#22 TOY MARKET UPDATE & OUTLOOK FOR H2 2023 (CELEBRATING 100 EPISODES OF PLAYING AT BUSINESS PODCAST

#22 TOY MARKET UPDATE & OUTLOOK FOR H2 2023 (CELEBRATING 100 EPISODES OF PLAYING AT BUSINESS PODCAST)

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THE 3 MOST IMPORTANT MANAGEMENT ISSUES IN THE TOY BUSINESS: INVENTORY, INVENTORY & INVENTORY!

Q4 2022 was pretty horrible for the Toy & Game business overall, consumer sell through was really poor. The stock market listed companies reported double digit sales decreases year on year and inventory levels in warehouses and in retail soared leaving our industry with a significant inventory overhang heading into 2023.

As we’ve moved further into 2023, there are some positive signs out there in that inflation is reducing in most major Toy markets, although it is still significantly higher than we have become used to in recent years. And while discount channels are going to be overflowing with good product this peak season, most mass-market retailers have gone so conservative on their buying that they are almost inevitably creating a situation where the opposite problem to excess inventory will prevail before too long.

Anyone who has been around long enough has seen the pendulum swing that comes from too much inventory in the trade – normally retailers become so averse to ordering inventory that the overstock soon becomes an understock. Although the current inventory situation is more significant and widespread compared to nearly any other year in the 25 years I have been in this business, we could see the same retailers who are refusing to commit screaming for more stock by the time we get into Q4. Normally this kneejerk inventory conservatism therefore leads to a much cleaner market heading into the following year. Therefore, ‘normal’ would suggest that 2024 will be a much better year for the global Toy & Games business all else being equal. Although these are turbulent times, so anything could happen.

MOVIES & THE TOY BUSINESS IN 2023

The bumper movie year we thought 2023 was going to be has in reality yielded mixed results so far. We’ve had the super successful Super Mario Bros movie which grossed $1.35billion at the US box office. We’ve also had the massively publicised Barbie movie, which at the time of writing has nudged over $1billion at the box office around the world. On this later success, I think we need to give a serious hats off congratulations to team Mattel. There was a time not that distant in the past where Mattel seemed to be well behind the curve as social media gave a broad platform to the dissatisfied, there was a time where Barbie’s future was in question. The move towards more diversity, and a brand narrative which was all about empowerment saw barbie & Mattel turn the corner. The massive cultural moment of the Barbie movie release with the accompanying commercial success suggests to me that the Barbie brand is well on track to be a major iconic Fashion Doll brand for the next generation as well as the last few. I can’t remember a movie derived from a Toy brand creating so much ‘noise’ before in mainstream media, and so again we have to recognise Mattel’s success here.

At the same time as we have seen big success with some movies this year, we have also seen an unusual number of flops. Hasbro’s Dungeons & Dragons seems to have failed to meet commercial expectations despite being a critically well received movie with a good cast. 2023 has also been disappointing so far for The Walt Disney Company with more flops than we have been used to seeing. Overall though, as is usual we have had big hits AND big flops, and so from an overall Toy business perspective, the movie business has been more of a help than a hindrance for Toy companies so far in 2023.

SOURCING & SUPPLY CHAIN TRENDS

As many of you reading this will know I spend a lot of time advising Toy & Games companies on their Sourcing efforts, and especially help them review their supply chain risk diversification in these crazy times we live in right now. The good news in 2023 has been that we have seen a major reversal in the exorbitant shipping costs which affected us coming out of the pandemic.

The other major trend is the continuing ebbing away of Toy manufacturing from China. The relationship between the two great powers of the USA and China has become a dominant issue for many of my clients working in the Sourcing function. Some of the biggest mass market retailers in North America are telling my clients that they need to move at least 25% to 35% of their production out of China in the next couple of years due to the sourcing diversification strategies of these companies. Hasbro & Spin Master are already reportedly more than 50% outside of China. The challenge as ever though is that China has the world’s most efficient and (comparatively speaking!) easiest Toy factories to work with.

Capable, experienced and efficient capacity outside of China is limited and in high demand. Sourcing from new geographies inevitably comes with problems, delays, challenges and above all more management time and hassle. In some ways I guess I should be grateful as it is the difficulty of managing new geographies which provides me with a substantial supply of Consultancy gigs, but I don’t take any pleasure in things getting harder for companies in our industry.

The one thing I can guarantee though is this – acting like the proverbial ostrich with its head in the sand is not going to be a better solution going forward. In fact if I can use another analogy to illustrate how I see the current status of Toy Sourcing it’s more like the frog in a pan that doesn’t notice it is boiling until it is too late. The world has changed and will continue to change whether we like it or not, and successful companies don’t just react, they pre-empt and plan for the future.

The New York Times reported this week that China’s overall exports are down 14.5% in July versus July of 2022, and that in the first half of 2023, U.S. imports from China dropped by 25% year on year – by any standards that is dramatic. The reality here is that some manufacturing is moving away from China as the perceived geopolitical risks have risen. My clients (which include some of the biggest Toy companies in the world are now taking bold steps to set up production with factories in other geographies based on perceived risks not necessarily on the reality of what is happening.

I’m seeing a lot of emphasis on Mexico, Indonesia & India for new production as Vietnam capacity is constrained and factories there are tending to be quite full. A couple of weeks back I toured a U.S. company around Toy factories in India. The capabilities in India, along with the depth of supply chain are growing, but like with any new geography, the experience and smoothness of working has a long way to go to match what China can do currently. The new normal is going to be more Sourcing problems as companies balance out diversification with efficiency. Above all though we need compliant capacity first and foremost, with cheap labour second in priority and so we will end up going to any countries which can meet these 2 priority needs.

