WHAT’S GOING ON WITH TOYFAIR IN NEW YORK? (REVIEW OF TOYFAIR 2023 & DISCUSSION OF FUTURE SHOWS)

WHAT’S GOING ON WITH TOYFAIR IN NEW YORK? (REVIEW OF TOYFAIR 2023 & DISCUSSION OF FUTURE SHOWS)

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The topic of Toy fairs in various countries has been very much up for grabs since the COVID-19 pandemic disrupted the usual schedule. The North American International Toy fair has been much under scrutiny. So this edition of the newsletter will review the show we just had & look at the future of the show following the announcement that the show will repeat once more in New York before moving to New Orleans, for at least a few years.

NORTH AMERICAN INTERNATIONAL TOYFAIR 2023 REVIEW

The 2023 show has just finished this week. I’ll leave the stats about how many competitors were on show and how many visitors came to the show to the official channels. But we can comment on some of the talk around the show – in general, the feeling I got from speaking to other people was that the overall traffic seemed a little on the quiet side, perhaps somewhat down versus the last time the show took place in 2020. I’m a little dubious about this train of thought however, as most of us can’t remember what we had for dinner a few days ago, let alone retain a memory of visitor numbers at a trade show 3 and a half years ago!

The other point we have to accept is that this is not some sort of consumer show, where the crowd numbers have a strong meaning. The reality is that trade show success should be measured by interactions with buyers and the eventual end results of those interactions i.e. purchase orders at the end of the process. I don’t have an overview of which Buyers were at the show, although I was told several times that both Walmart and Target were at the show by people who met with them. Frankly if Walmart & Target are in attendance you already have a large percentage of the North American market, and therefore the world covered.

Next, I want to address the gargantuan elephant in the room – clearly some exhibitors and attendees were fresh from previews in Los Angeles. Numerous companies had already just spent 4 or 5 weeks in showrooms in the City of Angels.

For example I met one Toy company executive who said they weren’t exhibiting in New York because there was no point – they had just spent 3 days with the team from one Mass retailer, and as such exhibiting straight after in New York would have been unnecessary & a waste of money from their perspective. And this is where I am going to make one of my main potentially contentious counter arguments here – Toy fair has not really been about the major Toy companies for many years (shock horror felt across the world of corporate Toy companies!). The mid-February timing of Toy fair has been far too late for Mass market retailers for a long time, and big companies primarily focus on Mass market retailers as they deliver the most volume, that after all was what the Dallas preview was for.

Here's a reality we need to understand about the Toy business – the vast majority of revenues come from outside the Top 10 Toy companies. This is unusual versus other industries - the smartphone market for example is dominated by just a couple of global behemoth companies.

Some of the Top 10 Toy companies are not publicly traded, which means they don’t have to share their revenues with anyone, which makes sizing the Top 10 a little tricky. But, by my estimate, the Top 10 companies account for somewhere between 35 to 38% of the overall Toy business global revenues. So the vast majority of sales don’t actually come from those major companies who can demand the attention and time of major buyers the most.

This leads me to my passionate belief about the North American International Toy fair (the one we’ve had in New York for so long): it’s about small and medium sized companies coming together en masse in order to justify the time and attendance of retail buyers so that the buyers can most efficiently review the myriad of suppliers who make up the majority of the market and the majority of their spending.

Which leads me to my second contentious statement of opinion herein: Toy fair 2023 (in New York) was more effective because bigger companies had already previewed and because some of them chose not to exhibit again in NYC. In short, the absence of some big-name suppliers gave more Buyer time to smaller and more up and coming companies. This is surely a great thing for the overall health of the industry.

I can remember meeting founders of companies like Zuru & Spin Master when they were just a few years into their journey and still up and coming. They both clearly had more than a little hustle about them, and both had an energy and visible determination. Maybe these now mighty companies were always destined for huge success, but maybe, just maybe, shows like the New York show gave them a leg up and delivered them some Buyer time at the point in their history when they most needed it. Could some of the exhibitors who just rocked up in The Big Apple be the next major Toy company early on in their journeys? And will some of them springboard onwards and upwards from the Buyer interactions they had at the show in New York...?

That is (in my opinion) the whole point of this show. And as such, from that perspective, I would measure the 2023 show as a massive success. I spoke to half a dozen or so clients at the show who are all smaller companies (so far), but are clearly on the way up. They had spoken to Buyers they didn’t anticipate being able to reach, and had very successful shows in terms of both quality & quantity of Buyer contacts and expected to reap the rewards going forward. That's the whole point of this show surely?

