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Toy Distribution Methods: Pros & Cons Of The Main Routes To Market

Toy Distribution Methods: Pros & Cons Of The Main Routes To Market

We consult with dozens of companies each year in our toy and game Consultancy business www.kidsbrandinsight.com – more than half of the projects we are asked to help on include export selling – helping a company who are maybe established in one market grow their sales to other countries. We find that the most important consideration is to match the distribution method appropriately with the product, the company ethos and the country in question.
Sometimes companies create more problems than opportunities by not paying enough attention to the differences of the various methods of getting your product to market in other countries.

This article then outlines the main options for selling product into another market, and looks at the positives and negatives of each of these options:

LICENSING – the least hands on method of getting your product to market is to license the rights to another company. This might make sense for product categories or markets where the company licensing the rights wants to manage their own manufacturing. Your company then takes no stock risk, and aside from a licensing agreement and file/data transfer can leave everything else to your licensee. The challenge with this model is that it pays a relatively smaller $ amount per unit as a royalty is a fraction of the net sales value, which is an issue for companies trying to grow sales and profit versus just profit. The other issue is that you can be so hands off that it can be hard to measure or assess whether the other company is doing a good job with your product – the royalty statements will be all you have to review sometimes.

FOB SALES TO DISTRIBUTOR – with this method your factory (or your logistics company) delivers the product to the port nearest to the factory, and your distributor takes the product from there. This way they are responsible for taking the stock risk and responsible for shipping and import costs and administration. They then supply retailers from the ordered stock. Generally speaking this is as safe a way of getting to market as any, the only limitation is that your margin will be fairly limited, as the distributor needs to make a fairly significant margin to make this method work from a profitability and risk management perspective. The distributor will therefore often tend towards being more risk averse than you might like, and will often under order stock to avoid any costly over stocks. You also won’t get to see much of what happens in market as the distributor is handling the entire domestic process.

SHIP TO DISTRIBUTOR’S WAREHOUSE IN THE MARKET – with this method you are responsible for shipping into the customer’s warehouse, and so you have to cover the shipping and import costs and administration, as well as the stock risk until delivery. The distributor may prefer this because they don’t have money tied up in stock sat on the water, they are receiving and paying for stock closer to the point in time where they can deliver to the retailer and invoice it.

SALES REP/AGENT – (in the USA they tend to be called sales reps, and in some parts of Europe they tend to be called sales agents). With this method the rep/agent presents your products to retailers and solicits orders. You manage the manufacturing, stock management, shipping, warehousing/logistics, marketing activities and deal with any returns or over stocks. The rep/agent doesn’t normally get paid until you get paid by the retailer, and then they are usually paid a commission based on a fixed percentage of sales, normally 5-10%. The benefit of this method, and one major reason why it is quite a popular route to market is that your company gets most of the margin, and you don’t normally have to pay the rep until you receive sales proceeds. The major challenge/drawback with this model relates to the major benefit – when your sales rep is not getting paid unless something sells, they are not incentivised to a). sell to the right retail channels b). help you build a brand. They are just going to find the biggest and easiest opportunities to sell as much product as they can. For some companies this is fine, but it can cause issues for companies looking to build strong stable brands in the market sometimes. Also, reps are in business like you, and it is not in their interests to pursue a hard sell. They will generally seek out low hanging fruit, and because there are so many products available out there, they can always find another possibly easier/more lucrative product to sell, so some reps will ditch your range or at least focus on something which is likely to pay them back more for their efforts and opportunity costs. Therefore, while the rep/agent model may seem great at first glance, you need to consider the potential pitfalls also.

DIRECT TO RETAIL – this one is quite straightforward. Your company sells direct to retailers, so you are responsible for everything except for the retail element. The benefit is that you get a much higher margin from this method versus some of the other options. The issue is that most retailers are not particularly keen on adding new suppliers unless that supplier has such a compelling range they can’t not take the product line. So getting a ‘foot in the door’ is the main challenge with this method, it takes time. A secondary but nevertheless formidable challenge is that there are many languages spoken in the world, and while most countries will speak at least some English, it can be harder to sell to a customer in their 2nd language. Also with this model, bear in mind that you take significantly more risks versus the distributor model in terms of being responsible for product liability in the market and other in market risks. This may be fine for a market you know quite well and is culturally and perhaps legally similar to your own, but some countries are very different trading environments, and therefore come with risks and roadblocks to surmount, some of which you may not discover until you learn by error – so sometimes while this can be the most profitable route it can be much harder to deliver sales and profitability in reality.

DIRECT TO CONSUMER – with this model you sell directly to the consumer in the market. This model is much more involved. Whereas all the other routes to market listed here are in essence SALES challenges, selling direct to consumer is more of a MARKETING challenge i.e. you need to get your product in front of a significant number of potential consumer purchasers, online, at events via pop up stores or by other methods. Gaining critical mass can be tricky and costly with this method. Clearly the price you sell at is higher, so in theory your margin can be higher, but you need to watch your marketing cost per unit sold and your fulfilment (i.e. delivery costs) per unit to ensure you do actually make more profit per unit.

That then covers most of the routes to market. We find that toy and game companies often spend too little time considering the right option before leaping into selling and processing sales. There are many details in each of these options that we didn’t have space to list here, this is just a topline – we do suggest that companies take their time and do their due diligence to avoid costly mistakes!

We run a Consultancy business advising toy companies on how to grow their business by a combination of strategic analysis and export sales facilitation. We have helped more than 100 toy and game companies grow. For more information on our process and methodology for growing toy sales: https://www.kidsbrandinsight.com/blog/toy-co-growth-booster-program/

Toy Business Insights: Managing Virtual Events For The Toy Business

Toy Business Insights: Managing Virtual Events For The Toy Business

As the pandemic has put many major trade shows in jeopardy for the short term, we are all working on virtual alternatives to get in front of people in the business, especially our customers.

