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Happy New Year, and welcome to the first of these newsletters in 2024. Wishing you health, happiness and prosperity this year. This instalment takes a look at the outlook for the worldwide Toy & Game business as we head into 2024:


Setting the scene – the Pandemic Years and the counter reaction aka 2020 and 2021 were unexpectedly good, and 2022 and 2023 were particularly bad!

One of the biggest business learnings you can have is that successfully managing expectations can make a drop in sales look like a success, and a sales increase can become a failure if you don’t manage expectations of people and organisations effectively.

I first learned this around a quarter of a century ago. I was managing a portfolio of well-known classic Toy brands. One of the 2nd tier brands was particularly challenging to manage. The brand owners were hard to handle, with ludicrously unrealistic expectations, a toxic political situation at the top of their company and a direct line into the very top people in the company where I was working as a comparatively junior manager. Due to the effectiveness of the approach of this company, we massively (over) invested in a full brand refresh, new advertising and a heavy marketing push. The initial forecasts were stellar, due to the high expectations our new investment set. I made the very amateur mistake of communicating the massively uplifted forecast to the brand owners, who no doubt went out and bought new Lamborghini’s and other such fripperies on the back of the expected bonanza. Then as reality set in later in the year, it became apparent that despite the massive push and investment, the brand itself was just not going to make the required jumps in consumer demand which our investment should have delivered. We lost money, and more importantly, we lost the chance to invest that money in brands which deserved that scale of investment more. The brand owner went crazy when presented with a much-reduced sales update, and I was in a lot of hot water as angry Faxes started to fly back and forth (Faxes, remember them, lol!). In the end there was a moderate sales increase, but my stunning failure to manage expectations made a sales increase and a massive investment in the future of this brand a colossal failure in the eyes of this particular brand owner.


All of which is a great opportunity for me to go down memory lane, but what’s the relevance? Well, the Toy market growth we saw in 2020 and 2021 was such a bonus because it was not expected. And the failure of the consumer to show up in 2022 vs an expectation that sales would continue climbing left the entire Toy business struggling with an inventory problem and a resultant self-fulfilling lower sales potential heading into 2023.

 

2024: Resetting Expectations

So for 2024, the question is where should we be setting expectations? If they are set too low, then we could lose sales and leave our customers with empty shelves too early in the season, but if we set them too high, we risk over shipping and creating another inventory hangover at the end of the year. So what should we do?


 

2024 Toyetic Movie Slate

As the COVID-19 pandemic lead to the closure of movie theatres around the world, some movies went out via streaming platforms, but others were either held back or left unfinished ahead of the return of bums on seats in cinemas around the world.


What we then got for 2022 and 2023 was a large raft of movie releases which should have provided a boost to the Toy market in those years to counter the drop off after the lockdown inspired boom. Unfortunately some weak creative executions left a lot of question marks about key movie franchises going forward.


The Hollywood strike of 2023 saw movie writers and actors withdrawing their labour in protest at the threat they foresaw from artificial intelligence and at their share of streaming revenues.  These strikes are now reportedly resolved, but they disrupted movie production for a significant chunk of 2023, which combined with what appears to be a reset year for some franchises leads us to a movie slate in 2024 which as weak as we have seen for some time (not including the Covid years).


Mattel hit a massive home run in 2023 with the Barbie movie. It greatly exceeded expectations at the box office, becoming the highest grossing movie of 2023 worldwide(!) but also in terms of cultural resonance and mass media exposure. In short, the movie went as good as it could from Mattel’s perspective. The challenge after any success like that though is how do you anniversary that – heading into 2024, the Barbie brand is undeniably stronger in terms of brand recognition, awareness and cultural relevance…but in revenue terms Mattel won’t find it easy to anniversary the sales levels boosted by the movie in 2023.

Another movie which was a monstrous hit driving Toy sales in 2024 was The Super Mario Bros movie which grossed a massive $1.3billion and was the second biggest movie of 2023. This now perennial brand doesn’t get its fair share of credit and profile, but I suspect it will going forward after a stellar box office return in 2023.


In summary, 2024 looks like the weakest movie year in some time after two years with a strong release schedule. Historically speaking, a weak movie slate or more flops than usual can have a downward effect on global Toy market value of c. 5-7%. Conversely a strong slate can offer a similar upweighting effect.


So, if the 2024 movie slate is weak what will drive the Toy market in 2024?


