8 Characteristics Of Toy Companies That Stand The Test Of Time

8 Characteristics Of Toy Companies That Stand The Test Of Time

This article is the script of a podcast episode from our PLAYING AT BUSINESS podcast. If you would rather listen to the podcast than read the text, then just click here: https://podcasts.apple.com/gb/podcast/ep-112-8-characteristics-of-toy-companies-that-stand/id1389778170?i=1000713244503

If we look at Toy companies that have been around a long time, we can make several observations. Firstly, there are a surprising number of companies in the Toy industry that have been in existence for a whole generation or more. Secondly, there are certain critical factors these companies have in common, and in fact, we can also usually observe that those companies that don't stand the test of time have failed to follow one or more critical principles which their more longstanding counterparts have adhered to.

Here we outline these key factors:

1. Longevity Of Key Management

A ship on a long journey will make more direct and successful progress to its destination if it has the same skipper charting the course. In other words, this is industry works on extended timescales. We sell primarily in 2 windows per year, with a bias towards one of those windows, and it takes multiple cycles to make significant progress. Therefore it takes years to get anywhere in this industry. Consistent management, ethos and approach is a key criterion for success.

Take a look at the 3 biggest Toy companies - Mattel, Hasbro & Lego - all began as family businesses, built up product by product over an extended period of time. for 3-5 year pay back.

2. Clear Positioning In The Market

As human beings we like to put things in boxes/affix easy labels to aid our own understanding. Having a clear positioning allows buyers, suppliers, partners to know what we stand for, what to bring us, what to expect us to bring to them etc. Clear positioning also allows us to assemble expert knowledge, strong carry forward product lines and easier re-listings with buyers who know we will be back to see them this time next year and thus have a vested interest in supporting their business should our product not sell through.

3. Commitment To Brand Building

Again, if we look at the big 3 Toy companies globally, we can see that Mattel report their own brands accounting for a huge c. 75% of total sales. Hasbro's corporate strategy throughout the 'noughties’ was core brand focus, and Lego is in effect both a company and a hugely powerful brand at the same time.

Brands deliver more long-term security than nearly anything else because known performers get re-listed by retail, own brands are higher margin due to not having to pay 3rd party licensor or distributor %ages and because brand extensions are a much easier/less risky way to launch new product lines. And of course brands have huge value within themselves, as intellectual property, and can drive additional revenue via licensing out brands to other companies in different product categories.

4. Retaining Key Staff Members While Being Open To New Ideas

Note there are two parts to this factor - retaining key staff over the long haul, while still maintaining an openness to fresh ideas and ways of doing things. The human capital which is needlessly and sometimes thoughtlessly lost by many Toy companies for petty reasons or for reasons of neglect is a huge asset that disappears down the swannee.

Speaking as someone who has made massive, glaring errors, I'm reminded of the Thomas J. Watson (founder of IBM) quote:

“Recently, I was asked if I was going to fire an employee who made a mistake that cost the company $600,000. No, I replied, I just spent $600,000 training him. Why would I want somebody to hire his experience?”

The reality is those staff who have been in situ longest inevitably hold the most knowledge, and in this business, knowledge very often is money saved or money earned  i.e. reliable, cost effective factories, knowing which QA tests to do, how to deliver the shipment on time etc.

Now having said that, under performing staff don't remain in situ for that length of time in the most long-lasting companies.

Experience and tenure are also no excuses for being closed to new approaches/ways of doing things.

So the companies that get the right balance on this factor tend to be the one's with most longevity.

5. Excellent And Enduring Product Pipeline

This is a product and feature driven business, innovation is key - but note it doesn't necessarily need to be your company's innovation, there are hundreds of long established, successful companies bringing proven products to their market from other company's R&D investment.

6. Excellent And Enduring Customer Relationships and Effective Sales Team

Let's be frank, retailers are a hard-nosed bunch on the whole, and rightly so, retail is a cut throat business. The strong and very demanding are more likely to survive in their game.