There is nothing judgmental, negative or political about this perspective on China losing Toy production by the way, it’s just that China’s place in the world has evolved. Going forward it seems unlikely that a developed economy is going to be the right place to manufacture ALL of the world’s Toys when we rely on cheap labour in our processes. China is the world’s 2nd largest Toy market, and we're unlikely to see that changing any time soon with China having 1.4 billion increasingly wealthy people, and with a culture of having fewer children but ‘investing’ more in the development of those children than some countries. China is still manufacturing the majority of the world’s Toys today, and so I don’t see us EVER stopping from having some manufacturing in China, but going forward we will be working with a multi-hub Sourcing situation, and China will consistently lose share of global Toy manufacturing consistently over the next decade.

FIND OUT MORE ABOUT TOY SOURCING AT TOYFAIR IN NEW YORK

If you’re interested in hearing more about this topic of Sourcing and why the world is changing away from relying primarily on China as a hub for Toy production, you can hear me present on this topic at the Toy Association’s Toyfair in New York this time round. On Sept 30th 2023 at 9.30am I will be sharing my thoughts, conclusions and a whole load of data with those who turn up to listen to my presentation. https://tfny2023.mapyourshow.com/8_0/sessions/session-details.cfm?scheduleid=3

If you want to meet for coffee, tea or some other form of liquid sustenance at the New York show, please feel free to drop me a line :)

DEMOGRAPHIC CHALLENGES & SUSTAINABILITY: THE LONG-TERM THREATS TO THE TOY INDUSTRY

I’ve written previously in this newsletter series about these two topics, but while we are all focused on the considerable commercial challenges we face this year with the inventory situation and cash strapped consumers, we also need to keep an eye on longer term trends, so I’m going to reiterate:

Firstly, birth rates are falling in all major Toy markets. This is a long-term threat to the Toy business if we stay doing the same things in the same way. The ‘Kidult’ opportunity offers a significant incremental upside to the traditional Kids business. And so if I had to predict how the Toy business would look different in ten or twenty years, I think that nearly all Toy companies will need to diversify their consumer target profile to avoid fighting for scraps in an increasingly reducing pond.

Secondly, the other major risk I see for the overall Toy business from a longer-term perspective is all that comes from the need for ever greater sustainability, and the potential for consumer plastic rejection. We know that we could already make most Toys out of bio-based plastics, but we also know that retailers/consumers won’t pay (en masse) the c. 40-60% price premium for that. We also know that massive upsurge in bio plastics production could adversely affect global food production and food prices. The obvious answer here to me is that all Toy companies should have serious strategies for ‘Plan B’ which includes non-plastic, non-fossil fuel derived materials. Wood, cardboard and other sustainable materials should be an ever-increasing part of your product mix if you want to ensure you remain successful over the next decade.

PLAYING AT BUSINESS PODCAST

100 EPISODES OF ‘PLAYING AT BUSINESS’ PODCAST

Back in 2018 I started the Playing At Business podcast with the aim of sharing knowledge about the Toy & Games business. There were three motives: 1. A genuine desire to help those people and companies who were newer to the business and don't know all the answers 2. An easy reference tool I could refer people to to avoid having to answer the same questions repeatedly 3. To act as a marketing tool for my Consultancy business. And over the past 5 years, the podcast has been fairly successful in all three respects based on feedback from listeners.

So, if you've been with me from the start - many, many thanks, watch out for more episodes coming soon. And if you have yet to listen, why not join the other listeners and check it out...

Anyway, here's the latest episodes here:

EP 100 – How To Recruit Good People And Find New Job Roles In The Toy Business

Join host Steve Reece in a deep dive into the toy industry's recruitment nuances. Having helped many people to find new roles in the Toy business and having advised many Toy companies on who & how to recruit, Steve unveils key strategies for companies to recruit effectively and tips for candidates to land their ideal roles. Whether you're hiring or job-hunting, discover invaluable insights to assist your recruitment/job search process.

https://playingatbusiness.libsyn.com/ep-100-how-to-recruit-good-people-find-new-job-roles-in-the-toy-business

EP 99 – Gift & Hobby Distribution Channels (The Original Kidult Toy Business?!)

Guess what – people have been buying Toys for adults for a very long time. Even though the ‘Kidult’ thing is the big noise nowadays, hobbyists and people buying Toyetic gifts for adults have been around for a long while.

Listen in to Episode 99 as we look at these adjacent areas in more detail:

https://playingatbusiness.libsyn.com/ep-99-gift-hobby-distribution-channels

EP 98 – How The Toy Industry Clears Excess Inventory

A few episodes back we looked at why excess inventory is so dangerous - in this episode we move on to look at the practicalities of how our industry manages excess inventory, where they sell it, how it works and some major banana skins to watch out for when selling clearance stock!

https://playingatbusiness.libsyn.com/ep-98-how-the-toy-industry-clears-excess-inventory

AND FINALLY…

KIDS INDIA, MUMBAI - I'll be attending the Kids India show in Mumbai in a few weeks. If you will be there & want to meet, please get in touch.

