The Value Of Department Stores To The Toy Business

Department stores have historically played an important role in the toy business. One of the many benefits they tend to bring is supporting a broader and more diverse product portfolio. Since department stores tend to have higher overheads and therefore need to work with higher margins than discount stores or grocery retailers, they are structurally incentivised to take a significant ratio of products you won’t find in cost cutting bargain basement retail stores. By listing a different product range department stores support the broader health of the toy industry overall, as well as acting to inherently encourage new suppliers and new ideas more than some retail channels.

These though are difficult times for department stores. At the time of writing, Debenhams in the UK have just entered into the liquidation phase of the administration that began earlier this year. While Debenhams has struggled for a few years, the pandemic and resultant lockdowns appear to have been the final nail in the coffin. Debenhams leaving the market will leave a big gap, which doubtless other retailers will be quick to try to fill, but they won’t all have the same impact on the market of diversifying product ranges and accessing different consumers.

Department stores are a primary venue for the most undervalued, underutilised and arguably most effective marketing method – that being the in-store demonstration. Due to having more spacious environments, and due to being a nicer and more relaxing environment versus a grocery retailer or discount store, shoppers will often dwell longer to try something out if it looks interesting. Logically the best place to spend marketing funds should be at the point of sale, yet while toy companies queue up to pay for advertising on Amazon to raise their profile, very few fully commit to encouraging shoppers to buy in physical stores. Normally those companies who do focus on in store marketing and demonstration are among the most successful companies in the industry.

Following on from this, one area of improvement for many department stores is to make more effort to physically reach out to bring shoppers into stores. Often they have more staff versus discount chains, and you can often find staff milling around without customers to serve, yet outside the door hundreds of people can be walking past (in normal times that is, maybe not currently depending on local lockdown rules). Department stores could utilise the fun and wow factor of many toy products to entice people into store. A good example of this is Hamleys flagship store in London, at the door at point of entry there is always somebody doing something funny like juggling, blowing bubbles or something else to create a sense of fun. Perhaps Department stores could learn from this approach and take more steps outside stores to entice shoppers in.

Department stores have historically been an important part of the toy business, but times are tough, those store chains which evolve will have a better chance of being a part of the toy business in the future.

We run a Consultancy business for toy & game companies. We work with major toy & game companies through to start ups and one person bands. For more information on how we help toy & game companies grow their distribution around the world: www.KidsBrandInsight.com/services

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A Thanksgiving & Black Friday Like No Other

Due to the Covid-19 pandemic we’re heading towards the end of what is easily the worst year humankind has faced this millennium and arguably since the end of World War 2. Vaccines are on the horizon and offer a sense of light at the end of the tunnel, although we are probably somewhere between 3 to 6 months away from the end of this pandemic which has ravaged the major economies of the world.

This week as America seems to finally have an agreed President elect we head into a Thanksgiving and Black Friday like no other. Firstly, most people will have plenty to be thankful for, despite the difficult circumstances – the majority of humankind can be grateful family, friends, health and more. The pandemic has shown so many people how much of a gift our normal life is in the developed economies of the world. From the perspective of the toy business we should also be grateful that the demand for toys has been strong throughout this crazy year. So many industries have been decimated by lockdowns, by reduced footfall and by mandatory business closures.

While there is a backdrop of economic hardship for many people due to the negative financial impact of the pandemic, there is the likelihood that parents will go out of their way to make this a good festive season for their children. This prevailing sentiment is likely to ensure at least a relatively good trading season for the toy business. The desire to have a golden family moment in a year full of bad experiences should bring us a Black Friday as big as ever.

There can be no doubt of the massive challenges out there for so many people and for so many businesses right now, but here’s to the longevity of the toy business and to a moment to reflect on a year like no other – because if our industry can thrive in such a difficult year we can surely expect to thrive forever.

