N Is For Nerf, Novelty & Nintendo – A To Z Of The Toy Business

N Is For Nerf, Novelty & Nintendo – A To Z Of The Toy Business

NERF

Nerf has been around for more than 50 years as a brand. Originally a brand focused on outdoor sports toys, the brand came to the fore with a soft foam throwing ball in the shape of a football (that is an American football, not a European football/soccer ball!). In the last 10 to 15 years though, Nerf has moved up the ranks to become one of the biggest and most successful toy brands in the world via the dominant position the brand has in the foam blaster category of toys. There are many different variants of Nerf guns, from small to massive, and from single to multi-shot, but the core remains the same, a toy gun firing a soft foam projectile which kids just love to play with! In recent years, a number of licensed Nerf toys have come to market including products based on the video game Fortnite and long running Star Wars franchise. Little known fact: the original idea behind the Nerf brand came from famous inventor Reyn Guyer, who also invented the classic Milton Bradley game Twister.

 

NOVELTY

Novelty or ‘new news’ are common demands from toy buyers. The toy industry features literally millions of products, with more than 65% of toys new on the market each year. That is just a huge amount of product development ‘churn’. The toy trade therefore is in a perpetual cycle of develop, produce and sell. When toy companies present to retail buyers around the world, they inevitably want to see what’s new, and many of these new toys become the hottest toys at Christmas.

 

NINTENDO

The Japanese company Nintendo has had a significant impact on the global toy industry for two primary reasons: 1. The effect of their iconic console gaming machines on the broader toy business 2. Their iconic characters which have spawned strong selling toy products over decades. These famous characters include Mario & Luigi, Zelda and Donkey Kong. Nintendo started life way back in 1889 producing hand crafted card games, fast forward to today and the company had revenues of nearly $16 billion usd in fiscal year 2021. To put this in context, that’s nearly three times bigger than the largest toy company in the world. The video console business actually spawned out of and away from the toy business back in the 1970s and 1980s, and Nintendo’s iconic handheld gaming devices – the Gameboy & DS have had a long-term cannibalistic effect on toy sales, at the same time as driving sales of toys based on Nintendo characters.

 

We run a Consultancy business helping toy & games companies get ahead. For more information, check out www.KidsBrandInsight.com/services

Our Managing Director, Steve Reece, works with a limited number of companies as a non-executive director, independent board director and as a board advised. If you are interested in finding out more about this, check out the link to our service above.

 

 

STRAP IN FOR A TURBULENT Q4 IN THE TOY BUSINESS

STRAP IN FOR A TURBULENT Q4 IN THE TOY BUSINESS

We’re heading into the ‘sharp’ end of the year for the toy trade, with a challenging cocktail of price increases, varying levels of inventory and consumers hungry to provide good times for their families after more than a year and a half of a grinding pandemic.

Things are certainly going to be ‘interesting’ this Christmas season! The good news though is that consumer demand remains strong, and at no other time in living memory have hard times (economically or otherwise) lead to a decrease in toy demand.

So, what’s going to happen? Well, we can expect the hottest toys to sell out even earlier than usual. We can also expect inventory in retail to be cleaner than it ever has been before, and we can also (hopefully) start to see the softening of the supply chain issues that have plagued the toy business in 2021 as we start to look forward to 2022.

Hopefully we won’t see too many containers of toys arriving after the peak sales window, because with toys being in and out in a single selling year so often, stock arriving after season is not a recipe for success.

In the UK, retailers The Entertainer and Smyths have warned consumers to buy their toy gifts as early as possible this year to avoid disappointment. In the USA, MGA Entertainment’s CEO Isaac Larian has warned consumers of a toy shortage, as has Jay Foreman of Basic Fun.

Q4 is usually frenetic in our business, but this year will be more frenetic than ever as available stock sees more demand than ever before.

One way or another though, our ever-resilient business will come through this, and we can expect to see at least a little softening of the shipping issues which have been so bad this year as we head into 2022, with more containers available, buying patterns returning to more usual patterns and general adaptation across supply chains.

 

We run a Consultancy business helping toy & games companies get ahead. For more information, check out www.KidsBrandInsight.com/services

Our Managing Director, Steve Reece, works with a limited number of companies as a non-executive director, independent board director and as a board advised. If you are interested in finding out more about this, check out the link to our service above.