To be successful though in these different circumstances takes some thought and planning. We can’t presume we can do things the same way but just via video. We caught up with leading Virtual Events Consultant – Catherine Gresty of RG Events to find out how toy and games companies can find competitive advantage by running their virtual events more efficiently than their competitors:

TOY INDUSTRY JOURNAL: What common mistakes do you see toy companies & others making with virtual events?

CG: We see companies thoughtlessly pushing out information without connecting and engaging with their audience first. It has become the standard to run a basic and unplanned Webinar in one flat format without thinking enough about interactivity and not thinking enough about the customer experience and customer journey. How are you going to reach and influence them most effectively when they have other distractions at home and when you aren’t physically in their presence. We advise our clients that they need to think about the psychology of engagement as much as their presentation content and message. Getting your customer to pay attention is critical.

Do you need to restructure what you want to tell your customers around the online media available to you instead of presuming you can just do the same old thing but via video feed.

TOY INDUSTRY JOURNAL: Ok, so what is the psychology of engagement and how can toy and game companies use that to their advantage?

CG: It begins with taking full and proper consideration of your customers situation and mindset.

Don’t expect people to spend the whole day online with you, because that is exhausting, and they will have other things to get done that day. It might be the case that they normally will visit you for a full day for product previews in your showroom, but online is a different experience. Try to think about what it will be like for them to sit there in one place for days on end viewing product after product. You don’t want to keep them online for too long and you definitely do want to try to standout versus everyone else’s presentations.

The quality of your visuals and the information to be presented needs to be really high, but also professionally succinct.

The golden rule we work to with our clients is that a virtual presentation, even for the largest of product lines should last for a maximum of 2 hours, so maybe plan to present category by category split over a few sessions, or just present the topline & highlights with follow up communication with videos and sales sheets to cover off all the information.

TOY INDUSTRY JOURNAL: What opportunities or advantages can virtual events present that physical ones can’t?

CG: Normally when we manage selling events the clients who are most successful are the ones who tell the best stories and who make things fun instead of just droning through presentations in a monotone voice.

Perhaps you can take these unusual circumstances as an opportunity to add presentations from people at a higher level in your organisation, so think about what you can record your senior management saying or doing in a way you can’t easily replicate at a physical trade show when there are hundreds of people to meet. Perhaps your bigger customers are due to meeting your CEO, but maybe you can introduce her or him to your other customers by recording a message as part of your virtual presentations?

When people aren’t travelling to events and rushing round and aren’t exhausted they probably do have a more time available overall, but it will also need to be more structured and you need to take account of their attention span.

TOY INDUSTRY JOURNAL: How else can people use virtual communication around events to help them achieve better results?

CG: We often hear how it is the informal meetings in the halls of exhibitions with contacts in the trade which can sometimes be most valuable. So, you will have to work harder to replicate those passing conversations in absentia. This is a relationship driven business as well as being a product dependent business. Without the after-hours bars, restaurants and entertainment which are normally such a focal part of trade show attendance you have to consider how to reach out to more people and retain and build those informal relationships.

TOY INDUSTRY JOURNAL: Obviously virtual events will mostly be significantly cheaper to run than physical ones. Can you think of any good ways toy companies can use the budget savings to deliver greater impact from the virtual events?

CG: Obviously we would recommend engaging expert professional support from a company like ours!

But you can also look at how technology can help you deliver additional interactivity. If you look belong the standard off the shelf technology platforms you can use live feeds, hybrid studios (purpose built studio with green screen), you can invest in animation or simulation with products and you can upweight the typical production values on your product ‘sizzler’ videos.

For sure companies should enjoy the cost savings which virtual events can offer over physical events, but don’t forget your objective is to effectively sell your products and your company, in which case, sometimes a little bit of extra spend can go a long way in selling both the products but also your company capabilities.

TOY INDUSTRY JOURNAL: What advice would you give to people attending virtual trade shows arranged by another company or organisation? How can they make the most of those opportunities?

CG: Start by looking at how you can adapt your physical showroom to the format offered by the organisation managing the virtual event you plan to participate in. This takes pre-thought, planning and potentially some lateral thinking. Above all though, how do you plan to draw people in to engage with your team and your presentations?

On a more practical note, make sure you understand the platforms before you present to your customers. Make sure you understand the presentation formats and contact opportunities. You can also check if the events have an educational strand or platform – can you promote your business and products in these spaces?

TOY INDUSTRY JOURNAL: Do you have anything else to add, and how can people get in touch if they would like to find out more about how you help clients deliver more effective virtual events?

CG: Prepare for change. This is not business as normal, so be flexible and ready to take advantage of opportunities that are offered in a different way or format from what you are used to.

Challenge yourself, your colleagues and your company to think and act differently as this new circumstance we find ourselves in necessitates.

The fundamentals don’t change though, in planning any event we should always start from ‘What are our objectives & how can available events formats allow us to meet our objectives?’. If you start with your objectives and a plan based on meeting those objectives then you shouldn’t go far wrong.

For more information on our business or for help and advice on how to run your virtual events more effectively, please ask your readers to visit www.r-gevents.com for more info, or via LinkedIn: https://www.linkedin.com/in/catherinegrestyeventsmanager

 

Catherine Gresty is a highly experienced Events professional with 20+ years experience of planning, executing and evaluating major events across the world for companies including The Financial Times, Coca-Cola, The Imperial War Museum, The National Trust and others. 

 

 

Christmas 2020: Here’s Why Toy Sales Will See The Usual Seasonal Sales Spike

CHRISTMAS 2020: HERE’S WHY TOY SALES WILL SEE THE USUAL SEASONAL SALES SPIKE

As much of the world is still hunkering in coronavirus inflicted lockdown ,we’re starting to finally see the light at the end of the tunnel in terms of some easing of restrictions and businesses around the world either opening up again or at least seeing a timeline for how they can open up again.

