5 Features Of Highly Successful Toy Companies

5 Features Of Highly Successful Toy Companies

As we head into another toy fair season (once more into the breach…!), we can see that mostly the same old toy companies just keep coming back year after year. And while some companies have fallen by the wayside, there are still those companies that just keep going. The interesting thing about these companies who keep on coming back is that they have several factors in common:

  1. Strong product focus & pipeline – above all the toy industry is a product driven industry. Products that get listed by retailers and sell through to consumers are what this industry is all about. Successful companies with longevity either have very strong product pipelines, or in a very few cases have the sheer luxury of evergreen products that sell year after year.
  2. Strong operational disciplines especially stock & cash flow management – the one thing that will kill toy companies stone dead is loose inventory management, especially when combined with poor cashflow management/financing arrangements. This is a largely seasonal business, so you had better be prepared to manage the sharp end of the cashflow cycle. Moreover, if your cash is over tied up in stock that isn’t selling you need to be ruthless to ensure cash generated helps to fund the next cycle. Most importantly, managing what needs to happen if key product lines fail is critical to ensuring longevity. In the toy business something like 2/3rds of all products are new each year, and many of the huge litany of new product launches fail. The key is to clearout and move on cutting losses and avoiding emotional investment in products which just don’t cut the mustard!
  3. Maximising carry forward product lines and launch success propensity – if we look only at the huge amount of development effort, expense and resource that drives just 1/3 of sales in our industry, it’s easy to miss the other 2/3rds – the silent majority which is where all the profit is at! Carry forward products are proven performers, and often need less marketing expenditure (both trade and consumer) and certainly have less development cost to amortise/cover. Yet these trusty old warriors often get little attention versus the glitz and glamour of new product lines. Companies that thrive over the long term usually have silent behemoths in their product ranges – evergreen products that keep on performing year after year!
  4. Brands, Brands, Brands – brands are a crucial factor for most long term successful toy companies. Either you utilise someone else’s brands via licensing, or you create/build/acquire your own. When toy companies are sold, a major element of value is intellectual property – or brands! New product launches are often more likely to succeed as brand extensions versus completely new IP.
  5. Good people – the toy industry is a relationship/contact network driven industry. It’s not normally faceless business, success usually relies on forming strong relationships with retail, suppliers and other companies. Good people can make all the difference. Companies which employ a short sighted approach and who undervalue/under-compensate or under-acknowledge their people are less likely to succeed, and significantly more likely to fail. Also, in an industry with so many smaller (in global terms) and family owned/operated companies, successful management often depends on filling gaps in capability/temperament of management team i.e. employing staff who are good at all the things the managing team are not so good at!

So there you have it – 5 features of highly successful toy companies…as you walk around toy fair this time round, it might be worth observing those companies who just keep on coming back year after year, and seeing if you/your company can learn anything/observe the above 5 factors in action!

 

by Steve Reece, CEO of Kids Brand Insight www.KidsBrandInsight.com,  a leading Consultancy to toy companies around the world, which helps companies with product reviews & awards, find the right toy & game factories, consumer research test their products with kids and parents and secure export distribution/market entry around the world