 

M Is For Mattel, Monopoly, MGA, Marvel & My Little Pony – A To Z Of The Toy Business

M Is For Mattel, Monopoly, MGA, Marvel & My Little Pony – A To Z Of The Toy Business

M is one of the most important of all letters when it comes to the toy business. We have some real behemoths in this instalment.

MATTEL

Mattel was founded way back in 1945 by husband-and-wife team Ruth & Elliot Handler, along with Harold “Matt” Manson (who soon exited the business due to ill health). The company’s iconic toy brand Barbie came to market in 1959, quickly becoming the best-selling toy for the company. Barbie today is still a global market leader in the toy Doll category and is a massive profit generator for Mattel. In recent times Barbie has been adapted to meet the times we with a broader array of looks, shapes and other variations. Mattel launched Hot Wheels in 1968, originally the product line was designed by a bonafide rocket scientist and a real-life car designer. Fisher Price makes up the third side of Mattel’s triangle of iconic brands, having been acquired by Mattel back in 1993. Mattel today remains one of the biggest toy companies in the world, and after a few rocky years looks set to be on an upward trajectory again.

MONOPOLY

THE iconic board game has sold more than 275 million copies since Parker Brothers released their version of the game back in the dark days of the great depression in 1935. Parker Brothers originally rejected the game because it was “too complicated, too technical, [and it] took too long to play”. The game is famous for causing (mostly good natured) family arguments and for games that last for hours and hours, or even days. Generation after generation has enjoyed teaching the game to their children. Today there are many, many versions of Monopoly, with numerous companies who produce local and niche versions around the world. A DVD game version and multiple video game versions have been launched. The Monopoly world championships event seeks to crown the world champion player, and there is also a variety of successful fruit and quiz machines.

MGA ENTERTAINMENT

MGA has been one of the most disruptive toy companies of all time. The company shot to the forefront of the toy business with the launch of Bratz dolls in 2001, which took significant market share from Mattel’s flagship Barbie at the time. But MGA wasn’t done disrupting, in more recent years, L.O.L. Surprise! Has been a phenomenally successful product line which appears to have all the hallmarks of a long-term brand. Aside from the Dolls category, MGA Entertainment also owns iconic U.S. toy manufacturer Little Tikes, having acquired the company from Newell Rubbermaid in 2006. Little Tikes iconic Cosy Coupe product has sold millions and millions of units over time, and is itself considered an iconic toy in the U.S.

MARVEL

In the last decade or so, Marvel has played a massive role in the toy business, with the ongoing cinematic universe being the highest grossing ever with box office takings in the region of $23 billion usd. Superheroes and villains have long since played their part in the toy business. Marvel is in many ways the modern-day cinematic representation of this. Since being acquired by Disney for $bn usd back in 2009, Marvel has been a blockbuster movie making machine, and has significantly boosted the toy business overall, especially Hasbro who have produced many iterations of Marvel toys to mush commercial success.

 MY LITTLE PONY

This super cutesy line of ponies first came to market in 1981 as My Pretty Pony before becoming My Little Pony in 1982. There are have been several phases in the story of M.L.P., with numerous relaunches over the decades. The brand has sold well in excess of 100m toys over time, and spawned numerous TV series and movies.

 

We run a Consultancy business helping toy & games companies get ahead. For more information, check out www.KidsBrandInsight.com/services

Our Managing Director, Steve Reece, works with a limited number of companies as a non-executive director, independent board director and as a board advised. If you are interested in finding out more about this, check out the link to our service above.

 

China’s Delivery Robots & Online Gaming Limitations: Implications For The Toy Business

China’s Delivery Robots & Online Gaming Limitations: Implications For The Toy Business

Things affecting the toy business seem to keep on occurring in China with a frequency we don’t see in other countries. We’ve written at length about supply chain issues & the ridiculous price of container shipping right now. But this week there have been two more occurrences in China which may affect the toy business.

Chinese Tech Giant Alibaba Announces Increased Role In Delivery For Robots

Alibaba have announced that they will be rolling out 1,000 delivery robots in China to manage the final delivery of parcels bought via online shopping. This is important because China tends to be at or near the forefront of e-commerce and m-commerce. One of the primary drivers is the volume of Chinese people in China who are buying via e-commerce, with over 1 billion people shopping this way versus approximately 300 million people in India and c. 250m in the USA. Therefore, China is dealing with the largest challenges in terms of fulfilling a ridiculously high number of people ordering and needing delivery.

