to be past that point now. If you have children yourself you will know how little TV many kids today actually watch, they are more likely to be on platforms like Netflix or on YouTube, and as they get a little older, on social media i.e. Tik Tok.


Influencer partnerships can be viewed as integral today as TV was back in time, although the influencer has to match the audience you are targeting and have sufficient metrics to register. You also need to get value for your money, one or two actions are not likely to cut through unless the influencer is top level, at which point they will be very expensive to work with.


Of all the growth drivers detailed in this article, spending money on marketing is the one I would be most careful/reticent to deploy – and bear in mind my professional development was to a degree through working in Toy company marketing departments, there is some strong evidence for my feelings on this.

 

 


We run a Toy & Game business growth accelerator program. We have run this program with many up and coming companies, and we run through our process to review your progress to date, identify your strengths and weaknesses versus your competition and to ramp up your Sales efforts. If you want to find out more on how this service works, just click here: https://www.kidsbrandinsight.com/services 

 

Sign up to our Free Toy Industry Journal e-newsletter for the latest articles, podcasts, trends and insights into what’s going on in the Global Toy & Games business, just click here to sign up: https://forms.aweber.com/form/54/1325077854.htm 

 

The 5 Stages of a Toy Business Start-Up: Navigating Your Path to Success

Starting a toy business is an exciting and challenging venture. From initial concept to a thriving operation, the journey involves several distinct stages. Understanding and navigating these stages can help you turn your vision into a reality. Here’s a breakdown of the five critical stages in launching and growing a successful toy business:


1. Pre-pre Launch: Laying the Groundwork

The Pre-pre Launch stage is where your Toy startup dream begins to take shape. At this point, you're focusing on research and ideation. It’s essential to understand the market, identify potential gaps, and refine your product concept.

  • Market Research: Investigate current trends in the toy industry, analyze competitors, and understand your target demographic. Are you catering to toddlers, tweens, or collectors? This will influence everything from design to marketing.

  • Product Development: Begin prototyping your toy. Focus on innovation, safety, and the play experience. Engage in early testing, gathering feedback to refine your product before it hits the market.

  • Business Planning: Craft a solid business plan. This includes defining your brand, setting short- and long-term goals, outlining financial projections, and planning your go-to-market strategy.

This stage is all about setting a strong foundation. The more thorough your preparation, the smoother the subsequent stages will be.


2. Pre-Launch: Building Momentum

The Pre-Launch stage is where you transition from planning to action. This phase involves generating buzz and finalizing all details before your official launch.

  • Brand Development: Solidify your brand identity, including your logo, packaging, and messaging. Your brand should resonate with your target audience and stand out in a crowded market.

  • Marketing Strategy: Develop a comprehensive marketing plan. Utilize social media, influencers, and pre-orders to create anticipation. Early engagement with potential customers can help build a loyal community even before your product is available.

  • Logistics and Supply Chain: Ensure your manufacturing process is efficient, and establish relationships with suppliers and distributors. Consider the logistics of packaging, shipping, and handling returns.

The Pre-Launch stage is crucial for building anticipation and ensuring that all operational aspects are ready for the big day.


3. Launch: Hitting the Market

The Launch stage is the culmination of all your hard work. This is when your toy officially enters the market and starts reaching consumers.

  • Marketing Execution: Implement your launch marketing campaign. This could involve a combination of online ads, influencer partnerships, PR events, and social media promotions.

  • Sales Channels: Whether you're selling online, in physical stores, or both, ensure your sales channels are ready to handle demand. Monitor performance closely and be prepared to make adjustments.

  • Customer Engagement: Engage with your customers actively. Encourage reviews, respond to feedback, and create a sense of community around your brand. Positive customer experiences during the launch can drive word-of-mouth and repeat sales.

The Launch stage is exciting but demanding. Stay flexible and responsive to ensure a successful market entry.


4. Growth: Scaling Up

Once your toy business is established, the focus shifts to growth. This stage is about expanding your reach and increasing sales.

  • Product Expansion: Consider expanding your product line or introducing variations of your existing toy. This keeps your brand fresh and offers more options to your customers.

  • Marketing Optimization: Analyze the performance of your initial marketing efforts and optimize them for better results. Experiment with different strategies, like seasonal promotions or bundling products, to boost sales.

  • Partnerships and Distribution: Explore new distribution channels or partnerships to reach a broader audience. Whether it’s entering new retail chains or collaborating with other brands, expanding your presence is key.

Growth is about building on your initial success and pushing your business to the next level.


5. Consolidation & Normalization: Sustaining Success

The final stage, Consolidation & Normalization, is where your business becomes a stable, enduring entity. The focus here is on sustaining success and establishing long-term profitability.

  • Operational Efficiency: Streamline your operations to reduce costs and increase efficiency. This might involve automating processes, renegotiating supplier contracts, or improving inventory management.

  • Brand Loyalty: Continue to build strong relationships with your customers. Loyalty programs, regular engagement, and excellent customer service can help retain your customer base and attract new ones.

  • Financial Management: Monitor your financial health closely. Ensure that your revenue streams are stable, and that you have strategies in place for managing any downturns or challenges.


This stage is about solidifying your position in the market and ensuring your business is resilient and sustainable.


Conclusion

Starting a toy business is a journey of creativity, strategy, and perseverance. By understanding the five stages—Pre-pre Launch, Pre-Launch, Launch, Growth, and Consolidation & Normalization—you can better navigate the challenges and opportunities that arise. With careful planning and execution, your toy business can grow from a simple idea into a beloved brand that brings joy to children and collectors alike.


If you would like to find out more about how we have worked with more than 200 Toy startups and about our Toy business Consultancy services, just click here: https://www.toyindustryjournal.com/toy-business-consultancy

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