GROWING YOUR TOY BUSINESS ON AMAZON WITH ASHA BHALSOD PLAYING AT BUSINESS PODCAST – EPISODE 17 The following a transcript of our interview with Asha Bhalsod of Etopia Consultancy, in which we discuss all things Amazon & Toys. If you prefer to listen to the podcast episode, you can do so here: https://playingatbusiness.libsyn.com/growing-your-toy-business-on-amazon-with-asha-bhalsod Steve Reece: Hello and welcome to Episode 17 Playing at Business Podcast, I’m your host, Steve Reece, and today we’re talking to Asha Bhalsod of the Etopia Consultancy. Now Asha is an expert in managing toy sales on Amazon and in this episode, she shares some great insights into how Amazon works how you can better manage it, and suggest several opportunities to enhance your Amazon game. Before we speak to Asha though, a couple of things which might be interesting for you to take a look at, so we’re you can get news analysis and insights by our twins game trade block sites, www.toyindustryjournal.com, which is all about the toy business and www.boardgamebiz.com, which is all about the ball game business. So please do go ahead, visit those sites and also sign up for our free email newsletter on there, which is sent out most Fridays with links to all our latest published content across various platforms including notification of new podcast episodes. If you find any of our content, interesting, please do share it with your friends and colleagues in the industry because the larger our audience is, the more content we can produce, the more resources we can put into it. And if you need to help to grow your target in business, you can check out our consultancy services. We’ve worked with more than a hundred companies to date delivering tens of millions of dollars in revenue growth and making more than $10 million in manufacturing cost savings for our customers. So to find out more about that and how we work, please check out www.kidsbrandinsight.com/services and that’s the upfront bit out of the way and now we’re going to move on to our interview with Asha Bhalsod of Etopia Consultancy. Hey Asha, how’s it going? Asha Bhalsod: Good, thanks Steve, how are you? Steve Reece: Very good, thank you. So, thanks for doing this, I guess I’ll start with something fairly straightforward, so we’re recording this in late December 2020. So a few things have happened this year, how’s it all been for you? Asha Bhalsod: It’s been quite a crazy year, to say the least; it’s been crazy but a very good year. Who knew that launching a business ahead of a pandemic in e-commerce was going to be the best thing I could have done. Steve Reece: That’s one of the weird things about this whole time is it has affected some people in our industry but quite a lot of our industry has done well out there and I guess you’re probably in that position yourself, hopefully. Asha Bhalsod: And the best way to describe this is I’ve always said there are three very distinct types of profiles when it comes to an e-commerce customer; one is you’re very mature that has been trading with Amazon and when we talk about e-commerce, we know that Amazon is the biggest retailer of them. So I talk about Amazon more here but we say that you’ve got a very mature type of customer, which is been trading with Amazon for many years may have pan-European agreements and/or global agreements. And then you have an existing type of business that may be only in one or two markets that are doing well and then the third type of client or the business I like to say is your newcomer brand which is very much still deciding whether they want to launch through vendor central or seller central deciding whether they want to go down to the different marketplace options. How do they launch a new brand in e-commerce and these three clients as I call them have got a wealth of opportunity ahead of them in this new retail landscape, which is driven predominantly by e-commerce at the moment? Steve Reece: It’s interesting isn’t it? So personally speaking I used to work directly with Amazon, but probably must be10 years since I’ve done it, so an awful lot has changed in that time. So just let me ask you some random questions that are on my mind, so for instance, as an average selling item in an average toy category nowadays with Amazon in the UK, what would be a normal selling volume for an item today? Asha Bhalsod: I think I could have answered that question about five years ago, I would say that the pandemic outset has changed. I don’t like items less than sub 99 item price points simply because of the cost of shipping and it makes it a little bit unprofitable for them. Having said that, I have worked with clients that do have items that are around 7.99, 8.99 and are doing fantastically well, and there are methods in the way you can still sell those items through the e-commerce channel as well. Steve Reece: Interesting, so and then from your perspective, let’s take a step back, let me act like a real interviewer for once. So can you tell us more about your story? How did you get into doing what you do now? And why toys? I always like to ask people. Asha Bhalsod: Well I used to work for Amazon many years ago back in the saloon days in those Patriot Court offices. Well, I worked with Amazon for over four years and I had a little girl and decided that I couldn’t continue my journey with Amazon they were relocating to London at that time. So I then went to work for Tony UK, which was the real start of my love relationship with the toy industry; four fantastic years at Tony UK and I used to work in the sales team looking after Amazon for them. Steve Reece: Fantastic. Asha Bhalsod: And then I had the fortunate