The remaining issue though which won’t pass as quickly as this horrible (and hopefully only) wave of coronavirus is the economic damage inflicted across the world. Businesses have failed and will continue to fail throughout at least the next 12 months due to the direct impact of the pandemic lockdown or due to the hangover from it. Many millions of people have lost their jobs, many millions more are officially furloughed but facing an uncertain future.
None of which is uplifting of course, but there should be some light ahead for toy companies for a number of reasons:

1. The economy will pick up – while there is no doubt the global economy has taken a big blow, this downturn was not caused by some fundamental structural factor, it was caused by a hitherto unprecedented shutting down of society and economy. When people can come out again, as long as the coronavirus stays largely away, things will pick up again. It will take time, but this is not a massive physical destruction of economic drivers like we saw coming out of World War 2. The buildings are still there, planes are still on the tarmac and so while it may regrettably be a different company or different people operating the bars, restaurants and plans they have not physically disappeared. 2020 is bound to be a tough year, but hopefully 2021 can see a return to normal. The global population is still growing, and while we may see some changes in consumption and travel habits, the underlying factors driving economic growth are still there for the mid-term thankfully.

2. The Toy business is recession resistant – it’s an often-quoted cliché, but the toy business tends to do ok in tough times economically speaking. The global financial crisis of the late noughties did not kill the toy business. Parents did not stop spending at Christmas because times were tough, history shows that the tougher the times the less likely parents are to skimp on giving their kids presents. When things are difficult human beings tend to see greater value and security in golden family occasions like Thanksgiving and Christmas. While there is always a first time, we have not seen a financial crisis bad enough to stop the usual buying and consumption patterns in Q4 of the year. There is no reason to believe this will suddenly change for Christmas 2020. It is likely that many people will struggle to find work and that some industries and businesses will not make it through this crisis quite like they were before, but nevertheless people are very resourceful and at this stage (May 2020) Christmas is quite a long time away. The issue is more likely to be one of stock commitments as toy companies and retailers can become risk averse during difficult times.

3. The reasons why parents buy toys have not disappeared – arguably the reasons for parents buying their children toys have got stronger in some ways. Increasingly parents are seeing toys as an antidote to excessive screen time, in effect they are desperately trying to leverage their kids off screens by buying them toys. Bearing in mind how big a thing screen time addition is for kids these days, this modern-day fundamental driver is not going away. Sales of parentally approved toys like board games, puzzles and science kits have soared during lockdown, but 6 months is a long time. Consumers will mostly have long since forgotten what they bought in March an April by the time November rolls around. These ‘worthy’ toy products are seen by parents as helping their kids’ development, so why would that suddenly stop when the shops are full of such products for Christmas? We should also remember the massive impact that the ‘playground effect’ can have on sales of toys, and while many children in North America and Europe will miss school until after the summer holidays in some cases, they are still likely to return en masse to school in the autumn. Therefore, we can predict a massive upsurge in kids re-uniting with their strongest social influencers which may seem a late boom in pocket money toys for the back end of the year.

4. Food retailers will have a greater share of the toy market coming out of the pandemic – the retailers most likely to come out of lockdown stronger are food retailers, because their businesses have remained largely open. While they may have seen a dip in non-food sales and therefore in profits during the lockdown, they will nearly all be trading still towards Christmas when the normal pattern of shoppers going to buy groceries but then buying additional often high ticket Christmas presents returns.

5. There should be more toy marketing money on the table heading into Christmas – anyone planning so spend marketing money in Q1 or Q2 will have most likely done everything they can to either stop the planned campaigns to preserve cash or switched them to more parentally approved products which have sold well through this period. Also, for those companies who had products based on movie licenses, it is quite likely that those items did not get delivered to market or if they did without full marketing commitment as the movies did not come out in the cinema. For these reasons there should be plenty of marketing money available to promote products coming out late in Q3 & Q4 this year.

There is no doubt we are heading into a significant economic downturn, but we suggest it should not have massive effect on toy sell through this Christmas. As long as toy companies and retailers order enough stock, we think demand will exist – hopefully this demand can be met.

We run a Consultancy business advising toy companies on how to grow their business by a combination of strategic analysis and export sales facilitation. We have helped more than 100 toy and game companies grow. For more information on our process and methodology for growing toy sales: https://www.kidsbrandinsight.com/blog/toy-co-growth-booster-program/

The 2 Key Factors In Launching A Successful New Board Game

THE 2 KEY FACTORS IN LAUNCHING A SUCCESSFUL NEW BOARD GAME

Thousands of new board games are released each and every year. Needless to say, very few of them stick in the market. It’s just a plain matter of fact that in order to make space for the next round of new board games last year’s board games launches need to be shuffled off to the archives of Board Game Geek.

Some games stick though, and go onto achieve ‘evergreen’ status whereby they sell year after year and become ‘must play’ games for those who are really into board games, as well as ‘should try’ for those with more of a transient interest in playing games.

if we could easily understand why some games sell well and some don’t we could begin to increase our chances of launching a game that sticks in the market and to reaping the rewards of that on an ongoing basis. Just imagine how much more profitable and dependable an established classic game is in the market, with no particular need for huge marketing spend, no expensive product development process and easier sell in to retailers and to consumers.

There is a 2 step formula for exactly this, although as with most things this will be easier said than done:

STEP 1 TO LAUNCHING A SUCCESSFUL NEW BOARD GAME: 

Create a compelling concept and visual presentation of the concept.