 

Trends, Innovations & Perennial Brands

Typically when the movie slate is weak, then Toy companies fall back on new innovations, new Toy I.P. launches, their existing brands and some support from evergreen licenses. To look at each of these areas in turn:


NEW INNOVATIONS – last year I heard some commentary which put the poor sales performance of the Toy category down to ‘a lack of innovation’ in the market failing to create products kids wanted enough. We’ll all have some opinions on the veracity of that, but to me that is total baloney! I have never been through Toy Fairs and come away thinking that there was a lack of product development, if anything the cycle of constant product churn on a gigantic scale which we take as normal in the Toy business is a problem, not a lack of innovation.


Also, what do these people mean by innovation, because as a cynical ‘veteran’ of this business I haven’t seen many new Toy concepts in the last decade that were totally unlike anything I had seen before. Our industry is actually quite formulaic, and the reason for that is due to consumer churn – in effect we get around one third to one quarter of our consumers in each category for new every year, so what was old hat 3 years ago can be new again to kids who have just moved into our target age groups. That is not to criticise the talented creatives we have working in our industry, but normally the creativity which leads to commercial success is a reinvention, a mash-up, or taking an idea which worked in one space and adapting that to a new space.


Having said this, I would expect that in the absence of as many big movies for 2024, Toy companies will be creating more own I.P. products for 2024, and while that type of year often sees a flat or small reduction in market size it is often healthier for the Toy companies in terms of brand equity and bottom line profits.


EXISTING BRANDS

We should expect 2024 to see a doubling down on established Toy brands. With R&D resources and investment freed up from developing highly authentic movie related products, they can instead be used by those companies who have their own IP portfolios to raise investment into their own brand portfolio. These products often require less due diligence in terms of adherence to style and character art guidelines, they don’t normally require the same level of approval processes and they aren’t subject to a 3rd party licensors pressure to increase the number of skus in each line. In short, we can logically expect major long term Toy brands to increase their market share in 2024.


EVERGREEN LICENSES

In a weak movie year we normally see ‘evergreen’ licenses take up some of the slack. Companies shift focus to classic licenses and classic licensed products. If you look at the franchises which have been top of the tree for decades, these will most likely be even stronger in 2024.


Of course we haven’t yet considered the role of streaming and content from other platforms such as YouTube. There is no doubt that streaming can itself drive successful licensed product ranges, albeit normally to a lower degree versus streaming. But the other point here is that while the Toy industry has made big strides looking at new properties from influencers and YouTube channels, we are still in the infancy of that, and as companies seek alternative drivers of sales in 2024, we could see more products originating from ‘non-traditional’ licensing sources.


 

The economic outlook: Will consumers find it easier to spend on Toys?

I wrote a lot in 2023 about the impact of inflation on consumer disposable income, so I’m not going to reiterate what happened before. But what we should do is take a look at inflation trends in major Toy markets. And what we see is that inflation rates have dropped significantly overall. The USA has seen inflation reduce from the peak of c. 9% to 3.1% in most recent financial reports. The UK has reduced from a peak of 11.1% to 3.9%. Germany has seen a drop from 10.4% to 3.2%. And perhaps just as importantly we have seen worker pay increasing to start to cover the gap created by inflation. So purely based on inflation eroding consumer spending potential, we should see the impact of inflation reduce heading into 2024 versus 2022 and 2023.


The other point we should consider though is that interest rates rose in order to reduce inflation, and this affects consumer spending too. Mortgages rise, loans and credit card borrowing rates increase and also from a macro-economic perspective increased interest rates can start to reduce demand, which often leads to job losses which in itself can hamper consumer spending.


The economic conclusion then should be that we are not out of the woods, significant pressures remain, but while demand reduced year on year for 2022 and 2023 in many markets, the reality is that the perpetual drivers of the Toy market are still strong – that being parents investing in and rewarding their children with gifts, and I don’t see that changing.


It seems unlikely that consumers have just simply moved on from the mass orgy of consumption we tend to have in the festive season. Just this morning (on the day of writing) UK grocery retailers reported their highest ever spend overall for the Christmas period.

If we take a medium-term view of the Toy market from say 2018 through to 2024, we’re going to see a market which was on a long-term slow growth curve, which then spiked dramatically upwards during the Covid years, which then corrected heading out of Covid.



Not another shipping crisis? Houthi attacks on shipping and rerouting – how big a deal is this for the Toy business?