And if you want to find out more about my Toy & Game business consultancy services, please just click the link below. Our company has helped hundreds of Toy & Game companies to get ahead and grow sales/make more profit. I have worked on all product categories across a 25 year career in Toys & Games, and genuinely love sharing knowledge, contacts and facilitating greater success for our clients. For more information on our services, click here:

https://www.toyindustryjournal.com/toy-business-consultancy

Sign up for my free e-newsletter and receive all the latest reports, analysis and insights on the Toy & Games business: sign up for free here: https://forms.aweber.com/form/54/1325077854.htm

#21 ARTIFICIAL INTELLIGENCE & THE TOY BUSINESS: REALITY CHECK, REALITIES & PREDICTIONS

#21 ARTIFICIAL INTELLIGENCE & THE TOY BUSINESS: REALITY CHECK, REALITIES & PREDICTIONS

Sign up for my free e-newsletter and receive all the latest reports, analysis and insights on the Toy & Games business: sign up for free here: https://forms.aweber.com/form/54/1325077854.htm

Just for the record, let’s get one thing out of the way - this article has not been written by artificial intelligence. I have written this article myself as a genuine if highly flawed human being. This is not one of those articles where you read through, and the last line says “and this was written by AI”. (I recently listened to a brilliant podcast by Seth Godin, a well renowned marketing ‘guru’, about A.I., in which the last line of the podcast was and both the script and the voice for this podcast were A.I.)

Today, we are in the early days of our understanding and living with AI and what it can do for us, the technology can already do some very impressive things, and clearly the trajectory with technology like this is rapid advancements as the technology teaches itself and the knowledge base it works from infinitely faster than we mere human beings.

We’re not going to go into the potential exponential risks for humankind with AI that have been highlighted and discussed elsewhere in more depth and with greater insights than I can offer. However, we do need to appreciate how AI has changed and is going to continue to massively disrupt the business of Toys & Games.

A.I. - A DEFINITION AND HISTORICAL PERSPECTIVE

Wikipedia defines AI thus: “Artificial intelligence is intelligence—perceiving, synthesizing, and inferring information—demonstrated by machines, as opposed to intelligence displayed by humans or by other animals.”

So, the key thing here is that A.I. doesn’t necessarily have to be advanced or super intelligent. Even going back to early internet experiences via Google or Amazon or others back in the day – from the very beginning these online platforms have been driven by machine intelligence as well as human insights and management.

The reason why Google is the global leader in internet search and has been for more than 20 years is that they have had the best A.I. managing the crawling and searching process from a technical perspective. The reason why you can search for any information and normally find it in a few milliseconds is because of Google’s tech, not because of any direct human involvement in your search. Obviously, humans have helped to shape and program the code driving the A.I. involved, but the point is that A.I. is not new – we have already been heavily relying on it for several decades already at this point.

We can look forward and project our thoughts into the amazing places that AI will go, but the most effective path here is to keep an eye on the present and the future, but also to keep an eye on the mundanely effective as well as the outlandish capabilities of A.I.

Mundane tasks like Finance admin or producing shipping documentation are increasingly going to be A.I. driven. This is one of the primary points to remember as we look at this topic – A.I. may well be able to take on advanced work before too long, but it has been helping us on an ever-increasing basis with basic mundane tasks for years already – back to the analogy of it taking twenty years to become an overnight success!

A.I. - PRODUCT IDEATION & DEVELOPMENT

One of the key engine houses of the Toy industry is the creative process at the start of product development– creating a concept and working out which concepts to actually produce. Let’s get straight into how A.I. can help at this stage.

The following segment is copy and pasted out of CHAT-GPT 4:

ME: Please create 10 original Action Toy I.P.s

CHAT-GPT 4: Sure, here are 10 original toy IPs in the action toy category:

1. Astro Knights: A series of knight-themed action figures set in a distant future where chivalry meets technology. Each figure comes with a unique set of cybernetic armor, a laser sword, and a transforming robotic steed for interstellar travel. Characters range from valiant knights to ruthless dark knights, all vying for control over the Cosmic Kingdoms.

2. Dino Bots: Dinosaurs come back to life as mighty robots, equipped with weapons and unique abilities. Each Dino Bot can transform from a dinosaur to a fully-articulated robot and vice versa. Kids can recreate epic battles between herbivores and carnivores but with a fun technological twist.

3. Shadow Ninjas: These ninjas are masters of stealth and weaponry. Each figure comes with a range of ninja weapons and a unique shadow ability, like disappearing into darkness or creating illusions. They wage a silent war against the evil Oni Clan in the hidden world of the Yokai Realm.

4. GigaZords: Giant robots piloted by a team of young heroes, each with their own unique powers. The robots can combine into a mega-robot to fight massive threats. The line also includes villain figures and their corresponding giant monsters for the heroes to battle.

5. Wild Elemental: A line of action figures based on mystical creatures, each harnessing a specific natural element - earth, air, fire, water, etc. They are protectors of their respective realms and often clash over territorial disputes, creating epic elemental battles.

6. Alien Infiltrators: Alien action figures, each with their own unique form and abilities. They live among humans, disguising themselves using their transformation abilities. The toy line includes both heroic and villainous characters, as well as humans who have allied with them.

7. Sky Pirates: Adventurous, swashbuckling pirates of the skies with steampunk-inspired ships. The toy line includes a variety of pirate figures, their fantastic airships, mythical sky creatures, and treasure to be found or fought over.

8. Tech Titans: A team of technologically enhanced superheroes, each with a unique suit that gives them special abilities. The toy line would include both the heroes, their alternate suits, and the villains they face off against in their futuristic city setting.