This is so generalistic that it is almost no help at all, but it nevertheless applies across the board. Board games packaging is the primary marketing and retail sell through driver for board games. Past research projects we have conducted included walking along retail shelves with consumers to observe and assess how they pick out a game to buy, we have also conducted similar research into online shopping behaviour with regards to board games. There is no doubt from this research that the front of box is one of the primary marketing factors for persuading people to buy and try a new board game. Our experience suggests that board games should have a clear visual concept, combined with a compelling and instantly understandable topline gameplay i.e. you answer questions, or act like something or use a particular prop in a certain way. All of this should be kind of obvious from the front of the board games box. We would also suggest that simplicity is better than complexity in general terms, but it needs to be impactfully and attractively designed simplicity.

Getting this 1st step to launching a successful new board game right will often lead to people buying the game once they see it on shelf or online. That doesn’t necessarily mean that they will actually get round to playing the game though. For those of us in the board games business we tend to over think things, when everyday people think about their purchased decisions very little often in comparison! The second step then needs to help us go from selling lots of boxes to getting people to actually play the game.

STEP 2 TO LAUNCHING A SUCCESSFUL NEW BOARD GAME

Annoyingly Step 2 is also very generalistic! Presuming the general concept and look of the game packaging has allowed us to sell a significant quantity of games off the shelf, the major driver in whether the game stays in the market and keeps on selling is primarily down to the gameplay experience and how enjoyable, compelling and socially stimulating that is.

Over the years I have worked on and launched plenty of games which sold ok in the first instance because they had a good general concept and positioning which people could understand and where they could imagine themselves playing with their friends and families.

This though is the surface gloss! The reality of whether the game will keep on selling depends whether they could easily and enjoyably get into playing a game that they find compelling and worth recommending and/or playing with their friends and families.

Normally if a game sells well in the first instance but plays badly, online reviews are poor, people don’t recommend the game to their friends and family, and as a result sell through tends to fall off a cliff.

In the end, ongoing success then comes down to the substance and quality of the gameplay experience.

A recent example I would give of this effect is a recent gameplay evening we conducted for market research for a particular client in the board games business. One of the games we tested was Dobble, the modern day classic game from Asmodee. We started with a low energy atmosphere, and 30 seconds later everyone was yelling and all players were hooked and totally focused on the gameplay. We know for a fact from our follow up interviews that most of the research respondents went out and bought Dobble themselves. This really is the best illustration we can think of whereby the ongoing sales and success of a board game eventually comes down to the substance and quality of the gameplay.

So there you have the 2 key steps to launch successful new board games, clearly this is easier said than done, but for your next board game release could you improve on either Step 1 or Step 2 to increase your chances of launching an evergreen board game?

We operate a joint venture creating and developing board games for people who need good games made quickly, for more information on this service: www.GameCreationAccelerator.com  We also advise toy & games companies on how to grow their businesses by a combination of strategy development and hands on export sales efforts, for more information on these services: www.KidsBrandInsight.com/services

We continue to publish board games market analysis, board game insights and board games expert consultancy via this Blog (please feel free to sign up for our free email newsletter with all the latest articles and insights) and via our other channels.

How The Pandemic Will Affect Toy & Game Supply Chains

HOW THE PANDEMIC WILL AFFECT TOY & GAME SUPPLY CHAINS

2020 has been a tumultuous year for mankind. For the toy and games business it has been interesting so far to say the least! Toy fair season mostly proceeded according to plan, albeit with fewer Chinese companies in attendance, but pretty much as soon as the trade show season wrapped up the world declared a pandemic and lockdown ensued.

We’ve written elsewhere about the purchasing habits of consumers during this time, but this article will look at the impact on and implications for the global supply chain for toys and games.

Firstly we should state that prior to the pandemic we were already at a crossroads in terms of toy and game manufacturing, with China’s rapidly developing economy moving beyond the point where it can easily sustain the type of high labour toy manufacturing which built the massive manufacturing hubs for toys in China. The following video presentation offers more insight on this trend, what it means, and why it means China is going to play a bigger part in the toy business in the future, but in a changed role and why that means some high labour toy production has already moved out of China and will continue to do so for the next decade:


Aside from this the world has changed a lot so far in 2020 due to the Covid-19 pandemic, the question though will be the extent to which that is short-term versus permanent.

The first major impact on the toy and game supply chain was China’s lockdown and delay in re-starting production after Chinese New Year. Thankfully at the time of writing this has now largely cleared and Chinese toy factories are mostly back producing again, albeit producing for a much altered economic situation and a toy market with differing demand levels across categories.

Vietnam, the primary alternative toy manufacturing hub to China has seemingly managed the pandemic in an admirable way with far less disruption versus other countries. While India has been in a strict lockdown, albeit with this easing at the time of writing and most factories beginning to produce toys again.

So that’s what has clearly happened in the short term. The implications of what has happened are less clear though.

While China was locked down we saw a flood of urgent enquiries for toy production in India and Vietnam as companies knee-jerked towards alternatives to China. Then all of a sudden as soon as China’s toy factories got back into swing the enquiries tailed away and the status quo resumed. Frankly this knee jerk way of managing sourcing is worrying – as the cliché goes you don’t want to put all your eggs in one basket!

Strategically speaking the market leaders in the toy business have been seeking to diversify their supply chain since at least 2013-2014, and at the time of writing Vietnam has been the primary beneficiary but with other Asian countries like India & Indonesia benefiting also.

So the trend has been to move some production away from China for some time. Both Hasbro and Spin Master have stated to the stock market that expect to have as much as 50% of their manufacturing coming from outside China in the next year or two. This is a huge shift versus where they were even 5 years ago.

So to understand whether there will be any long term impact of the Covid-19 pandemic on toy sourcing we need to assess for two ends of the spectrum – at one end we have strategic stock market listed companies who have to manage and mitigate risks as a part of their corporate culture to avoid having to ever (as far as possible) deliver bad news to the market for any single quarter. At the other end of the spectrum are the majority of toy companies – often owner or family managed, generally managed in a competent but not corporate, ultra-disciplined or strategic way.