Bearing in mind how critical Amazon now is in major Western toy markets, what happens with e-commerce in China is likely to be adopted by Amazon in the West at some point if it proves to be successful. For sure there are many challenges of robots operating in urban environments and it can’t be easy to ensure hey drop off parcels in the right circumstances, but the future is here already as far as robot delivery is concerned.

When we think about some of the labour shortages affecting delivery services recently, robots could well offer part of the solution.

 

China Limits Online Gaming Time For Children

Big news coming out of China recently with reports that the government will limit online gaming time for under 18s to a maximum of three hours per week in a move aimed at reducing gaming addiction, poor eyesight and other social factors. This could be good news for the toy business, as those children who can’t spend time & money gaming as much as they would like may buy more toys or have more toys given to them. It I hard to estimate what positive impact this could have on toy sales, but it seems likely to offer a systemic boost going forward based on how long children will spend playing video games if left to their own devices!

 

We run a Consultancy business helping toy & games companies get ahead. For more information, check out www.KidsBrandInsight.com/services

Our Managing Director, Steve Reece, works with a limited number of companies as a non-executive director, independent board director and as a board advised. If you are interested in finding out more about this, check out the link to our service above.

L Is For Lego, Leapfrog, L.O.L. Surprise! & Lincoln Logs – A To Z Of The Toy Business

L Is For Lego, Leapfrog, L.O.L. Surprise! & Lincoln Logs – A To Z Of The Toy Business

LEGO

Lego is arguably the most iconic toy brand, played with and enjoyed by many generations. Playing with Lego has been proven to advance the capabilities and skills required for STEM careers, and as such millions of engineers and scientists owe part of their success to having played with Lego when they were young. Lego is both the biggest toy company in the world (by $sales) and the biggest toy brand. The entirety of their just under $7billion USD revenues derive from the Lego brand. There is no other brand which comes close to achieving this level of revenue from one brand.

Lego as a company first began way back in 1932 when Danish carpenter Ole Kirk Christiansen started making wooden toys. The earliest forerunner of the now iconic and ubiquitous Lego brick came to market in 1949. Lego today trades around the world, dominating the Construction toy category in nearly every market. The company also has hundreds of retail stores selling their products. The latest plans from the company suggest growth to around 800 retail stores in the short term.

 

LEAPFROG

Leapfrog has been a market leader in electronic learning toys since back in the 1990s. when co-founder Michael Wood found it hard to teach his son to read and developed a prototype for what would become Leapfrog’s ‘Phonics Desk’ product. After battling with VTECH to lead the kids educational tablet device market, Leapfrog was eventually acquired by VTECH for a reported $72m USD.

 

LOL SURPRISE!

L.O.L. Surprise! Has been a sales juggernaut since launch back in December 2016. The brand was launched on the back of the massive unboxing trend but has since extended into a full Doll & consumer product licensing brand. There have been very few toys over time which have launched and hit No. 1 best selling toy and then stayed in the market with further brand extensions. We expect L.O.L. Surprise! To be a long-term perennial brand going forward.

 

LINCOLN LOGS

Lincoln Logs is an iconic construction toy which was first invented around 1919 and was inducted into the Toy Hall of Fame in the USA back in 1999. According to reports, the inventor, John Lloyd Wright modelled the toys based on a Japanese hotel design for which his own father was the architect. Wright was also influenced by Abraham Lincoln (hence the name!) and the frontier history of the USA.

 

Do you need help to source toys & games? We help people from all around the world to find reliable, cost-effective factories. We have delivered $tens of millions in cost savings for our clients. For more information on how we do this, check out our services here: www.KidsBrandInsight.com/services

 

Have you listened to our Playing At Business podcast? We talk about selling toys & games, interview successful people from across the toy business & we look at key trends in the toy & game business: https://playingatbusiness.libsyn.com/

 

 

Container Shipping Crisis – What Happens Next & How Does It End

Container Shipping Crisis – What Happens Next & How Does It End

Things are getting ‘interesting’ in terms of logistics and the toy & game business. We’re heading into what could be the most disrupted Q4 peak trading we have seen in living memory. This is not directly due to the pandemic which is still puttering along despite high levels of vaccination in most major markets by now. The issue is shipping.