9. Primal Warriors: These action figures are based on ancient warriors from various cultures - like Spartans, Vikings, Samurai, and more - each with an animal spirit guide that provides them with special powers. The spirit guides can also transform into a weapon for the warrior.

10. Quantum Voyagers: Time-traveling action figures, each from a different era. Each figure comes with period-specific weapons and a personal time machine. They battle time-traveling villains trying to rewrite history for their own benefit. The possibilities are endless for historical characters and scenarios.

As I have written about many times before, there are certain themes for Toys which are perennial and work time after time. There are only so many truly groundbreaking blue sky Toy themes in the market. The reality is most of what we do in Toys is to some degree derivative, the secret sauce for success lies in getting the execution right. The point here is that these 10 Toy concepts supplied by Chat-GPT 4 could well work. If you go through those ideas and really think about all of them, you have most likely seen something along those lines in the market, and you have probably seen about half of them be successful to some degree.

Now the challenge of course is that it is inevitable that AI can present Toy concepts which work, because to some degree what an AI like CHAT GPT does is to trawl all existing relevant materials and then to draw conclusions, so to some degree the concepts GPT produced in this example are likely to be credible because to some degree they are a derivative of everything that is already out there. To that point the true creativity of these large language models is debatable, but then most Toy companies are looking to produce products which sell, not to develop truly groundbreaking original innovation – hence why so many Toys in market are derivative.

It's not just in Toys of course that that approach of amalgamating all existing versions of something can lead to the production of something credible – for a couple of years now A.I. has been capable of ‘writing’ movie scripts which would be very likely to get greenlit by Hollywood studios.

There is no doubt then that A.I. is going to be a major tool for the creative aspects of our industry going forward. The challenge though is that they are a very long way off from being truly creative at this point. Currently, A.I. can be a strong tool to help creatives in our business, but there is a big difference between aiding and replacing. Those working in R & D departments should embrace A.I. and heavily skill up, because the R & D jobs of the future may be more based on creative skills in terms of creating the inputs to A.I. platforms as much as in traditional creativity.

With regards to content, which has played a major role in the Toy business for as long as most of us can remember, I expect that there will be a big role for AI in mapping out and expanding content narrative and churning out scripts for repeat episodes of an animation. If it becomes significantly cheaper to churn out content, we can expect to see ever more content, which is both good and bad – good because we should have more options of content based properties to develop Toys for but also bad because any content initiatives by Toy companies are going to find it harder to find ‘distribution’ to the increased competition.

So, at this stage, I see A.I. as being a major tool for product and content developers to use and still some way off from being a true source of ideation. In saying this I appreciate that something which is very systematic but also highly variable and like music can be created by AI, I see it as being harder for Toys because there is both a physical functionality element, a feeling of benefit on behalf of a parent, or kudos on behalf of a child or Kidult and AI does not seem yet ready to ideate in our business in this way – yet. Who knows what the future holds, you could eventually have a full A.I. Toy company churning out credible ‘Me-Too’ Toy concepts and content formats, but the true spark of brilliance and creativity in mashing things up that have pre-existed does not seem to be there yet.

A.I. - TOY & GAME PRODUCTS

We’ve looked at how AI will affect the PROCESS of ideating and designing Toys & Games, but we also need to consider the products themselves. Think of a basic Plush Toy – kids love Plush Toys for various reasons, but one of which is that they are so soft and cuddly. One of the reasons why Feature Plush is such a successful space and proven over time is because by adding some (relatively basic) interactivity, movement and sounds we can bring the product to life – we can make that character move from being inanimate to seeming at least a little real. Needless to say then the more advanced the tech inside that Toy the better the experience can be for the child. To put this into a real context – imagine sticking an Amazon Alexa device inside a furry Plush character from a child’s favourite show or movie. Already today artificial intelligence can deliver a massively enhanced experience. But imagine if the AI could interact with the child on a much deeper level – that’s where we are heading here. The AI will be able to riff of the cuff bedtime stories based on the child’s interests, friendships groups, family and pets – you name it. That will be so compelling for children. I have often written or spoken about one of my all-time favourite Toys - that being Interactive Yoda by Tiger Electronics, this product dates from around the fall of the millennium and Yoda literally talks to you & reacts to your movements with a light sabre. Now needless to say, the tech in that Toy was basic, it was clunky, and while it did bring Yoda to life, it was not a very deep interactivity. Imagine the same product with a modern, advanced AI language model inside. Yoda could not only relate the entire history of the Star Wars universe but could also ad lib in an authentic Yoda-ish way. That is one Toy that the ‘Kidult’ in me would buy every time!

Funnily enough, on the day of editing this article, my ex-employers Hasbro announced the return of Furby, the massive hit Toy of the late 1990s. This iconic interactive Toy was a huge commercial success at the time of launch, and when Hasbro brought it back again some years later. I expect a bumper year for Hasbro with this relaunch of Furby which features voice recognition and 600 phrases. We can expect much more to come from this type of product as artificial intelligence advances at a fast rate.

The creative executions coming up in the next few years and beyond featuring artificial intelligence capabilities will be stunning. Frankly, it’s not my job or skillset to ideate on what is possible from a creative perspective, but it is very clear that we are going to see a lot of truly ‘WOW’ products in the coming years, as much because of their technical functionality by way of offering a truly interactive experience. It won’t be long before children are being taught in school to recognise the difference between a real person or real animal and an artificial intelligence interface. What exciting times these are!