The major stock market toy companies have long since been diversifying to avoid relying entirely on China for manufacturing both in terms of managing risk of being reliant on on one country as a source but also to mitigate and to address cost inflation in China. For these companies, it is likely that they will stay on their planned track even coming out of the Covid-19 crisis, because they were already taking significant steps to plan for China’s rapidly advancing economic cycle and the hard reality that means this laudible increase in wealth and wages will make low end labour heavy toy production less and less viable over time.

For independent toy companies we would surely have to expect that some would recognise the risk of being so reliant on China’s toy manufacturing and seek at least a little diversification. To start from the beginning finding new factories, auditing them, checking them out and running a first year production pilot takes time. So to have to set all that up and do all the required work in a panic is not preparing for success. Nevertheless, we expect based on our understanding of human behaviour and the inertia and intransigence of toy companies who have a deeply ingrained sourcing from China ‘habit’ that most toy companies will not choose to change anything much coming out of the pandemic.

In fact, as change = risk and uncertainty we have seen short term signs of even the major corporate toy companies locking in their current arrangements. There is so uncertainty around the world, health, working practises and the overall toy and games business in the midst of the pandemic lockdown that even where it makes strategic sense, even the most corporate of companies will go into risk aversion mode.

Therefore, while we expect the long term trend of toy companies seeking alternatives to toy manufacturing in China to continue and if anything gather pace, the short term impact of the coronavirus outbreak is more likely to be a delaying influence on toy manufacturing transition.

 

We run a venture helping toy companies set up toy manufacturing in India: www.ToyTeamIndia.com 

We also help toy factories in China go from being OEM contract manufacturing suppliers to building their own brands and distribution. This change in business model allows factories to go up the value chain and move from c. 5% manufacturing margins to 30% brand owner margins. For more information on this: https://www.kidsbrandinsight.com/blog/toy-co-growth-booster-program/

 

Why Do Classic Board Games Like Monopoly Just Keep Selling And Selling?

WHY DO CLASSIC BOARD GAMES LIKE MONOPOLY JUST KEEP SELLING AND SELLING?

There are hundreds if not thousands of new board games coming to market each and every year. Nearly ever year of this millennium board games sales have been up year on year, and each year we seem to get at least one new  massive hit board game which really captures the moment.

At the time of writing in the midst of the coronavirus crisis we are seeing a very significant boom in board game purchasing and presumably board game playing as parents seek to gainfully occupy their locked down children. When you study the social media trends it becomes apparent that parents are often buying and playing those classic longstanding board games like Monopoly, Clue/Cluedo (yep the name is different in Europe vs the USA!), Game of Life, Jenga, Connect 4 and so many more.

When you speak to friends and family not in the board games business they quite often ask if anyone even plays these classic games any more when we have so much technology, video on demand and more recently launched board games? The answer to this question of course is a massively emphatic yes! As Hasbro’s ongoing success with their Games business suggests millions of people worldwide are buying and playing these classic games.

There are a number of reasons why they are still buying and playing these classic games:

  1. Nostalgia for their own childhood – our childhoods are welded very firmly into our ongoing consciousness, and experiences which didn’t seem that important at the time become treasured and golden memories. For many, these classic games remind them of strong and positive memory of a fun and entertaining part of their childhood – playing classic board games. Each generation so far since these classic games launched has tended to play and then pass on the impulse to play to their offspring, which when you think about it is an awesome and timeless purchase dynamic.
  2. The need for quality social interaction and social facilitation – modern day parents are constantly trying to pry their children away from screens – whether that’s phones, tablets, computers or TV. Parents, especially mothers, tend to use board games to facilitate social interaction and genuine quality time among family members. So often in this modern tech obsessed world people are in the same place physically but not necessarily mentally present, and board games offer an antidote to this. When many people who aren’t avid board game players go shopping for board games they will often tend to default to the classic games they know and have fond memories of, and this is again another strong driver of sales for these classic games.
  3. Predictability and longevity of sales facilitates stronger more effective merchandising and marketing – at this stage, even an unsophisticated retailer with poor data gathering and analysis capabilities will know roughly how many copies of the classic version of Monopoly they will sell each year and each peak season. Of course this may be up or down to some degree, but the retailer and the publisher both know the product will sell and will therefore tend to commit to stock and marketing investment more easily and with less risk aversion versus an unknown quantity i.e. a new game! Therefore people are more likely to find stock of classic games in stores (physical and online), moreover there are more local manufacturing options for board games versus plastic toys and therefore replenishment can be done more quickly locally thus further ensuring product availability and therefore sales of classic board games.
  4. People already know the gameplay and rules – learning new rules and new gameplay is one of the biggest barriers to playing board games. In general, people do not find it fun to read long instructions and to understand complex game play (there are of course objections, but this is a general global exception!). Classic board games like Connect 4, Guess Who or Risk have very familiar gameplay and adults tend to know how to play them. This makes it far easier for people to pick up and buy this type of game versus something with a rules learning curve which can be offputting.
  5. (Last but not least) Classic perennial games are fun to play – there are so many factors involved in selling board games but the fact that these classic board games are actually really fun and often very compelling play experiences is under reported. The media will gleefully report how many game play faults Parker Brothers originally identified with Monopoly for instance, but they rarely focus on the fact that people play Monopoly because it is fun! Yes, there are parts of the experience which are not perfect, but the reality is the basic gameplay is entertaining. The same applies to so many of the long standing perennial classics in the market.

Of course there are other factors driving the long term success of classic games, not least of which is good management by Hasbro and the other brand owners or publishers of these classic board games. In the end though, the above reasons go a long way to explaining the ongoing commercial success and consumer appeal of classic board games!

 

We operate a joint venture creating and developing board games for people who need good games made quickly, for more information on this service: www.GameCreationAccelerator.com  We also advise toy & games companies on how to grow their businesses by a combination of strategy development and hands on export sales efforts, for more information on these services: www.KidsBrandInsight.com/services

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How Will Toy Licensing Change Coming Out Of The Pandemic?