opportunity to go and work for Melissa & Doug, which is a brand very close to my heart because of its principles and what it stands for. And as a mother of two, it did educate me about the impact of screen time on children and the power of play as I like to say a role play. And I had two and half fantastic years of working with them and built e-commerce for them in Europe, then I saw the need that there were many brands out there, many businesses out there in those three types of clients that I specifically spoke about a little while ago that need support with Amazon. But my piece on building my consultancy business stems from strategy and that’s the underlying trait I’d call for Etopia. There are a lot of Amazon agencies out there, I wanted to distinguish myself from what I offer and Etopia is about helping businesses build their strategy in e-commerce and then showing them how to execute it. And more recently, what we’ve established is because of the pandemic, it’s very hard for businesses to navigate around Amazon which I believe also requires several different skillsets internally. And therefore I have also started offering Amazon account management in-house, so Etopia can not only just build your strategy, help you execute that strategy, train you and upskill staff, we can also bring Amazon account management in-house if that’s the preferred option Steve Reece: Fantastic. So let me ask you, this is going to sound like an ignorant question and I may be a link out how little I know her by asking this. But what would be strategic choices you could make with regards to Amazon? Why is strategy something you need to think about? Asha Bhalsod: Well, let’s start with the biggest question in this which is; what is the size of the price? And that’s a question that I get asked so many times. I’m doing X on Amazon, is that correct? A lot of toy brands will have Amazon as their number one customer but they look at that and they sometimes get a little bit scared saying, should Amazon be this much, so that starts with strategy. So what is your company strategy? Where is your brand going? What is the correct channel? Now we know that the independent channel is declining, so therefore we know then the e-commerce channel is growing. And if we look at the state of retail with bricks and mortar at the moment, it’s very difficult to find good bricks and mortar stores to have good retail relationships with. So we have a growing channel and we talk about Amazon predominantly this growing channel. So the first question starts with what should this channel be worth for me? And so that to me starts with strategy, and then it’s about products, what are the right products for that channel, what’s the right pricing strategy, what is the correct marketing? Now, Amazon is a huge marketing platform, as well as a sales account and I like to educate my clients about this which is; Amazon should also be part of your marketing strategy and although it has its separate P&L, there are huge benefits with putting in budgets for driving brand awareness through Amazon as well. There are a couple of ideas about where I go with the strategy of it. Steve Reece: Interesting, like many things related to technology I guess the DP goes, the more you find. I think one of my experiences is I spend quite a lot of time helping people find distribution across different markets and one of the biggest things that happen nowadays is at least half the conversation is about Amazon, especially in Europe, the treaty of Rome, and everything else has free movement of goods. So I’m interested to get a European perspective from you on Amazon and let’s say for instance, normally if I try and sell something to a distributor in Italy, he wants to know who’s the distributor in Germany because then he’ll know just by reputation, how they manage Amazon to make sure all the products don’t end up in his market cheaper. Asha Bhalsod: See, it’s a real tough question about how do businesses manage their Amazon channel when they’ve got distributors and this is a question that is posed to me quite a lot. The truth is Amazon is moving to handle European agreements and as Amazon moves into a pan-European agreement, they will ask the market that has the strongest sales to manage that. And if you have several distributors across Europe, that’s very hard to manage which is probably why an agency model or somebody managing Amazon and is the expert in, I would offer as the white advice. So what you then have is you would get an Amazon distributor coming in looking after Amazon, the good thing about this is having an expert in this field that is managing the Amazon channel for you. I would also say that adds value to your distributors because they will be doing it correctly and effectively trying to grow brand awareness through Amazon’s marketing platform too, which ultimately leads to failure and awareness in the market as well. Steve Reece: Interesting, so I guess another question I have is like if you go back in time to get a product up to a good volume per market, you needed to structure several retailers, maybe you could do the number one, number two in the market, you could do an exclusive, but nowadays to what degree do you think it’s possible to have a viable toy company or games company if you were to only sell on Amazon, is that possible? Can people do that? Asha Bhalsod: Absolutely, and I’ve got several clients that do that; so viable, you’ve got to look at just the shared traffic that Amazon generates. Now, arguably you could say and I was having this conversation with a former client of mine yesterday that what’s happened through the pandemic is with bricks