As has been widely reported, many shipping companies have decided to go the long way around the bottom of South Africa to avoid attacks on shipping through the Red Sea heading to the Suez Canal. I’m only an amateur follower of Geopolitics, but from what I have read, both in the news and opinions and analysis published by academic experts in Geopolitics and the like, I don’t see this issue being the scale of challenge which we saw during the pandemic when container shipping costs increased by as much as 1000% . Here’s a brief explanation of why:


Firstly, this is a current issue, the shipping companies could change their minds and direct ships through the Red Sea again as soon as they think it’s safe to do so. Secondly, the USA and allies will not be able to avoid direct military strikes against the Houthi in Yemen unless they stop attacking shipping. Having made their point, I expect the Houthis to either stop firing on shipping of their own accord, or to do so after the U.S. and allies unleashes some air strikes. Either way, this could blow over very quickly. Thirdly, if you are in the business of Outdoor and other counter-seasonal Toy categories this may affect a big chunk of your business as you are shipping a greater proportion of your annual volume across the next few months, but for most Toy companies an issue with shipping in January and February would have at most a marginal impact on overall performance in 2024.


Needless to say the world is ever more unpredictable geopolitically these days, so anything is possible and a broader conflict in the middle east could have a bigger effect on driving container ships the long way round away from the middle east. This is after all an opinion piece, and I am just as likely to be wrong as anyone else. However at this stage, the Houthis are unlikely to want to sustain their anti-shipping campaign once the U.S. and allies see the risk for inflationary shipping increases and shake the shackles of restraint they have shown so far and start to deliver damage to the Houthi’s bases, infrastructure and leadership.

 


Ongoing reduction in birth rate

Returning to more long-term cyclical factors, most mature developed economies have a reducing birth rate, and there does not seem to be any likelihood of a sustained upturn in births looking ahead. And so for 2024 as with previous years, we are going to see that the number of potential consumers for children’s Toys is not growing, in fact it is slowly eroding. As such, we either need to sell more to the remaining families, increase our export sales to tap into kids in other countries more than we have in the past, or we will see our sales reduce.

 

Kidults market driven by content, especially movies

On the flipside of the reducing number of children, the number of adults who could but don’t currently buy or gift Toys offers more than enough opportunity to bridge the gap left by decreasing birth rates. The challenge for this sector for 2024 though will be that movie merchandise, is likely to be a smaller driver in a weak movie year.


We can though expect Kidults to tap into evergreen licenses. And of course Kidult products are not restricted to hipster merchandise collectors, model makers, railway enthusiasts and more segments are still out there!


If you want to read more about the segmentation of the Kidult Toy space, I wrote extensively on that in a previous newsletter here: https://www.linkedin.com/pulse/17-deeper-example-kidult-toy-space-consumer-steve-reece/

 

In Conclusion

2024 then should be a reset year when expectations are realistic and prudent, when the kitchen sink was largely thrown at 2023 in terms of dealing with negative baggage, inventory hangover and sadly headcount reductions. With 2024 being a fairly fallow movie year, the opportunity is to focus our energies and resources on pushing all our own brands and own innovations harder than we may have for a while. In short, expect 2024 to be tough trading, but closer to pre-Covid norms than 2022 or 2023, and critically with more grounded commercial expectations all around. Economic pressures have not gone away but have softened. We’ll see how 2024 plays out, but as usual it looks like being an interesting year.

 

N.B. All trademarks and other intellectual property featured herein are the property of their respective owners.

 

Can we help your business? Do you want to grow your export sales, prep to offer your business for acquisition, find senior staff or maximise your sourcing efficiencies? If you want to find out more about our Toy & Game business consultancy services, please just click the link below. Our company has helped hundreds of Toy & Game companies to get ahead and grow sales/make more profit. I have worked on all product categories across a 25-year career in Toys & Games, and genuinely love sharing knowledge, contacts and facilitating greater success for our clients.

Here’s a profile of some recent projects:

·       Helped several Asian Toy companies to grow distribution in ‘Western’ markets & to recruit key staff to build distribution with new retail accounts opened up.

·       Advised multiple Amazon vendors on accessing traditional/offline distribution channels with various distribution deals signed across North America, Europe & Asia.

·       Toured a leading U.S. company around India’s leading Toy factories leading to factory selection, production start & significant cost savings.

·       Advised a leading Toy industry association on trends and data related to Toy Sourcing.

·       Advised the board of a leading factory group on sales trends and best practise in the Toy business.