I expect the L.A. previews to grow over time, but that kind of show only offers opportunity to those companies with existing relationships & vendor accounts. Many of the companies in attendance at Javits this last week would get no value from setting up in L.A. I spoke to the owners of one long established but not huge company who told me they would just get no Buyer visits if they set up in L.A. as they realistically assessed that they were not enough of a draw to merit a Buyer setting aside just for them. The same company met plenty of their customers in New York.

And so the bottom line here is this – as per the previous set up with the Dallas show early in the sales cycle & the New York show at the end of the cycle (or arguably just after the end) – is that there is a place for both these events. Nobody makes you exhibit at both, but you can if you want to, and if you don’t want to, perhaps you shouldn’t presume that every other company has the same needs and timelines as yours.

On a personal note, I was greatly excited to be back in New York after all that time away. The show was great for me, although as an industry analyst and Consultant to Toy companies I appreciate that the show is not designed for my needs, but regardless of that there is no better way for industry hangers on like myself to meet, greet and influence the great and the good of the Toy business in the world’s biggest Toy market.

Having ‘enjoyed’ a very turbulent descent from up high through the massive rain storm which smashed New York on the day before the show started, and having had just 3 hours sleep due to jetlag, I was the first speaker at the Toy fair University organised by the Toy Association – my presentation on Sourcing Trends seemed to go down well, although I was so discombobulated from jetlag that I may not have noticed if the audience threw rotten fruit at me.

One other observation on the city of New York itself, it was kind of bemusing to see so many Cannabis shops around the town and the constant smell of the product was unavoidable, I have not experienced this anywhere else in the world. At the same time, the stores in Manhattan seemed to be experiencing a shoplifting epidemic, in one Duane Reade I literally needed a personal shopper to get access to anything they sold, the shop assistant told me that this was due to a plague of flagrant thefts from the store.

THE NEXT SHOW IN NYC

On then to the topic of the next North American International Toy fair, which will be held in New York from March 1st to March 4th. This is clearly too late for the Mass market retail buying cycles but is closer to the original mid-February slot. My argument here would be that this is very late, but still worth attending for the hundreds of smaller and up and coming companies for whom Specialty business represents a significant opportunity. For the more established companies, I suspect it will be more of a PR and marketing driven event with some Buyer interactions.

THE MOVE TO NEW ORLEANS

On to the most surprising part of the recent announcements about the (New York!?) Toy fair was that from 2026, the show will be held, at least for a few years, in New Orleans. That was a fairly left field change. Nobody anticipated that! I have never been to 'The Big Easy', so I can’t tell you what it is like as an Events venue. But I can tell you it sounds like an interesting place to visit, and that I trust the Toy fair decision-making team to select a great venue for the show. It doesn’t seem fair to have shows just in LA & New York, there is after all a lot of America in between those two mighty metropoles. Reportedly the change of venue is due to other bookings at the Jacob Javits venue, it isn’t easy to find large Events venues and so I suspect trade offs were made to bring the show forward to try to deal with the constant sniping criticism that the show is too late in the cycle.

Which brings me to my one bone of contention in the whole conversation around the North American International Toy fair – that is the fact that the new planned timing for New Orleans in mid-January is awful for International, or at least European visitors. Some European countries have a national show in January i.e. my own home country the UK has one in the 3rd week of January. The mighty Spielwarenmesse show in Nuremberg, Germany is the world’s biggest and is held normally at the end of January/start of Feb. Nuremberg is the primary must attend show for so many of us in Europe. For the major open access show in the U.S. to be moved into the middle of this veritable furore of Toy shows is not ideal.

But to be fair, I would say that while the new show timing in New Orleans may question some of the 'International' element of the North American International Toy Fair, it very definitely offers to make the best of the North American opportunity, which after all is the main focus of this show. Those International visitors not able to attend can still meet people in L.A.

IN CONCLUSION: THE FUTURE OF THE NORTH AMERICAN INTERNATIONAL TOYFAIR

As part of my conclusion, I just wanted to recognise the hard work done by the Toy Association team in organising Toy fair. My wife is an Events Manager, and so I live on a daily basis with the stress, volume of highly detailed work and frankly unrealistic client expectations that Event organisation brings. A show of the scale of the one we just had takes a huge amount of work, and that should be recognised and applauded.

The other point about the Toy Association is this – like other national associations it is a Membership driven organisation. Toy company people sit on the board and committees of this organisation. As such, it is largely speaking the Toy industry itself who makes the decisions on what shows to hold, where and when. If you don’t like the decisions they make, can I ask if you are actually a Member of the organisation? If not, feel free to sign up & you’ll get the same vote as anyone else to influence how things are done!