and mortars closing. They haven’t seen the strong correlation of sales replicated in Amazon and my answer to that is twofold. One is there is that experiential piece when you do go to, I don’t know, somewhere like TESCO as an example in the UK and you have your children with you and you’re browsing through the aisle and they say mommy/daddy this is what we want. You have that experiential piece there where the child is choosing, or you’ve seen what you want. And nine out of 10 times people will probably open Amazon, check the price even if it’s the same price, buy it from TESCO or add to the basket from TESCO, from Amazon I’m sorry. Now that piece has been completely removed with the pandemic and what we’re going through at the moment. So arguably it’s very hard for brands that are only on Amazon to grow, I would say but the flip side of it is looking at the shared traffic, look at the performance, marketing opportunity that you have got ahead of you in performance, in search, in the display, in the video, in brand stores, to drive and capture some of that traffic that is on Amazon. Steve Reece: Interesting, it’s such a fascinating topic. So I guess another area that’s a little bit of a mystery to me is the data and the metrics. So is it true to say that you would not necessarily be wrong to look at Amazon and to think about it in the same way you might do SEO on a search engine? Like if you take any product category, I don’t know how many, let’s say ball games, there might be what 20,000, 30,000 ball games on there, so then to have probably more here, I am just booking numbers so I’d like to have a chance of anyone finding you, I guess, is its entire world of magic and mystery in itself. Asha Bhalsod: Data analytics is another topic very close to my heart and I think this is the biggest opportunity for any business, which is to tap into that Amazon’s analytics. There was so much information there, there’s so much that you can learn about people’s browsing histories and how they engage with your brand and your products. So yes, an answer to your question; Amazon should be treated like an SEO, and which is why I think Amazon is a whole business unit in itself because we’ve already spoken about marketing functions here, we’ve already started speaking about strategy and we are now talking about data analytics; that’s three huge roles in any organization that we’ve now said Amazon is entitled to have all three roles individually laid out for a brand. Steve Reece: I mean, I guess, and you would know better than I would, but like, medium to large to companies nowadays, like how many of them will have all those people that you might recommend and how many of them are still catching up. Asha Bhalsod: A lot, I would say are catching up. This is why I guess it was very attractive for me to launch Etopia, which is the strategy and the opportunities that I see in the market. I think people are playing catch up, but they might find it hard to navigate around those challenges. So skill sets are another topic that is very close to my heart because with the pandemic everybody wants Amazon skills in their business. There’s also that e-commerce might have accelerated by 10 years, but the skills in the market have not accelerated by 10 years. There are still many traditional national account manager skills in the market and it’s very hard for them to transfer over to managing Amazon because Amazon is not like managing Car four or Smiths or HESCO, it is not the same account. It does require different skill sets in marketing, analytics, in strategy and so it’s tough to find that those skills out there to be very honest and which is why Etopia does also offer upskilling in those areas. Steve Reece: Fascinating, isn’t it? I guess when the world changes one thing I’ve often found is that the world will change, but people’s minds don’t move as quickly. So their behavior may, but their minds sometimes don’t so, another thing my observation would be about what you’ve done is like, I’ve often seen a trend and moved far too early and therefore it’s not, nothing’s worked, but like timing machine, because aside from the fact that we’re, 20 years into, thereabouts like Amazon’s, like mass-market rise. But also just with the pandemic and everything, I guess people almost had to switch to this, and some of those people who still were not fully using this as a habitual thing, I mean, so many more of those people must have been converted it’s amazing actually. Asha Bhalsod: Yes. It’s real love, hate relationship in the market with people, and Amazon it’s the beast, that’s how people refer it to them as, my God. Amazon is taking all my sales, my God doing with pricing my God. Look at Amazon, and then you sometimes say can it just take a step, and what is the right strategy for your business? Where do you want to grow and how do you want to grow and how do we make sure that Amazon drives profitable growth. Steve Reece: Yes, interesting. So what’s going to ask you next was, yes. So, I think you mentioned some of the retailers it’s not like working with them. So I guess traditionally, a mass-market retailer in Argos, a Walmart, a Car for the bigger they are, the more it’s about helping to manage their processes, but also fundamentally it’s about relationships. So, where do relationships play in your role with Amazon, or is it more about your work with the interface? Asha Bhalsod: I’m chuckling a little bit Steve because this is another one of those questions that I get asked a lot and there’s a lot of frustrations actually in this question. So, the truth is Amazon has a phrase in the market that they throw out a lot, which is hands