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Disney+ Passes 73m Subscribers: Implications For The Toy Business

Disney announced in the past week that their Disney+ subscription-based viewing offering has passed 73million subscribers worldwide. This is a meteoric success for a recently launched product. Netflix by comparison took years to hit a similar level, whereas Disney+ has got there in just one year.

Aside from offering subscribers access to the vast vault of Disney content, the platform also offers the Marvel movie series AND the full collection of Star Wars movies and TV shows. Based on their unrivalled content catalogue, it was always a matter of when not if Disney would launch their own content platform.

The successful launch of Disney+ has to have been assisted by the Covid-19 pandemic and resultant lockdowns. People stuck at home have clearly seen Disney+ as both a compelling viewing opportunity and a bargain at the relatively low monthly subscription.

While Disney’s corporate results will not look so good for the period of the pandemic due to the loss of revenue from theme parks and due to the movie theatre network either being closed or lacking footfall to distribute their new blockbuster movies across, Disney+ stands out like a beacon of high performance during this difficult time.

For the toy business, the impact of Disney+ will be long and mostly positive. In the short term, Disney has a platform for launching new content which is only going to grow. When the pandemic first hit there was not an established alternative to movie theaters, but now Disney will always have the option of going direct to Disney+…in fact they will probably need to do that for at least some lower budget new movies to keep the momentum going. Disney+ is going to keep on growing and growing, and as such will offer an even bigger opportunity going forward.

The original content created around the Star Wars franchise in the shape of The Mandalorian has already proven that Disney+ alone can drive merchandise sales with the success of Baby Yoda products so far (despite their being no product in the market until some months after the content went live).

Longer term, when the pandemic clears and life eventually returns to normal, toy companies will have more opportunities due to the presence and scale of Disney+. For the next round of Marvel and Star Wars movies global cinematic releases should be possible which will see a return to the traditional method of toys based on movie licenses, but with an extra platform and launch window to drive merchandise sales. In fact, the boost to the adoption level of Disney+ may eventually give the toy business a significant boost.

We run a Consultancy business for toy companies. Sourcing and factory finding is one of our primary specialisms. We have worked with hundreds of toy & game companies to support their Sourcing efforts. We have saved our clients more than $10m. We are considered by many to be the leading Consultancy for toy manufacturing in India and other toy manufacturing hubs. From plush to plastics, from dolls to play dough we have worked on nearly every toy category. To find out more: www.KidsBrandInsight.com/services

You can also find out about our work with Indian toy factories here: http://www.ToyTeamIndia.com

How To Validate The Appeal Of New Toys Before Launch

Anyone who has been in the toy business for more than a few years will have launched products that seemed like a good idea and which garnered strong retail listings, but which died an agonising death on the shelf. Some products just don’t sell and have to be marked down to ever greater levels to get rid of them so that the next round of new products can have space on shelf.

If we could routinely predict which products would fail as badly as this, we obviously wouldn’t launch them, and every toy company would be a roaring success going from strength to strength. In reality though, for every 10 products that a toy company launches, one or two are likely to fail badly.

One of the key success factors for the toy business then is raising the hit rate of successful new products versus unsuccessful products, as well as being well prepared to deal with the downside when a product doesn’t work.

There are four primary ways in which successful toy companies seek to validate the appeal of new toys to reduce the risk of launch failure:

1. Test the product with the target consumer – this should be blindingly obvious, but if we had to estimate the percentage of new toy products which have not been anywhere near children at any stage before launch, we would estimate at least 95% of toys won’t have been consumer playtested with children. That seems like a ridiculously high number, but aside from the top 5 toy companies, where consumer playtesting is integrated to varying degrees in the product development process, for most toy companies it is an afterthought or only an occasional consideration. Formal consumer research with an established research agency can be expensive (although not in comparison with the tooling, marketing and inventory costs of a new product, and not in comparison with lost sales and margin from failed products!), but anyone can conduct rudimentary testing with the children of office staff or via local schools, after school clubs or via directly recruited research participants. Unless you actually want your products to fail why wouldn’t you test them with children?