Furthermore, if you don’t want to go to any Events organised in the Toy business that is your prerogative, but perhaps we should also consider the reasons for such shows and consider the other companies, especially those less established than yours who need the show you don’t want to go to!

Finally, a general point about the nature of discussion and disagreement (of which there has been much on this topic):

“I disapprove of what you say, but I will defend to the death your right to say it.” Evelyn Beatrice Hall

Please feel free to disagree with me in the comments, and to attend the shows you want. I’ll be happy to meet you at any of the shows I attend and understand you have to always make the right decisions for your business :)

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

SPIELWARENMESSE.DE

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:

https://www.spielwarenmesse.de/en/mag/toy-lab/unchanging-play-fundamentals/

PLAYING AT BUSINESS PODCAST

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.

https://playingatbusiness.libsyn.com/ep-101-how-to-run-a-successful-tech-toy-start-up-with-holotoyz

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.

https://playingatbusiness.libsyn.com/ep-100-how-to-recruit-good-people-find-new-job-roles-in-the-toy-business

EP 99 – Gift & Hobby Distribution Channels (The Original Kidult Toy Business?!)

Guess what – people have been buying Toys for adults for a very long time. Even though the ‘Kidult’ thing is the big noise nowadays, hobbyists and people buying Toyetic gifts for adults have been around for a long while.

Listen in to Episode 99 as we look at these adjacent areas in more detail:

https://playingatbusiness.libsyn.com/ep-99-gift-hobby-distribution-channels

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 department? 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.

· Secured Plush manufacturing outside of China for a company seeking to geographically diversify.

· Reviewed and scouted available Toy manufacturing facilities in Europe for a major Toy Co.

· Advised a leading high end Toy brand on marketing and licensing strategy.

· 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:

https://www.toyindustryjournal.com/toy-business-consultancy

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

#23 TOY RETAIL: THREE OLD SCHOOL FUNDAMENTAL PRACTISES WHICH STILL WORK…

#23 TOY RETAIL: THREE OLD SCHOOL FUNDAMENTAL PRACTISES WHICH STILL WORK…

#23 TOY RETAIL: THREE OLD SCHOOL FUNDAMENTAL PRACTISES WHICH STILL WORK… Way back in the 1980s I experienced Toy retail for the first time. My grandparents had a wallpaper/decorating shop in Manchester, England, and my grandmother, being of mixed Russian, Byelorussian and Ukrainian descent started selling Matryoshka Dolls in the window of the store. Wallpaper is fairly dull, but these famous wooden dolls featuring smaller and smaller wooden dolls inside brought people into the store to buy and play with the dolls, as there was nothing like that around at the time. Needless to say many people were attracted into the store by the dolls and then left with new wallpaper, paint or other decorating related items as well! My first graduate job was as a management trainee for Makro (a bit like a European version of Costco, although I’m sure neither chain would thank me for the comparison!). Retail management trainee’s get taught a lot of very basic realities of retail, from ‘you can’t sell it from the warehouse, get it out on the shop floor’ to seeing the reality of convoluted merchandising solutions devised by dozy marketers in an ivory tower office somewhere. These ‘solutions’ were often too time consuming/inefficient/unrealistic to be properly deployed by shop floor workers with high pressure on time and productivity. I always credit that first job I had with giving me a reality-based grounding which not everyone gets in terms of how retail really works. Successful Toy retailing is not just about basics & common sense though - it's also about creating ‘WOW’, because our consumers really love our products, so we have to balance out the boring but critical basics with trying to really grab people’s attention with some pizazz. I recall vividly a visit a few years back to Debenhams department store in the very centre of Manchester (England). This was at the point where the writing was clearly on the wall for Debenhams, and the future of the business was very much under threat alas. You can imagine then my surprise when I entered the store and found literally dozens of staff members hanging around waiting for customers to come into the store. Just a short distance away through the glass entrance doors I could see literally thousands of people walking past and failing to see anything outside the Debenhams store of sufficient interest to entice them in!