off the wheel and Amazon is moving towards a very much a hands-off wheel system. So, we already know the last few years Amazon’s ordering system s been completely automated. There is no human person that you can bring up and say, Hey, look, this I’m about to go on TV. Can you order some products? Does it work like that, unfortunately? Amazon is becoming very limited with human interaction and therefore you do need to know how to navigate through their systems and that also presents itself with lots of challenges, when ultimately you do want to have human contact with people to be able to say, these are the kind of strategies. This is the time I’m going on TV, here are five of my new product launches. What can you do? There is that now vendor managers do very much exist I’m not saying that they don’t, they do exist but you do have to be doing a certain level of turnover to warrant, have a vendor manager. And more recently, those vendor managers are now managing pan European agreements, so you may have a very small market and you may want to try and drive strong growth in that very small market, but the vendor manager will very much be focused on as well, the bigger markets and trying to drive growth in those markets. Sometimes the objectives are a little bit different and that can be a bit hard to manage. So, knowing how to use the systems, understanding the Amazon based and the fundamental advice I’d give to any business here. You can get frustrated and I appreciate is very frustrating for anybody. When you say I’ve got X amount of invoices that need sorting out, or I’ve got X amount of chargebacks that need resolving, and I can’t get anybody to help me do it. It’s about how do you understand the Amazon systems? And how do you change your mindset when the computer says no, every single time. Steve Reece: Interesting. One of my observations would be the more something matters, the more attention people pay to it. So like for instance, sourcing is a classic example we do loads of stuff in sourcing and factories in Vietnam and India and help people move whatever. And the thing is, generally people don’t pay as token companies don’t pay that much attention and to that whole area of their business unless there’s a problem. And the moment there’s a problem, they put some focus on energy and they find all kinds of inefficiencies and I guess here, the thing is, maybe 10, 15 years ago when Amazon would’ve been, for most businesses, barely even sort of single-digit percentage market share this would’ve been a huge frustration and they probably would not have engaged with it, but now we’re at the point whereby you can’t afford to understand how to resolve those problems because the sort of the faceless and it is just reality, isn’t it? It’s a bit like when you have a mass-market retailer normally, and their metrics are about having relatively few vendors. And therefore it’s very hard to get in as a new vendor here. You have almost the opposite problem, which is comparatively speaking, it’s relatively easy versus an Argos or a Walmart to get in, but then managing your way through that to grow and is a major challenge. Asha Bhalsod: And Steve, the way I talk about this is there are three pillars in the Amazon business. Its sales, marketing, and operations, and everyone is very heavy in that sales, which is about having the person or the people in your team, managing this, having some loose strategy about what they want to sell and how, and what’s the budget in the business. That pillar gets a lot of focus, it’s sales and that’s what everyone’s partner automatically is to do that. And then the bit that the people then switch up to, or don’t know how to navigate through is the two pillars, which are marketing, operations. If we talk about marketing, you are responsible for driving your sellout on a, you are responsible for the presentation of your brand on Amazon. We talk about in comparison to Walmart or Smyths or any of our largest toy retailers at the moment, you receive an order, you process it, you dispatch it to them, it’s then their responsibility for how it links on the shelf. Of course, you do your support with them with trade marketing, but that trade marketing now needs to be adopted to digital marketing in the Amazon world with performance search display, brand stores, content, a plus content reviews, that’s that marketing pillar, but ultimately the most important part, of these three pillars is operation. It’s making sure that Amazon is in stock a lot of the time and the money that you do spend in that marketing and driving traffic to your brand if you don’t have stock, customers will land on a page where is no stock, which is a bad customer experience. And ultimately what you’re trying to do is you’re trying to build your products up in the search algorithms. And any moment a product is been out of stock, you lose that momentum because the products then go lower down in the search algorithms. So all the money that you’ve just spent on marketing, it’s almost a bit wasted. For any business to succeed with Amazon, they need to know how to navigate around the sales, marketing, and operations three pillars with all levels of importance. Steve Reece: Interesting. So, I guess some other questions I was going to ask you, and by the way, I’m probably just going through the normal tick list of obvious questions people ask you. So, and then I’m going to ask you at the end, did I miss any. So, Amazon’s market shares the toys, I guess is what, probably something between 15 and 30% depending on the market. Asha Bhalsod: Yes, I’d go at the top end of what you’re saying right now. Steve Reece: Right