2. Benchmark against other products – other products have undoubtedly been launched in a similar space to the one you are trying to inhabit. How did they perform? Did they sell into retail well but then fail to sell out of retail again? To what extent were they a quick sales win versus a carry forward item? What was their marketing message and which marketing media did they focus on? Did the products sell better in some retail channels or markets versus others? There are a whole host of questions that should be asked by way of due diligence before significant expenditure is committed to a new product.

3. Milestone product reviews – because large companies tend to be run under strict financial protocols, they tend to have a formal process for evaluating new products ahead of launch as a matter of financial risk management. Depending on the company these product evaluation milestones allow the company to evaluate and if needed redirect product development to ensure the end product is more likely to succeed. Smaller companies tend to lack the formal disciplines and structure to implement the same type of process, but strong management teams often do periodically review products in development to keep things on track. Companies that routinely throw stuff out there with little evaluation are less likely to achieve launch success.

4. Retail input – if the first time you preview a toy to your customers is when you have already made it, then you take massive risks. It is quite common for new product initiatives to be cut from product lines if they do not preview well. There is though an art to managing retail feedback. Retailers are not always right on products, but if enough of them won’t list your product whether they are correct or not you can’t make much progress.

We run a Consultancy business for toy companies. Sourcing and factory finding is one of our primary specialisms. We have worked with hundreds of toy & game companies to support their Sourcing efforts. We have saved our clients more than $10m. We are considered by many to be the leading Consultancy for toy manufacturing in India and other toy manufacturing hubs. From plush to plastics, from dolls to play dough we have worked on nearly every toy category. To find out more: www.KidsBrandInsight.com/services

You can also find out about our work with Indian toy factories here: http://www.ToyTeamIndia.com

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

Why Increased Toy Sales In Q2 & Q3 Won’t Result In Less Toy Sales In Q4

 Toy sales have been up year on year throughout most of 2020, despite the most disruptive global emergency of several generations effectively locking down billions of people around the world and at least temporarily shutting down key retailers.

One of the repeated speculations has been whether increased toy sales in the earlier part of the year will reduce toy sales in the critical Q4 peak selling season. The clear and obvious answer to that question is no way!

The reason why we can be so equivocal about this is that toys and games are effectively throwaway purchases for consumers in this day and age. Even for those families sadly affected by losing their jobs or suffering poor health due to the pandemic, repeated history suggests that children around the Western world will still wake up on Christmas day (and other celebrated days) to find a bumper crop of new toys waiting for them.

We have conducted endless focus groups with children and parents on the subject of toys and games. For some of these studies we had the parents show us how many toys their children had, and in every instance, the answer was measured in the hundreds! Over time as price points for classic toy items have stayed static, they have been devalued by inflation to the point that a $9.99 or even $19.99 purchase is considered throwaway to most of the population of developed countries.

Therefore, the idea that because the child had a few extra toys in April or May they would be left short for Christmas is frankly laughable.

Consumer demand is likely to be stronger not weaker in this Q4 based on our calculations because history again suggests that even in really tough times, parents don’t skimp on treating their kids in the festive season. Moreover, it is possible that this need to give children a great Christmas or Thanksgiving or Three Kings Day will be amplified in the toughest year humankind has faced on a global basis since the end of World War 2.

There may be challenges finding shops open or online retailers with courier capacity on the other hand, but any lost sales this Q4 are very unlikely to result from a dip in consumer demand.

We run a Consultancy business for toy companies. We work with major toy companies through to start ups and one person bands. For more information on how we help toy companies grow their distribution around the world: www.KidsBrandInsight.com/services

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

Has The Pandemic Been Good For The Toy Business?

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

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

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

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

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

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

We run a Consultancy business for toy companies. We work with major toy companies through to start ups and one person bands. For more information on how we help toy companies grow their distribution around the world: www.KidsBrandInsight.com/services

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