 For more information on our services, click here: 

 


 

SPIELWARENMESSE – SPIRIT OF PLAY BLOG

THE GROWING ‘KIDULT’ OPPORTUNITY

Here’s to Adults growing older later! The Kidult market is a major thing right now, offering significant growth opportunities for Toy & Games companies despite the fact that birth rates are dropping in most major markets. Read more in this latest article I wrote published by the Spirit Of Play Blog, which is published by Spielwarenmesse, the world’s biggest Toy trade show. Click the link below to read the full article:

 

Also here’s a short video excerpt from my presentation at Spielwarenmesse’s Toy Business Forum in 2023 looking at the potential impact of the ‘Kidult’ phenomenon on the future of the Toy business: https://www.youtube.com/watch?v=hE2ZERGW7nc&t=26s

 

 

UNCHANGING PLAY FUNDAMENTALS

So often in the world of Toys we look for the big changes, we go trend spotting to find new things to jump on. The reality though is that far more doesn’t change than does. That’s what this latest article I wrote, published by Spielwarenmesse.de looks at. Just click the link below to read:

 

 

PLAYING AT BUSINESS PODCAST


 

 

EP 102 - Selling A Toy Business: How Mergers amp; Acquisitions Work In The Toy Biz

Many companies in the Toy business grow via acquisition. Company owners often want to sell up and retire or move onto other pastures. In this episode we take a look at some of the biggest Toy acquisitions of all time, we look at why and how Toy Cos are bought and sold and we discuss the details of the process of buying or selling.

Maybe you have a Toy business you want to buy or sell, or maybe you just want to understand how company sales work in the world of Toys, either way this episode will have something for you.

 

EP 101 - How To Run A Successful Tech Toy Start Up With HoloToyz

In this latest episode host Steve Reece talks to Kate Scott & Declan Fahy, the Founders of HoloToyz. Their company aims to inspire creativity and imagination via augmented reality technology.

Kate stated "At our core, we believe that children should be able to experiment, play and learn through emerging technologies in a kid-safe environment away from the open web, whilst not losing touch with the physical world."

We discuss this proposition, and the path from starting the business, through raising funding to achieving distribution for HoloToyz products. 

This episode is a must listen for anyone interested in or actively pursuing a start up in the Toy business, as well as international distributors looking for new products and new stories to latch onto.

 

EP 100 – How To Recruit Good People And Find New Job Roles In The Toy Business

Join host Steve Reece in a deep dive into the toy industry's recruitment nuances. Having helped many people to find new roles in the Toy business and having advised many Toy companies on who & how to recruit, Steve unveils key strategies for companies to recruit effectively and tips for candidates to land their ideal roles. Whether you're hiring or job-hunting, discover invaluable insights to assist your recruitment/job search process.



Sign up for my free e-newsletter and receive all the latest reports, analysis and insights on the Toy & Games business: sign up for free here: https://forms.aweber.com/form/54/1325077854.htm


Sign up for my free e-newsletter and receive all the latest reports, analysis and insights on the Toy & Games business: sign up for free here: https://forms.aweber.com/form/54/1325077854.htm



It’s a recurring annual event in the Toy & Game business to see almost ludicrous price promotions from generalist Mass Market retailers offering products at substantial, and presumably not particularly profitable promotional prices. This represents a big problem for specialist Toy & Game retailers who stock our products year-round and who tend to run a much broader range than the Mass Market box shifters.


Not a lot changes in this space though – I still remember my original inductions in the Toy business back around the turn of the millennium. After going around some of the ‘fluffier’ departments I especially remember being sent along to the UK Sales department. I can’t remember which grizzly Sales veteran was given the pleasure of sharing some grim realities from the sharp end of the business with me, but I can remember really well him telling me that price promotions in the run up to Christmas created ‘a complete f#@ing bloodbath’ every year.



The next part of my induction was to go and meet with colleagues in the French subsidiary. Again, after some nice fluffy talks about Brand pyramids and messaging hierarchy for TV commercials, I was sent out to visit French retail with the Sales team. First, we looked round some really good specialist Toy stores, and then we went to Carrefour. My colleagues explained to me the significant price reductions run by the Hypermarche in Q4 each year, which seemed somewhat excessive even to my greenhorn eyes!


Finally I was hooked up with a US colleague, who after talking me through the workings of Toys R Us (!) and then KB Toys (!), explained to me the pricing strategy of Mass Market behemoths like Walmart. Again he explained how the aggressive pricing of Toys by this type of generalist retailer caused real problems with the Toy Specialist retailers during Q4, when the Specialists who need to make a profit from selling Toys came up against these massive price slashing retail machines who it looked like did not care about profitable sales of Toys.

In c. 25 years, the situation relating to retail pricing has not changed that much in this regard. OK, we have Amazon as a major player in the market now, but if anything their impact is also to cause downward pressure on retail pricing, so the rise and rise of Amazon has hardly decreased competitive pricing pressures.