now. Yes, there you go, I’m always out there catching up still. So, is there space for any more growth? Like, is it going to continue? Because I remember using Amazon back in my High School days, as the 10 of the millennium and it was so easy and I so lazy and like, just that everything about it works for me, not having to go around shops and everything. But I was probably likely to be a relatively early adopter, like 20 years on surely there’s no one left who is not already buying in so, is there still future growth, where does that come from? What do you think? Asha Bhalsod: Absolutely, it does. I’ll ask you the question you are almost back to you, which is how much have your buying habits changed through the pandemic? So, if you think about your shopping habits this year versus your shopping habits last year, how much have they changed and then your children, how much have they shopping habits, it’s then changed? So absolutely there is growth and I’ll take a personal example for me, which is I remember when I said to my husband, Amazon does this prime membership and it’s 79 pounds. And he laughed at me he said, “I’m not going to waste 79 pounds or for your next day delivery we don’t need it.” And then Amazon started introducing the wealth of services that they offer in their prime subscription, whether it’s video, whether it’s music, etcetera. And he has been paying for the prime me over the last five years and we actually couldn’t live without it. But also this year, over Christmas, when my children were writing their Santa letters, we typically would have a Smiths or an Argos catalog or might be another industry-related magazine, lying around mommy’s desk, but they would look through it and they’d look at the latest toys in there and they would put them on their list this year. They didn’t have anything like that to do we hadn’t been into any shopping centers, any stores for them to see. So, they went to Amazon and they created lists by looking at Amazon best sellers and then going, we’d like that and that’s how their lists have been created. So, I do think that there is huge growth still in this channel and we talk about Amazon and the majority of this conversation has been about Amazon, but we can’t ignore the fact that there are areas in commerce, other e-commerce customers that are also arguably getting stronger, we can’t ignore Ali express in Europe, which is getting strong, but also Omnichannel, I think Omnichannel being in any Smiths, as an example is an Omnichannel retailer because it has an online presence. And online in general is growing and will continue to grow and has only been accelerated because of the pandemic. Steve Reece: Actually, that was going to be one of my next obvious questions. What do you think the other retailers are likely to do? Because one of the most interesting things joined the sort of the craziness of what I refer to as, like the internet revolution, we had the industrial revolution, I think history will look back and see, this is the internet revolution, just because of how much it’s changed humanity and our lifestyle and way of everything. But like one of the most noticeable things was some retailers invested and jumped on this and some were very slow, obviously some of those that were very slow, no longer with us. How do you think those other retailers are likely to react and do they have any chance going forward to compete in their space against such a mighty beast? Asha Bhalsod: Well, even if you say in comparison to Amazon, I love the Smith’s experience online I think they do a good job and they have been very much ahead of the curve and probably the reason why they’re growing so much in the market. So do think that the retailers do have a huge opportunity, I think Amazon brand stores is huge, reviews are huge and if you can take segments out of what makes Amazon so successful, it’s that trust element, knowing that the customer service is fantastic, that you can read reviews and feel as if they’re authentic. And some of these bits, any retailer adopts would have the ability to drive their e-commerce growth as well. Steve Reece: Yes, interesting. If you were doing like a five or 10-year strategy for any of these retailers now exactly what it would look like, but I mean, you mentioned about catalogs, having a Smiths or Argos catalog, obviously the purely from a UK perspective and we have people listening from all around the world, but for anyone who doesn’t know the UK toy industry has been, I wouldn’t say dominated by it, but heavily influence by the Argos catalog. And Argos printed 20 million of these catalogs, which is roughly one for every household in the UK, my kids would go through it and kind of goes, I have that one or, I’ll have that one. It was like the tick sheet for the Christmas wish list. But yes, even when Argos moves on from such a big thing, we know that the world changed. So actually another, the question I wanted to ask you about was obviously in the USA and the UK, we are like decades into Amazon, but they’re still rolling out. This is one of the most amazing things about how the world works. I often look at the growth of companies like Hasbro and Mattel, I’ve been tracking Hasbro, for 20 plus years since I worked there and since I left, you know, but they were still opening offices, they still have places where they are opening offices, a company like spin mass who are so much newer have a long way to go in terms of all that. From Amazon’s perspective, they’ve got hugely more resources, but they’re almost entering markets where they’re maybe 20 years behind in some cases because they’re new to it. How good a job do you think they