The vast majority of our toys & games are manufactured in Asia and are therefore mostly reliant on shipping and containers. As we have all seen, there is a real sellers’ market operating right now, which means that shipping costs have soared and container availability is restricted.

We just saw that the major corporate toy companies have reported the shipping issues to the stock market but have largely predicted that their sales and margin will be largely unaffected due to their strength, due to agreed price rises with retailers and a diverse supply chain not completely reliant on chaotically overloaded Chinese ports.

For smaller companies though this could well end up as a very uncomfortable year with real challenges keeping stock on shelves in peak season.

So, what happens next apart from ongoing chaos in the shipping sector? Well, we expect to see very significant backlash on shipping companies and the industry as a whole. Politicians around the world have largely ignored the loud noises coming from toy & game companies, but in the back end of the year, empty shelves will mean lost sales for retailers which means less jobs and lack of ‘stuff’ to buy for Christmas. We predict that the resulting consumer and media backlash will prompt politicians to react aggressively (albeit belatedly).

Competition and monopoly laws are some of the most draconian in major markets. We expect to see shipping companies getting punished and fined for their profit gouging during this time of crisis.  That though won’t in itself increase the number of available shipping containers and ships. But it will probably lead to some degree of price capping and increased regulation. Of course, enforcing such assertive actions can be hard on multi-national companies, but nevertheless we expect to se a backlash which should make the issue a lesser problem for 2022.

The other major consideration is when can slack build up again in the shipping demands so that ships and containers can make their way back into the normal way of things? Well, there are two obvious time periods for this to happen: Firstly, the lull in between/after back-end products and spring-summer items should allow some kind of reset. Secondly of course is Chinese New Year where factories in China to all extent and purposes close, often for the best part of a month.

Product development slates for 2022 and 2023 are likely to be impacted. Any toy & game company which is badly affected by the current crisis is likely to curtail product development to a degree to protect cashflow and to focus on fewer bigger things. If this also happens in other industries and sectors than that also should help to bring things back to normality.

Finally, we can reasonably expect that the Covid-19 pandemic is going to be on a downward trajectory overall from hereon. There are quite possibly going to be new waves and mutations which could cause issues, but nearly all of humanity has survived, and vaccines are going to keep on being updated and developed in line with the mutation of the virus. Therefore, it is reasonable to expect a slow road back to previous normality, with Covid being something countries need to manage along with influenza and other medical issues. So, the reality is that the current sellers’ market is not likely to be prolonged, but that doesn’t make it any easier to manage the immediate challenges we are facing.

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

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

Kenner

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

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

 

Karma

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

 

Korea

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

 

KB Toys

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

 

Ken

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

 

Do you need help to understand the toy & game business? We help people from all around the world to understand and successfully enter the toy business. For more information on how we do this, check out our services here: www.KidsBrandInsight.com/services

 

Have you listened to our Playing At Business podcast? We talk about selling toys & games, interview successful people from across the toy business & we look at key trends in the toy & game business: https://playingatbusiness.libsyn.com/

 

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

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

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

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

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

 

Do you need help to understand the toy & game business? We help people from all around the world to understand and successfully enter the toy business. For more information on how we do this, check out our services here: www.KidsBrandInsight.com/services

 

Have you listened to our Playing At Business podcast? We talk about selling toys & games, interview successful people from across the toy business & we look at key trends in the toy & game business: https://playingatbusiness.libsyn.com/

Supply Chain Diversification – The Second Biggest Toy Industry Trend

Supply Chain Diversification – The Second Biggest Toy Industry Trend

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

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

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

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

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

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

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

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

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

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

 

Do you need help to understand the toy & game business? We help people from all around the world to understand and successfully enter the toy business. For more information on how we do this, check out our services here: www.KidsBrandInsight.com/services

 

Have you listened to our Playing At Business podcast? We talk about selling toys & games, interview successful people from across the toy business & we look at key trends in the toy & game business: https://playingatbusiness.libsyn.com/

 

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

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

J IS FOR JAPAN

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

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

 

Do you need help to understand the toy & game business? We help people from all around the world to understand and successfully enter the toy business. For more information on how we do this, check out our services here: www.KidsBrandInsight.com/services

 

Have you listened to our Playing At Business podcast? We talk about selling toys & games, interview successful people from across the toy business & we look at key trends in the toy & game business: https://playingatbusiness.libsyn.com/