So in reality strong relationships depend on the performance of the products you ship into them as much as any other factor, but customer service and maintaining maximal supply at key times are also important. Inter personal relationships can play a critical role though, with some buyers more than others of course, but nevertheless it's a given that bad relationships with customers won't deliver success in the short term, never mind the long term!

7. Reliable Supply Chain

We've all nickel and dimed our way to shaving a few cents off our manufacturing spend. And who wouldn't, it would be crazy not to, especially as THE biggest expenditure toy companies have is manufacturing cost. However, a few cents less pails into comparison with the carnage that unreliable supply and / or suppliers can wreak on your business.

The companies with most longevity in this business tend to be those who focus on reliability, in essence, risk reduction, from their supply chain, at the same time as seeking competitive costings.

8. Eggs In Baskets

Why would you ever allow one customer, one supplier, one staff member, one product, one brand one anything for that matter to have the ability to terminally injure your business if you lost it/them? One person departments are all well and good until the one person leaves. Smash hit products are all well and good until the hangover sets in when the hero fades away. Huge numbers via one retailer may be a great bonus, but it should be treated as the icing on the cake - not the basis on which overhead is fixed, or expectations are set.

The reality is in this business, and life in general, people move on, products and brands move in cycles, retail buyers move on. A fundamental factor in companies with longevity in this industry is the ability to survive or even thrive, regardless of the loss of any one 'basket full of eggs.'

I can think of 3 or 4 Toy companies who disappeared during the difficult times we've experienced over the last few years, and they went almost entirely because they relied on one person/entity/thing too much.

We recently launched www.ToyRecruitment.com  – a recruitment agency focused on the world of Toys, Games & Licensing.

We’re different versus standard recruiters due to being industry insiders ourselves. We have most probably sat across from the same retailers as your sales people, dealt with the same management issues as your management team and even sat at the top of the company understanding some of the same pressures you experience on a daily basis. We are able to screen out more unsuitable candidates to stop wasting your time interviewing people who don’t stack up for the role you are recruiting for.

We also have a genuinely strong network Globally. After 25 years working with Toy & Game businesses across the globe, we have good relationships with hundreds (or maybe even 1000+) people of all nationalities and working in all functions. We also have a strong digital reach hitting c. 25,000 people. Our Linked In newsletter alone has 6,300 opt in subscribers. Our specialism is in finding overseas hires for companies in a different country to their Head Office. Needless to say we do charge for deploying the knowledge and contacts built up over 25 years. We work on the same basis as all recruiters – a fixed %age of a full year’s salary. We can discuss that in more detail as and when you are ready to brief in a recruitment project.

Check out www.ToyRecruitment.com for more information.

How Children Have Changed & What That Means For Toy Companies

How Children Have Changed & What That Means For Toy Companies

INTERVIEWING CHILDREN & FAMILIES ABOUT TOYS

I first encountered the toy industry via market research, I was running focus groups with children about a toy promotion back in the late ‘90s. Since then I have conducted more than 1,400 focus groups with children about toys and seen many brands come and go, and some last the distance. Technology when I entered the toy industry was very ‘clunky’ i.e. slow and temperamental! I still have an interactive Yoda toy from this time which was cutting edge, and it is astounding how loud the movements of the toy are versus today’s slick high-tech toys.

Some of the first children I interviewed back from 1998 onwards are now becoming parents themselves, and this thought encourages reflections on how different is the new generation of today versus those kids of the late 1990’s. Biologically speaking, I doubt there is much difference between children today and 20 years ago. But toys are a cultural indicator, they reflect the times to a degree. And the human world in 2018 has changed quite significantly in the last 20 years.