do at entering new markets? And is it likely that pretty much every market they go into they’ll win or do they ever get it wrong? What are your thoughts on that? Asha Bhalsod: The most interesting market that they’ve entered and that’s when we’ve seen such huge growth in Brazil, and that has taken me as well by surprise. I think the sheer reputation of Amazon, I think almost any market they go into they’re adopting. If we even just take another example of them entering the UAE market by buying out super.com, it’s very smart with what they do and how they’re adapting to it. But what they’re doing is also they’re the millennial population in these countries are embracing it because they can see things from the Western world. They can see things that are happening and one of my recent experiences is of Amazon in India where the family were traveling there but didn’t take nappies because Amazon is servicing in prime there and was able to get nappies delivered to cities there now, history would say that that was a bit of a wow for me, it was like, wow, look at the way India is embracing e-commerce, which is a revolution almost created by an Amazon. Steve Reece: Yes. India, in general, is an interesting country for me, I’ve spent quite a lot of time there. But like you to think about, but in the UK, it’s it tends to be relatively oddly and your dresses are quite clear, but I wouldn’t personally want to be an Amazon delivery driver in some of the areas of India I’ve delivered because the addresses sometimes are a bit fake and like the experience of driving around trying to drop them off would being interesting as well. But anyway, so are running a little bit short time, so I have a couple of final questions. So the first one’s going to be, did I miss any of the normal obvious questions? Is there anything else that people normally ask you’d like to answer? Asha Reece: No, you think we’ve done all the questions that I would’ve asked Steve as well. Steve Reece: Okay, cool. So, then the final two questions one is just from your perspective if people want to talk to you about things I guess, firstly, what type of customers do you want to talk to? And then where can people find out more information or get in touch? Asha Bhalsod: I would like to talk to any type of customer that wants to either continue to grow with Amazon, or wants to know how to trade with Amazon or, e-commerce. And any customer can have a look at our website, which is www.etopiaconsultancy.co at UK or you could find me through LinkedIn and me and my team would very much welcome talking to anybody just to explore the services that we offer, and how we could help. Steve Reece: Fantastic. So, I would hardly recommend anyone have a look and find out more so the final question is if we were to do this again in five years, what do you think would’ve changed? Asha Bhalsod: That’s a tough question, I would’ve got an older Steve, let’s say that I would a lot more gray hairs as well. I would say that. Where we’ll be, I think we’ll be talking about Ali express in the same way we’re talking about Amazon. And actually, we didn’t touch on the fact that e-commerce penetration in the rest of the world is quite low. So actually I do see that e-commerce penetration is going to get a lot higher in the countries credit card payments are going to become more accessible and regular. And therefore I do see Amazon entering more markets there will be another level of prime that will be looking about, and they’ll be maybe more tiered memberships who know. But Amazon has ultimately created this internet revolution for us and I think there’s going to be another one of those in, the next coming few months with the pandemic as well. Steve Reece: Well. Yes, it’s interesting times. Isn’t it? Fantastic. Well Asha, thank you so much for your time that’s been fantastic. Thanks again for doing this and yes, hopefully, we can do this again in five years and find out what’s happened. Asha Bhalsod: Thank you very much, Steve. Steve Reece: Thanks. Steve Reece: Okay. Well then hope you enjoyed our podcast episode interview with Asha Bhalsod Etopia Consultancy discussing Amazon and everything about Amazon. If you did, please give us a good reviewer rating, and please do feel free to share the podcast with your friends, whether it’s this episode or another one. If you’d like to find out more about our consultancy services, which have helped more hundred-time game companies around the world to date and please visit www.kidsbrandinsight.com/services . Yes, and that’s all for now so I’ve been your host, Steve Reece. This has been the Playing at Business Podcast, and we’ll see you next time. We run a Consultancy business helping toy & games companies get ahead. For more information, check out www.KidsBrandInsight.com/services We also run a Strategic Sourcing Consultancy advising toy & game companies around the world on their Sourcing strategies, reviewing their vendor base & suggesting improvements. To date our Sourcing services have saved our clients $tens of millions. For more information on how we can help, just go to: www.ToyTeamAsia.com
HOW TO FIND INTERNATIONAL TOY DISTRIBUTORS & SECURE DISTRIBUTION DEALS – 5 TIPS
The question we get asked the most often in our Consultancy business is how to find distributors internationally and how to secure distribution deals with them. At this stage, we have been working with distributors for more than 20 years, with a fair degree of both success and failure! In the process of working with toy & game distributors across the world there are some recurring realisations we want to share:
You need to understand the distributor’s business model.