WILL TOY LICENSING CHANGE FUNDAMENTALLY COMING OUT OF THE PANDEMIC?

Developing and launching toys based on licensed properties has been an integral part of the toy business for a long time. More specifically, toys based on characters and scenes from movies have been a major factor in driving toy sales ever since Star Wars first came out back on the 1970’s.

The reliance of the toy business on movies has ramped up in recent years as more and more of the archetypal ‘toyetic’ movies came under the control of Disney. Whereas historically the toy business tended to roll up and down on an annual basis like a roller coaster due to a vairable movie slate as rival studios launched as and when they were ready, the relatively recent ability of Disney to plan their business (and as a by product the toy business) around so many key franchises has lead to a previously unknown security in terms of guaranteed strong drivers for toy sales each year due to an ongoing raft of massive cinematic events with large marketing budgets on a global basis.

Then two things happened: firstly two of the major movie franchises driving the toy market reached a logical peak – that being Star Wars with the end of the 3rd trilogy of films and the Marvel movies reaching a climax with Avengers: End Game.

The resulting insecurity surrounding movie driven toys was yet to be resolved in a clear way with new movie release dates when the coronavirus pandemic hit and closed cinemas across the world. Many new movie releases were postponed until later in 2020 or pushed back further to 2021. Some movies have been released direct to video on demand as some movie studios seek quicker revenue return versus postponements.

The question is whether the short term effects of the pandemic will turn into long term effects (i.e. an ongoing situation where more movies are released straight to VOD and less focus on cinematic releases) or whether they will prove to be a short term blip. We also need to consider the question of whether the business segment of movie related toys can continue to be such a sales driver as in the past since two of the biggest franchises reached a peak which may be hard to get back to.

On the straight to video on demand question, it seems likely that some content will go straight to VOD once the pandemic clears, but then that has already been happening. Generally speaking some content with potential for a cinematic release fails to register enough interest/demand to put bodies on seats in cinemas and as a result skips cinemas. This is a phenomenon that goes way back with straight to VHS or DVD releases stretching back decades. Netflix, and increasingly Disney+ will be able to justify commissioning production on some headline content based on their revenue model, but generally speaking these VOD platforms are built on a quantity based formula i.e. they need a lot of content to justify subscriptions, otherwise people would watch their way through the catalogue quite quickly. So aside from a few headline productions designed to bring in new subscribers and to build the kudos of the platform, it doesn’t seem likely that we are going to shift from cinematic releases to straight to VOD on a long term or permanent basis on the biggest movies.

Again, if we go back to the time of DVDs and VHS, there were typically 2 windows around a movie’s toy selling effect. The cinematic release and surrounding marketing would offer a big spike, often in the summer or other school hoildays when toy sales would otherwise be lower without a big blockbuster movie, and then again for the VHS or DVD release again towards the back end of the year into peak toy selling season. So in effect toy companies were getting two bites of the cherry with each movie they signed up for. And to some extent this still applies with DVDs still having distinct launch windows in retail, albeit this is far less important than it once was. Even then though the release to VOD tends to have a fixed window, so in a way while the content delivery mechanism has changed, the 2 spikes scenario hasn’t really, it’s just that the 2nd spike has softened a little and now burns a little less brightly but for longer.

So therefore while some movie companies have done ok out of sending much anticipated movies straight to VOD while cinemas are closed, they would be turning down a significant commercial opportunity to continue this strategy once cinemas reopen. Despite the friction between cinema chains and movie studios around the straight to VOD release we expect that once people can go back to cinemas the usual model will return but perhaps with VOD having improved revenues. It is possible that some movie chains will not reopen of course as will happen across many industries as not all businesses will make it through the economic turmoil resulting from the pandemic lockdown. In the end though, a cinema is a cinema, and is hard to convert for any other purpose, so either the current operators or future operators will still be likely to be showing movies in these cinemas in the future.

Perhaps the bigger question which is on the way to being resolved is how Disney will manage and originate around the Star Wars and Marvel franchises going forward. At the time of writing, it has been announced that academy award winner Taika Waititi will direct and co-write a new Star Wars cinematic release, whilst another Disney+ exclusive Star Wars series is also reportedly in the works. The depth of the Star Wars universe will make it easy for Disney to keep rolling out new TV series for the fabled interplanetary series to keep the Disney+ platform ticking over for years if not decades, but the cinematic strategy is yet to be revealed in full. What we can be sure of though is that Star Wars has been a top toy brand since the first movie, and with the brand planning, content production and merchandising might of Disney behind it a backward step seems very unlikely!

With Marvel, while the incredibly successful franchise seemed to come to climax and conclusion with Avengers: End Game, reports suggest that the next phase of the Marvel story will include more than half a dozen new movies, as well as various TV series as new stories and new sequels are spun off this massively toy friendly franchise.

In short then, kids and family entertainment movies have been intertwined through the toy business for as long as most of us have been alive, and this is not going away. While cinema goers may be bingeing on VOD at home right now we predict a full return to the usual way of things once the pandemic clears, which can only be a good thing for the toy business.

 

We help toy and game companies grow. We have a long since tried and tested methodology we use to help toy companies fix the right strategy, develop the right products and sell more of the toys and games they make. For more information, just click here: https://www.kidsbrandinsight.com/blog/toy-co-growth-booster-program/

 

 

 

Why The Board Games Category Is Booming During Pandemic Lockdown

 BOARD GAMES CATEGORY ANALYSIS:

One of the most notable and most positive of the difficult circumstances humankind is in right now is the surge in board games sales across the world. As families hunker down to get through the lockdown they have clearly been looking for productive ways to pass the time and to have fun together.

For sure, on demand video consumption has soared as inevitably both kids and parents binge on watching video content while stuck at home. But they have also been buying and presumably playing more board games.