A.I. - INTELLECTUAL PROPERTY

Having looked at how effectively A.I. can churn out concepts & ideas we can see that there are obvious challenges in terms of intellectual property ownership. AI can effectively produce IP which is derivative and mashed together from several or even many concepts based on searching information in the public domain on the internet. It clearly has the capability to casually infringe the intellectual property of other brands. If you take 1% of each of 100 brands to create 100% of your own brand does that mean that you have something truly distinct and ownable or not from a legal perspective?

Anybody who has ever seen IP infringement legal cases can tell you that the law in this area is not as black and white as you might presume it to be. Sometimes legal protection is given and sometimes not when it comes to courts of law. Different jurisdictions have different legal frameworks, but sometimes even within the same jurisdiction legal rulings can be inconsistent and sometimes arbitrary. The cost to get a definitive ruling on intellectual property cases is very high, but the rewards can also be massive.

There will undoubtedly be legal challenges to AI over the next few years. There are going to need to be landmark rulings which may alter the legal allowability of AI originated output or may leave the field relatively free, and the legal framework is going to vary from jurisdiction to jurisdiction.

The challenge right now is how to proceed until those legal tests come to pass. Prudence suggests that legal departments will need to be ‘on their toes’ to navigate the next few years as we enter the ‘storming’ phase of the introduction of more advanced artificial intelligence.

A.I. - ENGINEERING & MANUFACTURING

Artificial intelligence has already made a major impact on the sphere of engineering and manufacturing. In functions or departments which are driven by precision and efficiency, AI has much to offer and many positive impacts to make.

Let’s start with the manufacturing facility itself – AI with its massive capability to analyse data and to create efficiency through computation and calculation will design manufacturing plants optimised for efficiency to a level far beyond a human could.

AI will also revolutionise the supply chain into the factories we use. Human error on ordering specs or quantities should be eradicated, and while machines will make mistakes, they will make fewer and fewer over time as they learn from their mistakes in a way humans often don’t!

Moreover, as the intelligence level and capability of machines is growing rapidly, so is everything driving advances in robotisation. Today’s robots tend to be expensive and inflexible versus the multiple tasks we need them to fulfil. In the world of Toys & Games, so many products don’t make it past Year 1, and as such it makes little sense to acquire and setup new machinery. A.I. will make robots far more flexible and adaptable.

Mo Gawdat, a high-ranking Google employee (who left due to concerns of the huge, potentially negative impact of AI on the human race) tells a story of how he had a vast budget at Google, and would run all kinds of weird & wonderful experiments. At one point they set up a load of robot arms trying to do something fairly difficult in terms of dexterity – something like picking up something up while it was moving. He tells of how he walked past every day on his way to more important meetings and would stop for a minute to watch the machines trying but failing to complete the task they had been asked to do. The major lightbulb moment for him about how massive an impact AI will have on humanity was when one of the robot arms managed to complete the task. He observed that once one of the arms ‘got it' they all got it, unlike in humans where we all have to learn such physical skills ourselves, with machines they can share the learning when driven by AI, and so before long every single one of the robot arms was completing the task routinely, quicker and more efficiently than a human ever could.

So let’s think about Mo Gawdat’s story and apply it to Toy manufacturing. Let’s say you have an action figure production line, and one day it is producing a figure with just a couple of points of articulation and component parts, but the next day the same manufacturing facility might need to manufacture a much more complex product with more than a dozen component parts and with much more advanced articulation. The current way we would approach this is to restart the line for the new product by teaching the human labourers how to produce the new items, which would give them some time to pick it up, to make some mistakes and to learn from that. Every individual would need time and would make their own mistakes. If you think of AI driven robots with greater dexterity and adaptability than we currently have, the AI can more quickly and efficiently adapt to the task. Moreover, the machines don’t need to sleep, they don’t need holidays and they don’t have the same rights with regards to working conditions as human beings, which removes a major element of risk for Toy manufacturing in terms of ethical audit and worker safety.

Sadly, I have been shown round too many factories where the staff member touring me round has less digits than they should. While machines need maintenance, they don’t come with the same frailties and inefficiencies as human beings. Which is actually quite scary when you think about all those economies where human beings rely on a strong manufacturing sector for employment, but nevertheless much higher automation is coming and with it should come lower manufacturing costs once the equipment investment is paid off/accounted for.

A.I. - LOGISTICS

I have to be honest, Logistics sits alongside Accounting for me in the ‘critical but dull’ part of our industry. In depth analysis of how to move stuff from A to B is not my idea of a fun time, even though I recognise how important it is. Thankfully A.I. is going to take a lot of this work off our hands – from shipment paperwork to transit bookings and even unloading and delivery, machines will take on more and more of the Logistics function. Going forward that should mean we get to maximise efficiencies to a much greater degree than we do now which should save money on inefficiencies and on human labour. Again the theme seems to be human jobs going leaving us with better profits but perhaps a broader social issue. The counter argument suggests though that someone still needs to manage, guide and maintain the machines, so again we’re going to see big change with both opportunities and difficulties for humans to manage.

A.I. - MARKETING

If you’ve ever used a social media platform then you have had a raft of marketing tailored to your media consumption served up to you. The capabilities of machine learning are only going to enhance this. Artificial intelligence will be able to run advanced and large-scale marketing campaigns while adapting and amending at a bewildering speed human beings could not match.

