3 Reasons To Cancel A Toy Or Game In Development Before It Hits Shelves

3 Reasons To Cancel A Toy Or Game In Development Before It Hits Shelves

One of the peculiarities of the toy & game business is that the level of due diligence applied to product selection is far lower than in many other industries or consumer products categories. This is largely due to the fact that most products in market don’t carry forward to the next year. In our business, if a new product launch fails to live up to expectations, the implications are normally not that severe in terms of lost revenues – we budget for some markdowns and stock clearance across our product range and we clear the failed product and move on. In other industries where products can stay in market for years, and where the average value of a new product is far higher, more due diligence is applied before, during and after the product development stage.

The bottom line is that sometimes it just makes more sense to launch something (even if we’re not sure it will sell well) than to leave a gap in our topline revenues by not launching something.

There are some products though that should never see the light of day, regardless of how far advanced the product development is, because the risks of complete and utter failure are high.

REASONS TO CANCEL PRODUCT IN DEVELOPMENT

• RETAIL RELATIONSHIPS – retailers hate over stocks or slow selling products. If you ship a complete and utter dog of a product to your biggest customers, they will certainly not thank you. They may also be less inclined to take your next wave of product launches. Retail buyers are assessed and incentivised on selecting products that sell. So, if you get quite a long way into the cycle and become convinced that there is something fundamentally awry with the product in terms of commercial appeal or functionality, then perhaps you should cancel the project & put the inventory budget against upping the marketing on your other lines.

• RISK OF DAMAGE TO BRANDS – one $multi-million product line I worked on was a brand extension of one of THE most iconic brands both in our industry, but also in terms of broader consumer society. We developed a new version of this product involving an added technology element. But as often happens with technology development the end result did not live up to expectations, and we had to decide fairly late in the game whether to pull the product or not. We should have pulled the product because it bombed in retail, left a nasty hangover for both our company and the retailers, but perhaps more importantly it risked the health of a mighty cash cow of a brand.

• FUNDAMENTAL CONCEPT OR FUNCTIONALITY FAILURE – due to the prevailing lack of structure and due diligence in product development processes in the toy business, sometimes products make it a long way through before some fundamental flaw is discovered. I can think of one very painful experience for a client when I research tested their new major product release and discovered that both the underlying concept for the toy and the dexterity fit between the product and the target demographic were a complete mismatch. I made the rare recommendation that the product should be dropped before launch as it was genuinely so bad! Alas at this stage, the product had already begun tooling and the client chose to proceed. They shipped out in the region of $1m of inventory to the market and had to markdown or clear nearly all of that stock. The costs of this failure were close to catastrophic for the company, and they had to curtail 2 or 3 rounds of product development after. The cost to the company overall of proceeding with the product was $millions.

In conclusion, there are so many product concepts out there that we need to have robust product selection and product development review processes to filter out products that will fail badly. The earlier in the process we can find that a product has serious issues the less we have invested and the more we can put into alternative concepts with more ‘legs’.

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

Does The Impending Growth Of The Metaverse Threaten The Toy Industry?

Does The Impending Growth Of The Metaverse Threaten The Toy Industry?

Any further immersion of human beings into the virtual realm tends to create concerns and worries about whether that will negatively impact on the toy industry, which is a real-world consumer products business.

At this stage we don’t really know just where the Metaverse is going to take us, but we can presume that this is going to be yet another gigantic tech revolution. Facebook’s change of name to Meta is a serious statement from a company worth $500billion+ (at the time of writing). Tech companies across the world from the U.S. behemoths like Facebook, through to China’s mighty players including ByteDance, Tencent & Alibaba are researching, investing and acquiring to try to maximise their future participation in and profit from the Metaverse. So, we can fairly certainly predict that this thing called Metaverse is coming in a very big way.

But what does this mean for the toy industry? The first point to note is that despite the massive advancements in technology in the lives of children, despite the massive growth in screen time addiction and gaming time, the toy business has thrived nevertheless. How can this be? Surely children have less play time available to toys due to all their screen time, and surely they want to be gifted in the virtual realm nowadays? The reality is that children still love being given toys and playing with them, even if they spend less time with their toys versus past generations. For parents, toys are ever more important as they offer a potential antidote to screen time and aid their child’s development.

The nature of big technology companies is to build up huge data on users and general usage, and then to maximise the elements which create maximum usage and engagement. The Metaverse, in essence, is going to add additional elements of immersive virtual reality and interaction to what we already have. While children can have Netflix playing and still play with toys, it is less likely they will be able to be lost in a VR world and play with normal toys simultaneously, so that may represent a further loss in potential play time for toys, but toys developed specifically to be immersed in the Metaverse could be huge. We only have to look back to Activision’s Skylanders, which sold more than 170m toys to see the potential of toys immersed with a digital experience. No doubt there will be a company who absolutely cashes in on integrating toys with the Metaverse.

In conclusion then humans remain rooted in the real, physical world. There may be a future where we are fully lost in digital worlds like the Na’vi people in the movie Avatar, but we are a long way from that yet. Both children and parents value toys, and the more deeply children immerse themselves in virtual worlds, the more affinity they feel for the characters, worlds and brands they experience in the digital realm, which in turn can be expected to translate into sales of related merchandise, especially toys. Moreover, it is very likely that one or more companies will absolutely nail the execution of toys in and for the Metaverse. Overall then, the toy industry should view the Metaverse as both a threat and an opportunity – if we can keep on creating compelling and attractive toys, based on themes and characters kids love and exploring how toys can interact with the Metaverse, then we may be able to grow alongside.

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

THE CRITICAL ROLE OF ACQUISITIONS IN TOY COMPANY GROWTH

THE CRITICAL ROLE OF ACQUISITIONS IN TOY COMPANY GROWTH

Mattel purchased Mega Bloks for approximately $460m USD back in 2014. Hasbro acquired Power Rangers for $522million USD in 2018 and E1 (including Peppa Pig) for around $4billion USD in 2019. But it isn’t just recently that these long-established behemoths of the toy business have been on the acquisition trail, the history of both companies is littered with acquisitions.

Looking at other companies – MGA Entertainment acquired Little Tikes back in 2006 and of course Spin Master have made numerous purchases over the last decade or so with Rubiks being among the most notable of those.

Here’s why acquisition is always a big part of growth strategies for toy companies – it takes years, if not decades to build strong toy brands. Once a toy company gets to the size where they can access more advanced financing options, it often makes more sense to buy another brand or company than it does to proceed with a risky new launch in a category not previously entered.

For those building companies and brands with a desire to eventually sell up and cash out, there are many companies out there looking to buy ready made opportunities. If you’ve only recently started, you would need something quite special to get a quick sale most probably, but anything is possible!

Did you know we offer an acquisition Consultancy and agency service? For established businesses with something to offer that companies will want to buy we can potentially help. For more information, or to get in touch: www.KidsBrandInsight.com