Playing board games delivers so many positive benefits. They teach children to take turns, count, think, negotiate, compete and communicate. They also help adults interact with other people by stimulating and facilitating a higher level of personal interpersonal interaction, think of that classic awkward social situation or low energy family gathering or dinner party, and how much more fun everyone has in each other’s company around a game.

Coming out of the pandemic this should be one major positive – that people have re-connected with their family over their favourite games in a way they wouldn’t always take time to do. While the current significantly upweighted demand for board games will be likely to decline somewhat as people gradually are allowed to travel more and spend less time at home, game playing is a habitual thing, and once that habit is re-ignited it will remain for some families, and once they can get out and socialise again should spread between social groups in a much more palatable and less damaging ‘viral’ effect leading to consistent sales growth not just in the short term, but should have a positive ongoing effect medium to long term also.

While the covid-19 pandemic and resultant lockdown have made most of humankind focus on a different level of concern over life and needs, that needn’t be entirely negative long term. For the board games category, the upsurge in demand is good for society as a whole in two ways (at least): firstly, it protects a lot of jobs around the world, both for companies who sell only board games, but also gives some security and balance to those toy companies who have seen sales decline in other categories, and of course it supports countless jobs taking a broader view across manufacturing around the world, shipping, logistics, testing, product development and more.

On a social level, if humankind comes out of this crisis more grounded in their families, in their communication with other people and in their  ‘playing the game’ of life with a redefined sense of priority, that might in the end be a positive effect, and a silver lining coming from a tragic and damaging situation.

We run a Joint Venture creating, developing producing board games for people who need games made quickly to met urgent demands. Our team features all ex-Hasbro professional board game developers. Demand is ongoing as board game companies seek to bring new games to market. For more information, or to book our board game development services: www.gamecreationaccelerator.com

8 Reasons Why The Global Toy Industry Will Recover From The Pandemic

At the time of writing we’re seeing an economic slowdown like we haven’t seen in our lifetimes, and this is going to have significant implications far beyond just the global toy industry.

With large sections of retail shut down in many major markets, this is definitely not business as usual, and it is sadly likely that when we finally emerge from the medical emergency we find ourselves in we will find ourselves facing a large degree of economic damage.

While the toy business has proved over and over again that it is relatively cushioned from economic downturns and hard times, things might be a bit different this time because we will inevitably lose some retailers and also a number of toy companies of long standing and good reputation are likely to fail during this horrendous period.

All of that said though, whereas there are some people out there wondering if their chosen career is basically over for the foreseeable future unless they retrain and upskill, the longer term outlook for the global toy business remains positive for a number of reasons, and that should give many of us hope and faith. Here’s a number of reasons to feel reassured about the prospects for the toy market after the pandemic clears:

The Need For Play has not diminished – there are a myriad of play occasions and motivations. Children learn through play. They develop through play. And they play to have fun. This has not changed, and it won’t. If anything right now kids are playing a lot more than normal due to not being in school. Of course parents are constantly fighting screen time addiction, but either way kids do want to play, and if they consume content, some of that content creates interest in characters which normally leads to toy sales.

Parents still want the best for their kids – parents haven’t stopped wanting to be good parents, and haven’t stopped being concerned about their child’s development and fulfilment. In fact, all those categories of toys which are parent prompted primarily i.e. board games, puzzles, art & craft kits, science kits and such items are all flying out of retail despite lockdown as parents both positively seek to educate and gainfully occupy their kids as well as negatively in some cases are just seeking a bit of respite or peace and quiet!

Parents still get pestered by their kids for cool stuff – children do tend to sense when things are difficult for parents, but that won’t necessarily stop them asking for stuff they really want. And in some ways, parents are more likely to indulge their kids during tough times because they don’t want their children to be unhappy. As we come out of the current situation though, kids will feel less and less guilt about pestering for the stuff they want – and maybe they will be ‘into’ 3 or 4 new brands since they have been consuming so much content while not attending school.

The playground effect will return – this is one of the most powerful drivers of toy sales and toy consumption, and has been for a very long time. Kids love to show off the latest cool new stuff they are playing with and small items like collectable toys sit in their pockets, bags and pencil cases just waiting for the chance to come and play with friends at break time. Children are also (very thankfully) seemingly less likely to suffer from serious health issues related to COVID-19, so hopefully can go back to school sooner rather than later both for their sakes and for their parents!

Movies will return – lockdown has lead to a massive acceleration of growth trends for video on demand consumption from adults and kids as they seek to utilise the most accessible home entertainment in the current situation. But the typical movie release model will return for a number of reasons. Bigger companies in good financial shape have financial resources and balance sheets to call upon in times of crisis, of course they will seek all outside help they can from governments, employees and customers, but in the end they can usually access the necessary funds to get through even a long crisis. Therefore those mighty movie making behemoths will come through this less profitable in the short term but largely ready to go when things pick up again. Which means the entire model including big budget production with A list stars and the resulting marketing onslaught will return. The only thing is we may get a bit of a lag as nothing much is getting produced right now in most locations, but after the lag, the classic movie model will return. Some cinema chains may change hands, the physical cinemas might end up being operated by a different entity, but they haven’t disappeared, cinemas are great for one thing alone – showing movies, so someone will operate them somehow. Movies are a perennial driver of toy sales and this pivotal part of the toy business will return, while in the meantime on demand viewing will have broadened and deepened brand and character affinity.

Retail will evolve – retail is always a tough business to be in, but now things are worse than ever. Some retail businesses will not make it through this time, but many others will and they will be stronger due to having to work hard at diversifying their operating models. Either way though where there is consumer demand there will be retail of some sort, in some format and consumer demand will return mid term, if not before.

Global population is growing – the global population is growing fairly rapidly, which means there are more people to buy everything. In some countries the birth rate is not growing or is even diminishing slightly. Some analysis suggests that the population growth is at least partly due to people living longer, but don’t forget grandparents are a major secondary purchaser of toys after parents, so if we have more grandparents around for longer even if we don’t end up with many more kids we should still see sales increases.