Let’s start with this – being a distributor is a really tough business. The distributor buys products, warehouses them and ships them to the customer on typically thin margins. Cashflow is a constant strain, and you can’t afford to go big on stock on anything that doesn’t sell. You also don’t have a lot of margin to play with if your retailer needs help to mark products down to clear. In addition, to balance out the risks, prudent distributors will run a fairly broad portfolio of products. Those distributors who are over reliant on one brand or partner tend to be at greatest risk of going bust if those products are taken away from them as quite often happens in this business. As a result, distributors tend to be perhaps surprisingly cautious about taking on new product lines. They also have a massive choice – there are literally hundreds of thousands, if not millions of toy & game products out there for them to choose from. This is one reason why you might find it hard to get them on board to distribute your products.
The product is everything!
If you are good buddies with a distributor they will no doubt take a meeting with you at every trade show and be happy to take a look at new product lines you are pushing. However, in the end their business success depends on selecting the right products. A good distributor will not take a commercially unviable product from a friend, as that is just bad business. Whether they like you or not, if it won’t sell it is of no use. We have helped secure distribution across Europe, the USA, Asia & beyond for thousands of products. For some products it was quite easy – either because it was the right type/category of product at the right time or because the product featured a hot license. Occasionally we have secured major distribution deals from the first company we approached – this though had absolutely nothing to do with our selling skill – the product in those instances was so hot it effectively sold itself. On the flip side we have worked on products which are a really, really hard sell. One project we worked on involved us talking to more than 80 distributors before we secured distribution, and again this also wasn’t due to our selling skills, it was just a hard sell!
So above all, develop good products with clear and compelling selling points/benefits which fit commercially viable price points. Instead of falling in love with your product due to your high level of emotional investment, start with making sure you have a commercially viable product and you will be far more likely to succeed!
It takes time to build a distributor network around the world
It is usual to take years to build up a global distributor network. Each selling cycle you might bring on a few more partners, but the selling cycle is yearly, so it takes multiple selling cycles and therefore years to get things set up. Sometimes you can be having the same conversation with a distributor in trying to persuade them to take your products over several years. One product we worked on was finally adopted for distribution by the distributor ten years after we first pitched it to them. They were interested from year one but kept having other bigger more attractive products come along just as we were going to nail the deal!
Trade shows can be a rapid accelerant for setting up toy & game distributor networks
The toy trade show circuit is long established. (Pre & hopefully post covid) the toy trade circles the world with trade show after trade show getting products in front of retailers and distributors, securing distribution and taking orders. Which shows to attend depends quite a lot on your business and location, but there are often national toy trade shows e.g. the UK or Australia, alongside 3 major global shows – Hong Kong in early January, Spielwarenmesse-Nuremberg in late Jan/early Feb and New York in mid to late Feb. In addition, for toy distributors, Distoy in the UK is growing in importance. Attending these shows costs money, exhibiting costs even more, but there is no surer way of accelerating growth.
There are typically 2 types of distributors – those who distribute products with TV advertising, and those that don’t. For TV advertising distributors it should hopefully go without saying that you need a really compelling TVC to provide them, they would normally add their own local language voiceovers. Needless to say, it can cost quote a lot of money to TV advertise, so these distributors need to have enough margin and potential profit to merit the investment. Therefore, these TV advertising distributors tend to focus on product lines from major toy companies or hot (easy to sell) licenses. For non-TV advertising distributors, the lack of TV doesn’t mean no marketing…in fact, typically the successful distributors have effective (albeit lower budget) marketing executions. Offering distributors more marketing support in terms of managing pay per click advertising, content and supplying in store merchandising solutions again makes your success more likely.
To wrap up, here’s the bottom line: setting up distributor networks takes time, and above all the more commercially compelling your product is the quicker you will find distribution.
We run a Consultancy business helping toy & games companies get ahead. For more information, check out www.KidsBrandInsight.com/services
Our Managing Director, Steve Reece, works with a limited number of companies as a non-executive director, independent board director and as a board advised. If you are interested in finding out more about this, check out the link to our service above.