Having initially trained as a marketer in the pre-digital age, and then skilled up on digital marketing to the point that I taught Toy Cos how to do it more than a decade ago, I can now see many more interfaces and opportunities needing to be embraced by marketing departments across the coming years. Eventually I see a big role for an artificial intelligence brand manager in the future, simplifying the human inputs required – for example if you’ve ever found it painful to set up a PPC ad on Google, it won’t be long before you’re a.I. can talk to Google’s A.I. and sort it out with far less clunkiness and hassle. I think people will be needed on some of the more strategic and emotive elements of Marketing for some time, but I could be wrong on that.

One interesting idea I saw recently came from Bill Gates, who suggested that we are moving towards each person having our own A.I. agent, which will run tasks for us and save us from much of the hassle of modern day life. Think of things like trying to work out what to buy for a vast array of Toy aged junior relatives for the festive season. In the future, your very own A.I. agent may select and acquire all the Toys you need based on limited instructions you give it. Think of JARVIS, the A.I. which assists Tony Stark (Iron Man) in the Marvel movies…

The mind literally boggles at the thought of trying to optimise for A.I. decision making based on offhand limited human directions on what Toys to buy!

A.I. - FINANCE & OTHER ADMIN DISCIPLINES

I’m going to struggle to write much on these areas, but the reality is this, A.I. is already driving much in these functions. For example, in my home country, the UK, the government’s Tax collection service has an advanced financial search algorithm which can find irregularities which need to be investigated by humans. Just think how much more thorough those investigations could be if conducted by artificial intelligence at a higher level of capability and with the ability to literally search every piece of financial data out there versus a selected small percentage which is as much as human tax collection agents can handle. Be prepared for more and more change as A.I. let’s governments around the world deeper into more and more of our financial dealings.

A.I. - RETAIL

As I’ve already said above, we have been relying on A.I. for shopping for more than two decades now between Amazon and Google et al. One area I struggle seeing A.I. taking over definitively in the near future is in range selection. Perhaps this will become easier once A.I. is driving our purchase decisions, but until that point it’s hard to see how even the most advanced machine intelligence can work out why we buy crazy games like Pie Face or why adults want to collect a particular license of action figures! There is no doubt that retail is going to be massively sharpened up across the board by more advanced A.I., and retail buyers are going to have ever more data to use in their range selections. They may even be able to factor in more advanced computing to work out how likely it is that ‘El Nino’ will lead to a good season for Outdoor Toys, but the A.I. will get variables like these wrong just as well as humans!

One other thought I had on Retail & artificial intelligence is this – I started my career as a Retail Management Trainee. At that time the retailer I worked for was trialling digital pricing strips on shelf to see if they could make pricing up products more efficient. Twenty-seven years later, and we don’t seem to have advanced that far in terms of in store experience despite all the Technology. For sure, Amazon is amazing, but I’m talking now about physical retail. Once you move beyond Click & Collect, much of the experience in store is still the same. Mass market generalist box shifters still focus on volume & promotions, and Specialist Toy retailers still rely on the sheer magic of our products to get kids and adults interested and excited. Surely we’re overdue a revolution in terms of in store experience – let’s see what A.I. can deliver on that front!

CONCLUSIONS

We’re sat here again in the midst of another Tech driven revolution for the human species. I would argue this is the third Tech revolution we have had in the last 25 years. First, we had the mass adoption of the internet and all that brought with it, then we saw the emergence of massively influential new social media platforms which revolutionised the way we interact with others which in turn changed how we and what content we watch and how marketing works. And now A.I. is moving beyond the supporting role it has thus far had to be the next great revolution itself, with huge disruption ahead for the way we play, work and live.

Like many of you reading this, I worked through the previous two Tech revolutions, and did my best to adapt to help those I worked with to advance their activities. Back in 2001, I was one of many people working on www.MyMonopoly.com which offered customisable Monopoly game content via the internet (along with many other projects back in the day). With the social media revolution I helped Toy companies get up to speed on what it was and how to use it to enhance their business operations and interactions with their consumers and retail customers.

Today I have a similar feeling to when we sat on the edge of those two previous breakthrough periods – I have feelings of excitement and trepidation at the same time, but above all I’m looking for opportunity to help my clients to embrace all the new things ahead and looking for ways to adopt the new Tech to boost my own business offering.

I expect many of you feel the same – hang on tight, this is going to be the wildest ride of them all :)

N.B. All trademarks featured herein are the property of their respective owners.

PLAYING AT BUSINESS PODCAST

Have you listened to the latest episodes of my PLAYING AT BUSINESS podcast:

PLAYING AT BUSINESS PODCAST

EP 99 – Gift & Hobby Distribution Channels (The Original Kidult Toy Business?!)

Guess what – people have been buying Toys for adults for a very long time. Even though the ‘Kidult’ thing is the big thing nowadays, hobbyists and people buying Toyetic gifts for adults have been around for a long while.

Listen in to Episode 99 as we look at these adjacent areas in more detail:

https://playingatbusiness.libsyn.com/ep-99-gift-hobby-distribution-channels

EP 98 – HOW THE TOY INDUSTRY CLEARS EXCESS INVENTORY

A few episodes back we looked at why excess inventory is so dangerous - in this episode we move on to look at the practicalities of how our industry manages excess inventory, where they sell it, how it works and some major banana skins to watch out for when selling clearance stock!

https://playingatbusiness.libsyn.com/ep-98-how-the-toy-industry-clears-excess-inventory

AND FINALLY…

If you want to find out more about my Toy & Game business consultancy services, please just click the link below. Our company has helped hundreds of Toy & Game companies to get ahead and grow sales/make more profit. I have worked on all product categories across a 20+ year career in Toys & Games, and genuinely love sharing knowledge, contacts and facilitating greater success for our clients. For more information on our services, click here:

https://www.toyindustryjournal.com/toy-business-consultancy

Sign up for my free e-newsletter and receive all the latest reports, analysis and insights on the Toy & Games business: sign up for free here: https://forms.aweber.com/form/54/1325077854.htm

#20 HOW MANY TOY TRADE SHOWS DO WE REALLY NEED…?