KEY CHANGES AFFECTING CHILDREN:

The Internet Revolution

The children of the late 1990s were not that likely (yet) to be highly active on the internet, although it was in the early stages of meteoric rise. Fast forward to today and children (like adults) take the internet completely for granted. They have instant access to nearly any information, this has had the effect of creating a hugely impatient modern day generation of children. They are far less likely to take the time to concentrate on highly detailed instructions or frustrating activities. Playthings need to work quickly, instructions need to be very intuitive and flawed products will be almost instantly rejected.

Screen time addiction/reduction in time spent playing off screens – the Playstation generation of the late ‘90s were no strangers to screens, however, the screens were not so portable, not so addictive and the software (remember when apps were called software!) was expensive, so there were usually far fewer games available versus the practically unlimited number of apps available on tablets & phones today. Today’s generation of children are addicted to screen time on a vast scale, and therefore we have a whole generation of addicts who need to put down their ‘fix’ to play with toys. Therefore, there is a challenge for toys to remain relevant to kids.

Screen time backlash from parents – from a parental perspective though, the screen time addiction has created more support/more impetus for playing with toys, as parents use toys as an antidote to excessive screen time. Due to inflation over 20 years, toys today are now usually a throwaway purchase as often as they are a really considered purchase, and so economically they are far more accessible. So, this has led to children having vast collections of toys that they play with far less versus previous generations.

Social Media – mass adoption of social media has significant impact on children today versus the 1990s. The biggest single impact we can point to is unboxing videos, which have both changed the toy launch marketing model but also lead to a new type of product as ‘surprise’ driven products have become the hottest sellers for the last few years. From a content perspective, children’s content viewing has increased, but with a tendency to watch more ‘informal’ content, more driven by self-made personalities. This is an ongoing challenge to the classic toy business model of ‘massive movie = massive toy sales’.

Political correctness/Changes in gender perceptions and stereotyping – social norms have changed significantly since the late 1990s. The biggest change affecting children (in many major Western markets) is the shift in gender stereotypes, which is still underway at the time of writing. The classic stereotypes of boys should be tough & rough and therefore have tough & rough toys, and girls should be gentle & have softer toys have softened significantly. It isn’t necessarily that children have changed innately, but more that the gender roles they are assigned by society have loosened up, at least partly driven by the power of social media to name and shame those companies and institutions which maintained the status quo in this area. There are two harsh commercial realities though that toy companies should consider: 1. Today’s parents were kids primarily in the 1980s and 1990s, so many still carry the old gender roles as their default perspective 2. Reflecting the classic psychology debate of ‘nature versus nurture’ in child development, to the degree that nurture defines gender roles and behaviours, this has clearly changed and will probably continue along this path. However, to the degree that ‘nature’ is important, the traditional play patterns while no longer likely to be labelled as ‘for boys’ or ‘for girls’ are still likely to prevail to a degree.

Different character matrixes – following the social changes of the past two decades, one definite observation I have made is that the character matrix for hit movie, TV & entertainment properties are likely to be quite different in balance/make up versus twenty years ago. For instance, Black Panther’s predominantly Afro-American characters would have been far less likely twenty years ago. This can surely only be a change for the good, but it does perhaps make it harder for toy companies to predict what will work and what won’t.

KIDS ARE STILL KIDS

In summary then, children are fundamentally still children. They may live in a different media landscape, but they still have the same fundamental needs – to develop their sense of the world and themselves, to develop their physical skills, their brains and their relationships with others. For this reason alone, toys are as relevant and as necessary as they have always been, but if the next twenty years sees changes as dynamic as the last twenty years things could get very interesting!

Do you need help to find the right mid to senior level people? We can help…we have been helping people from across the world of Toys, Games & Licensing to find new roles since 2011. Our client list reads like a ‘Who’s Who’ in the industry, think of a Toy company and we have worked with them in some way. Along the way we have met thousands of really talented people who could be your next hire.  Get in touch for more information via the ‘CONTACT’ page if you need help to hire new people, or check out www.ToyRecruitment.com 

It’s Good To Be Different: Why Independent Toy Stores Need To Work To Differentiate Themselves From The Crowd

It’s Good To Be Different: Why Independent Toy Stores Need To Work To Differentiate Themselves From The Crowd

Independent toy stores are often viewed as the lifeblood of the toy business, and rightly so. While generalist retailers can often deliver the greatest sales volume, their commitment to the toy department and their allocation of space are variable dependent on what else is happening and how their business is doing overall. Of course, independent toy stores have no choice but to fill a shop full of toys, and therefore they are the only guaranteed outlet for our products along with toy specialist chains.