WHY MASS MARKET RETAILERS CAN SELL TOYS AT A LOWER PRICE VERSUS TOY SPECIALISTS


There are two straightforward reasons why Mass Market retailers can sell Toys with big price discounts and still stay in business:


1.     Bulk sales & efficiencies of scale working at lower margins

Firstly, volume is a big factor in driving pricing strategies for Retailers. Mass Market retailers are set up to move high volumes of products and to make a comparatively smaller margin on each product sold. In other words this type of Retailer is fundamentally set up to drive prices down in order to drive volume. We’ve all heard of price elasticity right? If the price goes down, normally sales volume can be expected to go up.

 

The other factor to consider is that many of the other categories these Retailers operate in have lower volume structures i.e. Food & other FMCG would normally offer lower retail margin versus Toys, as such inherently these Retailers can make lower pricing work because they are set up to deliver the bulk of their sales volumes on lower margin categories versus  a Toy store which would normally operate on 30-50% depending on their strategy.

 

2.    Toys & Games as a traffic driver at Christmas

One of the other key metrics Mass Market Retailers work off is total basket value i.e. how much does the customer spend per visit. They are also looking at how bringing in consumers into store with an offer on one product category nearly always leads to sales in other categories. As per the previous article in this newsletter – footfall is the critical success factor for physical Retail. Overall then these Mass Market Retailers often use the Toy category as a means to drive traffic into store by delivering highly motivating promotions and pricing reductions on Toys. This way they entice more shoppers into store who then buy other products and thus drive up the total basket value, delivering more volume for these volume driven retailers.

 

The bottom line is this – Mass Market Retailers often don’t look at their Toys & Games aisles as profit drivers. Parents feel that they HAVE to deliver a good Christmas for their kids, which will normally involve Toys. The food shopping for peak season family gatherings and set piece meals such as Thanksgiving and Christmas dinners are also a massive volume driver, and if you can get the family budget holder in to store to buy price reduced Toys you are much more likely to capture their Grocery spend, and their spend across other categories.



REALITY CHECK: WHY DOWNWARD RETAIL PRESSURE ON PRICING IS A GOOD THING FOR THE TOY BUSINESS

So now we have a clear idea that aggressive price promotions are a long-term structural challenge we need to manage on an ongoing basis. The bottom line is that we are in the business of selling more products, and the lower pricing gets the more we will sell. We may not want to fund a cycle of ever lower pricing as then we end up failing to make profit, but if we are selling our products on relatively equal terms to all Retailers, then what they choose to sell those products for is actually their business. If they want to sell them at cost, or even less, then that is up to them. In fact in many markets it’s considered illegal (against competition and consumer protection laws) to even suggest what retail price might be.


I remember managing an iconic Toy brand some years back, and the trade margin offered at the (suggested) Retail price was minimal, because this was one of those products the Retailers just had to stock, that they knew would sell through and which we therefore had to make the least effort/use the least persuasion to maintain listings. Our customers regularly sold this item at cost or below, and for sure they complained like heck about the low margin they were making on the product, but in the end that was their concern. Despite ongoing rumblings the same promotional pricing ‘bloodbath’ repeated on this iconic product year after year. And year after year, it remained a top seller and was the Number 1 margin driver across our entire product range for our company.


So the bottom line here is that while it’s often very difficult to deal with hysterical Retailers who are seeing cutthroat pricing from their competitors, this is just part of the game that they have chosen to play. It’s normally not our fault as Toy companies.



HOW TOY COMPANIES SHOULD SUPPORT TOY SPECIALISTS IN THE FACE OF TOY PRICING PRESSURES WITHOUT ENCOURAGING ANTI-COMPETITIVE FACTORS

Now, having made it clear that pricing promotions are inevitable, the next question is how should we manage that situation so that our Specialist Toy & Game Retailers who are committed to our industry and support a much broader range of products, and who really know and love the products and therefore help the consumer to know and love our brands and products, can also thrive even when they can’t dream of competing with Mass Market price promotions.


Let’s start with one clear assertion: Specialist Retailers need to stock the really ‘Hot’ items which every kid wants, otherwise they don’t become THE destination for Toys. But the reality is that they either a). Won’t sell through those products so well if they don’t compete on price or b). Won’t make any profit if they do compete on price. So while they need to stock these items to be a must visit destination for Toys, the reality is that they will make their money elsewhere, and Toy companies have to work really hard to help them do that.