#20 HOW MANY TOY TRADE SHOWS DO WE REALLY NEED…?

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DISTOY 2023 COMMENTARY

Like some of you reading this, I am just back from the Distoy trade show event in London. This show is focused on giving Toy distributors the opportunity to select products from other markets and gives those Toy companies who run their own product development programs the opportunity to show final production products after showing prototypes /work in progress at toy fairs previously.

The Distoy show started in the noughties, when some of the UK’s biggest and most established Toy companies came together to instigate the creation of the show to allow them to efficiently preview to their overseas distributors. At one-point Distoy was almost a secret, with attendance by invitation only. I was running an SME Toy & Game business back in the noughties, and I distinctly remember hanging around the location hoping to access some of the distributors visiting the event.

For several years now though, Distoy has been an open show and one which has grown and grown over time (at least up until Covid hit). As per usual there are some dissenters & moaners about Distoy. To summarise the grumbles I have heard in short:

1. Do we really need another Toy trade show.?

2. Why don’t we go somewhere else instead i.e. L.A. ?

3. The location is expensive, why isn’t it somewhere cheaper?

4. The two hotels used as venues are both expensive and at the same time run down.

5. The lifts (elevators) are limited in number and take too long to travel up and downstairs between showrooms and back down to the foyer.

6. There is not enough open networking opportunity, especially for newer people in the industry.

I’m now going to try to answer those questions:

1. Do we really need another Toy trade show.?

Distoy is a great opportunity to meet international and especially European Toy distributors at the point of the cycle when you have finished products and when your distributors are looking at product selections for the following year.

2. Why don’t we go somewhere else instead i.e. L.A. ?

That is of course an opportunity, but it’s hardly close to Europe, and is no cheaper, it also takes longer requiring more staff time & cost.

3. The location is expensive, why isn’t it somewhere cheaper?

I would agree that the location is expensive, but it is well located for people flying into London and those travelling to the show from elsewhere in the UK. And it isn’t that expensive a show to exhibit at compared with some other trade shows.

4. The two hotels used as venues are both expensive and at the same time run down.

I understand this point - these two hotels have done very well to retain the Distoy business in my opinion. The St. James Court in particular is looking very weathered in parts, despite some new decoration & flooring replacements, other parts of the hotel are in a poor condition…but we aren’t a hotel booking industry, we’re in the Toy trade and the product speaks for itself regardless. I see this as a complaint, not as a barrier to conducting good business.

5. The lifts (elevators) are limited in number and take too long to travel up and downstairs between showrooms and back down to the foyer.

Perhaps we could all benefit from using the stairs and using some of the excess energy we imbibe in both liquid and solid form at these shows! Either way it isn’t as bad as the old Toy building in New York – I remember walking 10 to 15 stories in between meetings back in the day.

6. There is not enough open networking opportunity, especially for newer people in the industry.

Again, I understand this point. I would like to see in particular some more organised events to help new entrants to the industry network with established industry players, as the learnings available from those types of interactions are highly valuable for newcomers. For the established people staying in touch with newness is also valuable to avoid becoming set in your ways. But regardless of this point, there are plenty of networking opportunities around Distoy, and I found no difficulty in findings opportunities to hang out with other Toy & Game people outside of official show hours.

THE BROADER QUESTION – HOW MANY TRADE SHOWS DO WE NEED?

So, the traditional Toy trade show calendar has been disrupted considerably, and the break in play that Covid delivered has in some ways allowed the industry to reassess and redefine what trade shows should be conducted when. Every trade show has always had detractors:

- New York – too late.

- Spielwarenmesse in Nuremberg – too cold and too long.

- UK too small/is it worth it?

- Hong Kong – too far, too expensive, too soon after Christmas, do enough buyers visit post-Covid?

- Distoy – as per above!

I could go on and on, but the reality is that there are negative things about everything in life and business. Trade shows are hard work and do cost money and do take up time for many people in your organisation…

…BUT, these shows offer an opportunity to grab some time with your customers and partners. I don’t know any Toy or Game company who doesn’t benefit from increased interaction with their customers. Having worked with and for both corporate giants, startups and everything in between, I can’t think of any company I know who wouldn’t benefit from more time face to face with the people who buy the products we invest so much in developing.

Larger companies have so many ongoing points and issues with retailers on an ongoing basis that a quick hello and chat can often defuse some of the simpler matters which can blow up if dealt with remotely or left to coast along. Big companies also have the challenge of having to preview extensive product lines across multiple categories to multiple buyers within the same retail business. It can take a few ‘impressions’ to ensure customers have fully absorbed all the new products on offer and understood which skus will get the most marketing support and which products are ‘must list’ items.

Smaller companies tend to get a different result from Toy trade shows – they tend to get comparatively little presence in front of retailers and distributors, and as such they benefit most from the ‘speed dating ‘ format of most trade shows. An over worked Buyer can quickly tick off a lot of smaller suppliers in an hour or two towards the end of Toy fair. I know from experience how valuable these quick meetings can be for up and coming companies – nearly all of the major customers we brought on board came due top a quick topline meeting at a trade show.

