Toy Industry Value Chain

Toy Industry Value Chain

When I first entered this industry, my focus was on the fun elements of it, the lack of stiff formality, the amazing product and the glamour & gleam of big entertainment driven launches. The longer I remain part of the toy industry (sure someone will kick me out one day, but until then…!) the more success seems a matter of formula, risk management and process.

Process management. Not a very exciting topic really when there’s so much whizzy stuff to look at in our industry. However, despite the lack of glamour and shiny-ness process management is probably the most neglected business discipline in our industry, and has the potential to make the most quantifiable £ difference to so many toy companies.

Far be it from to suggest that many toy companies develop products on a whim, chuck them at the wall and see what sticks…but it’s surprising how many companies do that! It’s even more surprising how often companies roll into very expensive marketing collateral creation, or manufacturing without enough structured process. And even more importantly, it’s often shocking to see how ad-hoc management sign off processes are.

Within our industry there are some easily compartmentalised parts of our process with only so many categories of variables. For instance we would normally split by function i.e. R&D, Marketing, Sales, Sourcing, QA, Finance etc., in smaller companies some people have responsibility for several of these functions, in larger companies there are normally separate departments for each.

In scintillatingly exciting project management terms, if you look at the value chain involved with all these departments in conceiving of a toy product or range and getting finished product on and off retail shelves there are literally hundreds if not thousands of moving parts. Taking an ad hoc approach to managing this morass is not a formula for success.

You may not have ever written down all the parts of your moving jigsaw. If you haven’t you should do it now, and consider how in control you are of the overall process and the many micro parts of it.

Effective project management should include a senior management risk review & signoff process, a pitching process for potential & existing suppliers, clear process milestones i.e. concept sign offs, sales forecasting, manufacturing sign offs and more. For each area there should be a clear understanding of who is responsible for what, and what needs to be more clearly thought out/signed off further up the chain of command.

For sure you still need brilliantly persuasive sales teams and amazingly talented creatives, but above all to succeed you need to deliver via following successful formulas & managing efficiently & effectively. In the end this approach will likely be less entertaining, but significantly more lucrative.

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: https://www.kidsbrandinsight.com/blog/toy-co-growth-booster-program/

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How To Validate The Appeal Of New Toys Before Launch

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

How To Find & Secure Effective Distributors For Toys & Games

How To Find & Secure Effective Distributors For Toys & Games

The area where we are asked for help most often from toy & game companies is to help them speak to & close distribution deals with toy & game distributors in more markets outside their home markets. Over time we have developed several ways of increasing the chances of success for our clients in finding productive and mutually beneficial relationships with distributors:

1. Trade Show attendance is the best & biggest way to meet new distributors

Virtual connections can lead to good results, but you can never meet face to face meeting. For this trade shows are a critical part of the process of finding and building relationships with toy distributors or board game distributors. Clearly this approach is not as viable during the Covid pandemic, but nevertheless the moment it is viable again it will come back to the fore as a primary method of meeting and recruiting new distributors.

2. Understand the business model of the distributor

Being a distributor is a tough business. Distributors take significant inventory risk to run their business, and a few bad product line selections can seriously constrain cashflow, therefore distributors are equally if not more risk averse than the retailers they sell to. In order to reduce the risk of anyone product line failing, they tend to have a broad and diversified product line, and that brings in the biggest challenges with using distributors to get your product to market – FOCUS, if they put little focus into selling and pushing your product line your sales will disappoint. It is really important to understand this, because having a distributor and having a focused and effective distributor for your product line can be different things.

3. Understand the marketplace

There are two elements of this: firstly, there is the local market situation in terms of retail structure, product culture, consumer preferences and other localised operating parameters. For instance, Germany has a very decentralised retail market, whereas France has a comparatively centralised retail buying structure. Therefore, you need to understand the differences to appreciate which distributor is going to have the best chance of being successful in the market.

Secondly, it is important to be aware of the general situation in the marketplace. In particular, product proliferation is a considerable challenge in trying to secure distribution for toys and board games. There are literally millions of products out there for distributors to chose from, and because they only have so much capacity, so much cashflow to fund stock purchases and so much time in front of each buyer, they will typically turn away many more product lines than they chose to distribute. This changes the balance of power somewhat in terms of negotiating and finalising a deal. In effect, it is a buyers’ market for distributors, they have considerable choice, and therefore the sales process and relationships should not be taken lightly.

4. Build relationships with people

Building relationships with all your contacts at every distributor you want to work with can only assist your efforts. Aside from it being a source of great pleasure and warmth to build friendships around the world over time (and often over a beer or two!), in work terms it helps if you have god relationships with people you are working with. Sometimes difficult situations arise, and it is usually easier to work through challenges with people you already know and like.

But also, the better your relationship with your distributors the more they will share the details and challenges of selling your product in your market, which should lead to both of you having a better chance of success in each market.

5. Distribute your distributors product into your home country

One really effective way to bind yourself closer to your distributors is to help them to sell their products into your own market. Most distributors will have at least a few product lines that they themselves have developed or have exclusive distribution for. By helping them to sell more of their products, you quite often build a stronger relationship and then their focus on your products tends to become stronger because they will feel a reciprocal obligation.

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: https://www.kidsbrandinsight.com/blog/toy-co-growth-booster-program/

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