This goes back to the point made earlier on these Retailers running a bigger range vs. Mass Market Retailers. A sound strategic approach for Toy companies to take is to plan a range which offers several SKUs which will favour Toy Specialists due to specification, price points and product style/type. If we go back to the example I used above of the iconic Toy product Retailers had to list, we would produce various higher spec and therefore higher priced versions of this product in order to offer an item to the market which would suit Specialist Retailers.


So for sure our Toy Specialist customers are not going to enjoy some of the range they have to stock, but if we structure our product ranges properly then we should be offering them plenty of products with which they can find less low end of the market price competition and perhaps even some items with channel or Retailer exclusivity.


The one thing I can guarantee on this topic is that Q4 price drops are going to be with us for as long as Mass Market Retailers stock Toys, and I genuinely hope that is forever, because we couldn’t run this business just on our beloved Toy Specialists, but we also couldn’t run it with just the Mass Market, so we need to work to supply products to fit all needs.

 

 

 

N.B. All trademarks and other intellectual property featured herein are the property of their respective owners.

 

 


SPIELWARENMESSE – SPIRIT OF PLAY BLOG

5 TIPS FOR AN OPTIMAL RESULT AT THE SPIELWARENMESSE

This article was recently published by Spielwarenmesse.de, the official Blog of the world’s biggest Toy Trade show. It’s my top 5 tips to maximise your results from attending Spielwarenmesse in Nuremberg.

 

 

PLAYING AT BUSINESS PODCAST

EP 103 – Why Product Selection Is Critical For Toy & Game Companies (AKA Why I Turned Down Settlers Of Catan)

Among my many claims to infamy in this industry, one of my biggest misses when taken at face value would be the time I turned down the distribution rights for now perennial classic 'gateway game' Settlers of Catan. This mightiest of Games has now sold over 40 million copies, yet I was right to turn it down...because product selection is everything for Toy & Game companies. Click the link below to here more.



AND FINALLY…

I’m now well into my second decade working as a Consultant to Toy & Games companies. My company has helped hundreds of clients across the trade. Do you have problems that could benefit from outside help? If you want to take advantage of my c. 25 years experience working across functions, categories and markets in the Toy & Games business just click here for more information on how you can work with me:

 

 

Sign up for my free e-newsletter and receive all the latest reports, analysis and insights on the Toy & Games business: sign up for free here: https://forms.aweber.com/form/54/1325077854.htm

The Massive Volume Driving Potential Of Off Shelf Placement In Toy Retail


Sign up for my free e-newsletter and receive all the latest reports, analysis and insights on the Toy & Games business: sign up for free here: https://forms.aweber.com/form/54/1325077854.htm

 

This newsletter instalment follows a recent edition where we looked at 3 ‘old skool’ retail concepts which are still critical to success in Toy retail today. If you haven’t read that instalment, you can read it here: https://www.linkedin.com/pulse/23toy-retail-three-old-school-fundamental-practises-which-steve-reece?lipi=urn%3Ali%3Apage%3Ad_flagship3_series_entity%3BDc5KsoZzTvOrE6RgD5camg%3D%3D


In fairness that article tended to favour Specialist Toy retail, and so I wanted to follow up with a look at off shelf placement which on the right brands and products can be a ridiculously powerful sales driver for Toy companies in Mass Market retail.


FOOTFALL: THE LIFEBLOOD OF PHYSICAL RETAIL

You will have seen really good retail stores who flounder and fail because their location (perhaps just tucked round a corner, or just off the main drag) denies them access to the same number of passing eyeballs as their weaker competitor located in a better place. Footfall is everything for physical retail. The same applies within a store – if your products are tucked away in a distant rarely visited corner, or on a higher or lower floor than the access level which gets far less ‘traffic’ you are going to sell less in that store than you might if your placement was higher prominence in a location where more people see your stuff.

What normally happens in mass market retail stores is that products are very carefully and strategically planogrammed, so that the in-store people often don’t get a big say in what happens on shelf in each department or product category area. However, they do sometimes have a bit more leeway with the space closer to where you enter the store and around the checkouts. Good retailers plan big national initiatives, but also allow some flexibility for stores to give a bigger push on products which suit their specific local consumer base best. So to get good placement away from the shelf it can help to work both angles – work with the head office team, but also where it’s allowed by the retailer offer to help merchandise on a store-by-store basis to maximise your placement & sales.

 


FORMAL OFF SHELF PLACEMENT

There are two examples of formal off shelf placement I remember clearly from the early days of my career:


Firstly, way back in the 1990s I worked for a discount retailer who ran a fortnightly promotion via a magazine packed full of special ‘once it’s gone, it’s gone’ deals. This was a massive traffic driver for the store, and needless to say while the special offer items normally sold out quickly & offered great value for customers, nearly everyone buying one of those items would buy multiple other products (normally delivering higher margin for the retailer) from the store.