For people running businesses which are partners to or are supporting actors in the business (like my own business!), trade shows are a golden opportunity to quickly say hello and get or share updates with clients. While Toy & Game companies would not choose to incur significant costs to meet with the likes of myself, they nevertheless do benefit from a quick intense period of pressing the flesh.

DO WE NEED SO MANY TOY TRADE SHOWS – MY THOUGHTS & CONCLUSIONS

All trade shows offer their own unique opportunities. Let’s quickly run through a few of them:

- Los Angeles vs NYC

I’ve read and heard a lot on this. Yes, it is inefficient and frankly a bit painful to have to attend shows on opposite coasts of the U.S. in short order. However, if there was ever a Toy market which could easily justify two shows in terms of size of opportunity and geographical breadth it would certainly be the U.S.A. Some business may prefer to do just one of these shows, but to maximise opportunities in the world’s biggest Toy market (by a long way) both are going to be imperative in my opinion.

- L.A. vs Distoy – the earlier Los Angeles gathering has been contrasted with Distoy, but I am not aware of a mass exodus of international customers to the L.A. show. I can completely understand why it makes sense for the U.S. toy business, or for those trying to break into or expand in the U.S. market from overseas to want to be at this earlier L.A. show, but in just the same way as Dallas was not really a fully international show, I don’t see L.A. becoming THE place to go versus Distoy & other shows. As one well known Spanish Toy company told me this week at Distoy, going all the way to L.A. for nearly a month versus two quick and easy days at Distoy hardly makes sense.

- LA/NYC vs HK – I genuinely think that the one long term casualty of the Covid period will be the Toy showrooms along Mody Road in Hong Kong. Much as I dearly love the place, the reality is that the one trade gathering which may be hard to justify going forward is in Hong Kong, mostly because it is less clear why retailers will visit going forward. Sourcing has changed, China is still very important, but less than previously, and Toys are now being produced all over the world. So, the question then becomes why retailers need to be in HK quite like they used to. There is no doubt mind you that China and Hong Kong will continue to be key players in the global Toy business – there is just too much expertise and capability, which we as an industry desperately need to retain, but going forward the purpose and value of HK trips for retailers, and therefore Toy companies seems to be lesser. There is no doubt that visiting factories in China will continue, and the expertise in Hong Kong sourcing & development teams needs to be and will be retained, but there seems less and less reason for this gathering as part of the annual sell-in cycle going forward.

IN CONCLUSION

I suggest then that the bottom line here is that companies have to prioritise based on their own unique business position, priorities and budgets. The reality for most companies though should be that more trade shows will deliver better results versus less as a general rule, and so I expect Distoy to grow back to pre-Covid levels in the next couple of years, and I expect the L.A. shows to continue with some expansion. I also expect the oldest and biggest shows like the Spielwarenmesse and New York to continue to be critical.

In my opinion, the final fallout of the post-Covid trade show schedule will be a shift in importance of the LA shows versus Hong Kong, a moderate increase in international participation in the L.A. show, and a New York show better positioned for the mass market business which is so important to the Global toy trade. So, I look forward to seeing you all around these various shows and let’s embrace the opportunities on offer versus grumbling away…

And finally, if anyone has a better place to be than in front of their customers, persuading them to buy, then that other place must be pretty good!

PLAYING AT BUSINESS PODCAST

Have you listened to the latest episodes of my PLAYING AT BUSINESS podcast:

PLAYING AT BUSINESS PODCAST

EP 97 – UNCHANGING FUNDAMENTALS OF THE TOY & GAMES BUSINESS

We are living through times of massive change and disruption. Technology is advancing at a frighteningly quick rate, and the very fabric of society has been changed by our adoption and development of new technologies.

However, despite that there are 5 unchanging fundamentals of the Toy & Games business. In this podcast we take a look at these fundamentals that have not changed for decades and are unlikely to change in the coming decades despite the huge technological change we have seen and are yet to experience.

https://playingatbusiness.libsyn.com/ep-97-unchanging-fundamentals-of-the-toy-game-business

EP 96 – 5 CHARACTERISTICS OF BEST-SELLING TOYS & GAMES

There are some recurring characteristics of bestselling Toys & Games. In this episode we run through the 5 most important features. This is not so much creative inspiration as it is a checklist for new Toy & Games products in development.

https://playingatbusiness.libsyn.com/ep-96-5-characteristics-of-best-selling-toys-games

EP 95 – HOW TO SELL MORE TOYS & GAMES INTERNATIONALLY

Regardless of which country is your home market, the opportunity outside your borders is greater...in this episode we take a look at some simple ways to significantly increase your export sales of Toys & Games.

https://playingatbusiness.libsyn.com/ep-95-how-to-sell-more-toys-games-internationally

AND FINALLY…

For over a decade, my company has been helping Toy & Games companies get ahead. If you want to find out more about my Toy & Game business consultancy services, please just click the link below. We have helped hundreds of Toy & Game companies to get ahead and grow sales/make more profit. I have worked on all product categories across a 20+ year career in Toys & Games, and genuinely love sharing knowledge, contacts and facilitating greater success for our clients. For more information on our services, click here: https://www.toyindustryjournal.com/toy-business-consultancy

Sign up for my free e-newsletter and receive all the latest reports, analysis and insights on the Toy & Games business: sign up for free here: https://forms.aweber.com/form/54/1325077854.htm