Asian economies are set for major growth over the mid to long term – at the time of writing there are 2 potentially massive growth markets for toy sales. Firstly China, which is now the world’s 2nd biggest toy market after the U.S.A. is going to grow massively – because of China’s huge economic progress, people in China will be far more affluent over the next few decades than ever before in history, and as a result toy sales will soar. Secondly, India is also seeing significant economic growth which is set to continue throughout this century, and with nearly the same number of people as China, and with a culture which cherishes children we expect to see considerable growth in the Indian toy market over the mid to long term albeit from a small base.

So while we are all going through tough times, and need to fight our way through the current situation, and will then need to fight our way to recovery, as the song says ‘The sun’ll come out tomorrow’!

PS For toy and game companies looking to grow their businesses, we offer an ‘all-in’ Consultancy package. The Toy Co Growth Booster is open to a maximum of 3 clients at any time, and offers both strategic planning and commercial insights alongside practical help to grow your business and make it more profitable, even during these tough times. For more info: http://www.kidsbrandinsight.com/blog/toy-co-growth-booster-program/

Toy Biz: Post Pandemic – Permanent Vs Temporary Changes

Many countries are now heading into extensions of lockdown right now. It’s almost beginning to feel like normality, albeit a normality we don’t want. Thoughts are again with those suffering from this horrendous virus and those directly in the front line fighting it.

We’re now starting to see a lot of speculation about what can end the current situation, and then what kind of world are we going to emerge into afterwards.

We’ll leave the first question to the medical experts, but for the second question, there have clearly been some massive changes. The question though is which changes will be permanent and which will pass leading back to how things were before in some instances. Here are our thoughts on which changes are likely to be permanent and which are likely to pass:

PERMANENT CHANGES

  1. Accelerated virtual lifestyles – we’re just over twenty years into the ‘Internet Revolution’, which in the future will be looked on as being as big a change in human society, culture, work and living as the Industrial Revolution. The lockdowns which have reached across the world have vastly accelerated what has already been happening for the last twenty years – a move towards virtual over physical living. Entertainment and social interactions have been moving online throughout the current millennium, but this trend has rapidly accelerated during the pandemic and while this may regress slightly, human beings are above all creatures of habit.
  2. Accelerated shift from physical retail to online – this shift has again been ongoing for two decades by this point. The change here though is not just about changing behaviour on the consumer side. The major issue with retail is that many retailers were struggling anyway, and a period of paying rents and costs (even if some costs are reduced) combined with diminished revenue will be more than enough to push some well known retailers into insolvency. Alas there is just no way we are emerging from this crisis with all existing retailers in tact and profitably trading. Some non-food retailers are going to go out of business. Just was we lost a raft of retail customers for toys through the global financial crisis of the late noughties, now the current hard times will also take their toll. Food retailers who sell non-food items i.e. Grocery/hypermarché will come through this stronger and with increased market share which is a relief in some ways but a challenge in others as they aren’t always the easiest or most profitable accounts to trade with. Overall then, when physical retailers disappear, online appears to take up more of the slack than surviving physical retailers, and so the trend to online shopping will irreversibly accelerate coming through this pandemic crisis.
  3. Growth in board game playing – some categories of the toy market are really struggling right now, and others are flying. We’re seeing creative play, arts and crafts and science kits selling extremely well for this time of year in some markets. This though is more driven by everyone being stuck at home and parents wanting to gainfully occupy their kids. The big impact longer term is likely to be in board game playing, as hordes of dormant game players rediscover how much fun board games are and how socially connecting they are versus screen time. Research studies we have conducted across our 20+ years in the business have always highlighted the importance of word of mouth or played at a friends house for driving board games sales, but the bottom line is actually one step back from this – board game playing begets more board game playing. We predict that the board games category will reap the rewards of the current pandemic lockdown for a long time to come.

TEMPORARY CHANGES

The global toy market may be down in 2020 or at least not grow as much as was expected, although this is hard to call because through tough times normally parents will go out of their way to treat and gift children to make up for the difficult times. It certainly won’t be plain sailing to meet demand however the final numbers come in. There are a number of issues caused by the pandemic though that will inevitably fade away once this pandemic clears either via fading away as happens with so many viruses or because a vaccine is developed.

  1. International travel – we foresee a return to near normality within 6 months of the end of the pandemic because business is so global in this age, and there isn’t any way to move back from that as the world is so easily accessible online today. Even if any struggling airlines don’t make it through this tough time, the planes will still belong to someone and the airports will still be there so someone somehow will meet the upsurge in travel demand that is likely to come.
  2. Disrupted supply chain – clearly China is now manufacturing again after being locked down, but at the time of writing some other countries with significant and ever growing toy manufacturing hubs are locked down including India. The long term shift away from China for a proportion of toy manufacturing is going to carry on regardles of the pandemic due to systemic and economic factors.
  3. Movies and toys – the toy business has historically been up or down for a particular year based on the movie slate and success of otherwise of the latest big movie releases. While media and content consumption is ever more fragmented, movies will come back in the way they always have with big global cinematic releases driving $billions of toy sales.

Aside from these predictions, we would also like to take this opportunity say thanks to all those on the frontline fighting this virus and to wish you all the best getting through this challenging period of time.

Our Consulting company – Kids Brand Insight works with toy companies of all sizes on a Consultancy basis. We recently launched a new ‘packaged’ up Consultancy service to help toy and game companies grow. While we appreciate some companies are just trying to get through this time, we have found increased demand as those companies who are still enjoying success through the pandemic have still been seeking our help. Our Toy Co Growth Booster program is open to all sizes of companies. For more information: http://www.kidsbrandinsight.com/blog/toy-co-growth-booster-program/