The size of the independent distribution channel varies by country – from the vast array of ‘mom & pop’ stores in the USA, through to the one per town in Germany (both markets where independents are rightly high up the pecking order), through to my own home market, the UK, where there are only around 10% of the total independent stores vs USA & Germany. Even in the UK though the independent toy stores have a greater focus and more ‘clout’/attention from toy companies than perhaps the potential sales volume suggests. There is no doubt that toy companies in general highly value & seek to help specialist toy stores & chains achieve advantage/sustainability versus cost cutting generalist retailers.

Independent toy stores of course do need all the help toy companies can offer, as it is hard for independent toy stores to thrive in this day and age when everything can be bought via the internet at the lowest price on offer. There are some in the toy trade who believe that independents should be able to stand on their own two feet, and should be left to sink or swim – I don’t believe the toy industry is as short sighted as to adopt that perspective en masse, but there is a kernel of truth in the need for independents to differentiate or die! Toy specialist retail chains will often request or be offered exclusive products – maybe a brand extension or a particular licensed product which won’t find full mass market distribution, but which will still appeal to kids – this allows them to differentiate their range from grocers and generalists such as Walmart, Carrefour etc.

Independent retailers won’t get offered an exclusive for their one store, so clearly they need to find another way to differentiate their offer. Generally speaking there are two key ways they do this – firstly, many become affiliated to buying groups, via these groups they can get better terms/pricing from suppliers and better product offerings. Secondly, they can really work on their in store setting to create a really compelling experience/destination for children and families. This is easily said, but often somewhat harder to actually deliver – many independent toy stores are family owned, so staff are often family who aren’t always available to do more than keep up with the basics of shop keeping. Yet above all this is the one thing that independent stores can do above bigger competitors – such corporate stores have very little autonomy at store level typically, everything is planogrammed by someone at head office.

An independent toy store therefore has one key advantage, a customized, flexible offering –fidget spinners, loom bands or whatever is the latest must have toy are easier for independents to take advantage of. These fads offer a comparatively brief but lucrative selling window, and an independent store can really take advantage of the opportunity – with window displays, ‘try me’ outside the store, special promotions/in store events – all offer good opportunities to achieve incremental sales, whereas such a trend is often in and out before bigger retailers can truly capitalize on the opportunity.

One other area where independent retailers can draw people into store is that ‘WOW’ factor – there are some products that you won’t ever see in Carrefour or Target or Argos, some toys that are either very niche or very expensive but really compelling/aspirational for kids to see or play with in store. Generalist retailers don’t need to create the wow factor, they work on pricing, in stocks and having the right hot toys, because they already have huge footfall. Independent toy stores need to work harder on attracting footfall, and then the basics of retailing still apply – good merchandising, good range of products that are appealing and prompting/offers to get products off the shelves and through the tills.

One thing is for certain, toy companies will continue to help the toy specialists, but toy specialists should be very focused on helping themselves by actively seeking differentiation versus their bigger generalist competition – it isn’t ever likely to be easy, but that’s the game!

Do you need help to find the right mid to senior level people? We can help…we have been helping people from across the world of Toys, Games & Licensing to find new roles since 2011. Our client list reads like a ‘Who’s Who’ in the industry, think of a Toy company and we have worked with them in some way. Along the way we have met thousands of really talented people who could be your next hire.  Get in touch for more information via the ‘CONTACT’ page if you need help to hire new people, or check out www.ToyRecruitment.com