The special deal products were stacked on pallets at the point of entry to the store, giving shoppers the highest visibility and ease of locating the products on special offer. Needless to say these items drove the highest volumes while stocks lasted.


The second example I remember was the massive success the Irish team had at a corporate Toy company I worked with. The talented and tenacious sales team in the Emerald Isle would not take no for an answer and persuaded a major grocer to take a seemingly imprudent quantity of stock on key iconic Toy brands on pallets in the run up to Christmas. The heavily laden pallets soon began to look decimated and for a relatively modest trade marketing/promotional spend vast quantities of products sold through retail. When the program was implemented across the same retailers UK stores the results were genuinely impressive. Needless to say soon after EVERY Toy co wanted that pallet space & the terms of securing the pallet deal became less and less commercially viable as a result as the competition became heavy, but nevertheless as a pure sales driver the pallet program was ridiculously successful.



INFORMAL OFF SHELF PLACEMENT

One of the most successful off shelf placements I encountered happened entirely randomly. I was managing a major new product range initiative which incorporated home entertainment elements. This was in the heyday of Blockbuster, home entertainment via video & DVD, CD’s and all of that pre-download stuff. My boss was particularly keen to push our new products out of our usual Toy focused distribution into home entertainment distribution channels to a). Grow distribution for other entertainment based licensed products we had in the range and b). To hit the right consumer in the right frame of mind for our new products.


The challenge we faced though is that Home Entertainment retail at that time had two basic product sizes – CD or DVD, and that was pretty much it. And despite the Buyers liking the concept of our new products they found the thought of having to work out where and how to merchandise a product that was 5 times bigger than their usual product ranges to be too difficult to entertain among all the other tasks and challenges they were facing. Our products appeared to be in the ‘attractive but too difficult’ box for them.

Eventually we persuaded them to place a trial order for one box (!) for their flagship, highest footfall store. That single carton of products sold out in about 5 minutes, so they called and asked for 5,000 units to be delivered asap, and so we duly obliged. The product arrived with them on the Thursday and on the Monday, the now desperate Buyer asked us to ship them 50,000 units asap, which we sadly couldn’t fulfil as the product was now our best-selling item, a hit across retail and a sell-out success. For those in the U.S.A. these volumes won’t sound big, but in the market I was working in they would be equivalent to ten to twenty times the stated volumes in the U.S.


The point of this story is not how successful the products were, or how retailers should commit to inventory on hot lines earlier than they do – no, the point was how the products were merchandised. Because the products didn’t fit on any shelving or racking the stores had, they were instead loose stacked on the floor around the checkout queues in stores that were packed on the run in to Christmas. In some stores, 10 checkout stations were fully open and 100 or more people were queuing. Every few minutes another 100 people would walk past our products and many chose to buy, then when the stacks got smaller the law of scarcity kicked in & the sell rate went through the roof until there was no inventory left at all.

Our product was a huge success exactly because they didn’t have space on shelf to merchandise. That one finding increased peak season revenues by nearly 10% across that retailer nationally, because they began to use impulse purchase cues by literally stacking entertainment merchandise all around people queuing to buy home entertainment products. I wouldn’t go so far as to say we found ‘Kidults’ earlier than has been reported due to this action, but it does go to show how breaking out of the standard methods of merchandising can be highly effective!

 


CLEAR RETURN ON INVESTMENT VIA OFF SHELF INITIATIVES 

As a trained blue chip marketer I shouldn’t say what I am about to say, but reality speaks for itself: If I had the choice on whether to spend a £/$/€ on consumer marketing with no direct selling offer, OR could instead spend the same amount on trade marketing with a focus on bringing the product off shelf and to higher in store prominence I would do the latter 99 times out of 100.


Like many marketers reading this, I have wasted a lot of money on marketing where there was no clear evidence of ROI!  My career marketing spend is in the vicinity of £50m (many of my corporate colleagues have spent many times more than this, but I moved to work with smaller up & coming companies years back and have thus wasted far less than many of my peers!). I can try to justify my effectiveness by stating career revenues of products I worked on being in excess of £500m…but I can’t tell you how much of that £500m would have been realised if you removed the £50m marketing spend, we will never know whether we would have delivered similar levels of revenues without chucking £50m into the ether…


On the flip side, I can clearly see from sales uplift across the board that whenever teams I worked on invested the money into merchandising initiatives at the point of sale, and where the retailer actually implemented or let us implement what we paid for, then pay back was clear and justifiable 9 times out of 10.


We of course need to acknowledge that today a large proportion of sales happen via online channels, and so digital marketing can be a strong direct sales driver in a way which the old TV advertising model wasn’t really provable to be in terms of tangible, clearly measurable and attributable payback. But while we still look at physical stores as a major chunk of revenues, then investing in in-store merchandising and specifically off-shelf initiatives should always be a priority.

 

 N.B. All trademarks and other intellectual property featured herein are the property of their respective owners.

 


 

SPIELWARENMESSE – SPIRIT OF PLAY BLOG

THE GROWING ‘KIDULT’ OPPORTUNITY

Here’s to Adults growing older later! The Kidult market is a major thing right now, offering significant growth opportunities for Toy & Games companies despite the fact that birth rates are dropping in most major markets. Read more in this latest article I wrote published by the Spirit Of Play Blog, which is published by Spielwarenmesse, the world’s biggest Toy trade show. Click the link below to read the full article:

 

Also here’s a short video excerpt from my presentation at Spielwarenmesse’s Toy Business Forum in 2023 looking at the potential impact of the ‘Kidult’ phenomenon on the future of the Toy business: https://www.youtube.com/watch?v=hE2ZERGW7nc&t=26s

 

 

UNCHANGING PLAY FUNDAMENTALS

So often in the world of Toys we look for the big changes, we go trend spotting to find new things to jump on. The reality though is that far more doesn’t change than does. That’s what this latest article I wrote, published by Spielwarenmesse.de looks at. Just click the link below to read:

 

 

PLAYING AT BUSINESS PODCAST


 

EP 102 - Selling A Toy Business: How Mergers & Acquisitions Work In The Toy Biz

Many companies in the Toy business grow via acquisition. Company owners often want to sell up and retire or move onto other pastures. In this episode we take a look at some of the biggest Toy acquisitions of all time, we look at why and how Toy Cos are bought and sold and we discuss the details of the process of buying or selling.

Maybe you have a Toy business you want to buy or sell, or maybe you just want to understand how company sales work in the world of Toys, either way this episode will have something for you.

 

EP 101 - How To Run A Successful Tech Toy Start Up With HoloToyz

In this latest episode host Steve Reece talks to Kate Scott & Declan Fahy, the Founders of HoloToyz. Their company aims to inspire creativity and imagination via augmented reality technology.

Kate stated "At our core, we believe that children should be able to experiment, play and learn through emerging technologies in a kid-safe environment away from the open web, whilst not losing touch with the physical world."

We discuss this proposition, and the path from starting the business, through raising funding to achieving distribution for HoloToyz products. 

This episode is a must listen for anyone interested in or actively pursuing a start up in the Toy business, as well as international distributors looking for new products and new stories to latch onto.

 

EP 100 – How To Recruit Good People And Find New Job Roles In The Toy Business

Join host Steve Reece in a deep dive into the toy industry's recruitment nuances. Having helped many people to find new roles in the Toy business and having advised many Toy companies on who & how to recruit, Steve unveils key strategies for companies to recruit effectively and tips for candidates to land their ideal roles. Whether you're hiring or job-hunting, discover invaluable insights to assist your recruitment/job search process.

 


AND FINALLY…

Can we help your business? Do you want to grow your export sales, prep to offer your business for acquisition, find senior staff or maximise your sourcing efficiencies? If you want to find out more about our Toy & Game business consultancy services, please just click the link below. Our company has helped hundreds of Toy & Game companies to get ahead and grow sales/make more profit. I have worked on all product categories across a 25-year career in Toys & Games, and genuinely love sharing knowledge, contacts and facilitating greater success for our clients.

Here’s a profile of some recent projects:

·       Helped several Asian Toy companies to grow distribution in ‘Western’ markets & to recruit key staff to build distribution with new retail accounts opened up.

·       Advised multiple Amazon vendors on accessing traditional/offline distribution channels with various distribution deals signed across North America, Europe & Asia.

·       Toured a leading U.S. company around India’s leading Toy factories leading to factory selection, production start & significant cost savings.

·       Advised a leading Toy industry association on trends and data related to Toy Sourcing.

·       Advised the board of a leading factory group on sales trends and best practise in the Toy business.


 For more information on our services, click here: 

 

 

Sign up for my free e-newsletter and receive all the latest reports, analysis and insights on the Toy & Games business: sign up for free here: https://forms.aweber.com/form/54/1325077854.htm

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