The old school retail mentality, like that of my grandparents, would have put all those staff members outside the store in the eye of the thousands of passers by offering people an experience that might draw them into store to buy – the staff from the make-up counters could have brought in shoppers by spraying perfume, the Gift and Toy department staff could have been showing cool Toys to families and above all the entire staff could have been focused externally on bringing in footfall versus looking busy with internal tasks which in the end did not make the business viable. The lack of imagination and adaptability was very striking in this instance. The truth is that in an industry like ours whereby we are selling both a physical product, but also an experience, getting people to play with our products can be a powerful sales driver. For sure Amazon, online in general and mass market box shifting retailers provide high sales volume for our industry, but even then, ongoing sales are largely driven by consumer reviews i.e. by their having had a positive experience of using the products after purchase. So, in this article we’re going to look at some of the fundamentals of old school retailing which are still effective for Toy retailers today. ‘WOW IN THE WINDOW’ - THE SHOP WINDOW IS WHERE IT BEGINS Have you ever noticed a retailer who really takes special effort to create enticing and appealing shop window displays which reach out and grab the attention of passers by? Hamleys flagship store on Regent Street in London is a great example of a really thoughtfully created shop window. Whenever you walk past there is a strong, professional, high impact window display, along side a team of play enthusiasts to greet you. If you see a Lego retail store there is also normally a strong effort to create ‘WOW in the window’. This can be done with a combination of a built up super-sized Lego model, alongside artwork that really grabs the attention. The same fundamental point applies to online retail also by the way! If an e-commerce site has a confusing front page with no clear navigation, which makes it too hard for the consumer to find something they are interested in. then people will click off the page and find another page which more clearly catches their attention and directs them further into the website. DEMONSTRATIONS REALLY DRIVE SELL THROUGH Like many other marketing people reading this, I have spent a lot of dumb money on marketing for Toys & Games! I remember a few campaigns which were so grotesquely over funded that I literally ran out of places to blow the money in order to spend the budget which management had dictated had to be spent. But one of the long-term proven marketing methods for Toys & Games is that for products offering a good experience, getting people playing with the product is the most proven marketing method with the closest link between spend and resultant sales.

I can remember one in store demo campaign I worked on which saw sales go from an average of one per store per week to hundreds of units sold per in store demonstration day. If you check the research, a large proportion of sales of Toys & Games are driven by trying the product out, whether that’s in retail or at a friend or family member’s house, so it is obvious that getting people actually playing with our products will lead to more sales. The challenge is that it can take work and effort to scale the impact of such demonstrations. One other observation then is to take demonstrations to a place where the size of the gathering automatically leads to scale i.e. music festivals – I have seen numerous Toy & Game brands at music festivals over the years for example, whereby the products can be played with by thousands of people in one go. The best examples of that type of demonstration came with either a place to buy on site, or a voucher to buy from particular retail partners with a discount or promotional offer. MAJOR MEDIA EVENTS BRING PEOPLE INTO STORE! At the time of writing, the Barbie movie has racked up a massive $1.4 billion at the global box office. Just to put that in context, that represents the 14th highest box office take ever. Barbie has outperformed Frozen, Black Panther, the final Harry Potter film, Minions, Iron Man (any instalment) and many many other successful blockbuster movies. This type of massive global media event brings people into Toy stores, and when people come in driven by interest in one event, they often purchase other products as well. Years ago, I remember working with UK entertainment retailer HMV to launch a new Star Wars product. We hired in an officially authorised squad of Stormtroopers and Darth Vader – these guys were all enthusiasts who had created their own costumes at their own expense and were so authentic that Lucasfilm at the time approved them as official impersonators. Once we had finished in the store, Darth & the Stormtroopers moved outside the store & began directing traffic along the road. Needless to say they caused a massive hold up, and eventually the police were called & asked Darth & his friends to go back in the store…which they did, followed by dozens of excited would-be shoppers. The point is this – it’s not guaranteed that major media events will be a success for every retail outlet, but for those stores which embrace the opportunity and utilise creativity and an event driven mindset can often achieve a strong sales boost, alongside creating an ongoing perception of their store as a fun place to visit. N.B. All trademarks featured herein are the property of their respective owners. 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 PLAYING AT BUSINESS PODCAST 100 EPISODES OF ‘PLAYING AT BUSINESS’ PODCAST Back in 2018 I started the Playing At Business podcast with the aim of sharing knowledge about the Toy & Games business. There were three motives: 1. A genuine desire to help those people and companies who were newer to the business and don't know all the answers. 2. An easy reference tool I could refer people to avoid having to answer the same questions repeatedly. 3. To act as a marketing tool for my Consultancy business bringing in interested companies who want my assistance. Over the past 5 years, the podcast has been fairly successful in all three respects based on feedback from listeners.

So, if you've been with me from the start - many, many thanks, watch out for more episodes coming soon. And if you have yet to listen, why not join the other listeners and check it out... Anyway, here's the latest episodes here: 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. https://playingatbusiness.libsyn.com/ep-100-how-to-recruit-good-people-find-new-job-roles-in-the-toy-business EP 99 – Gift & Hobby Distribution Channels (The Original Kidult Toy Business?!) Guess what – people have been buying Toys for adults for a very long time. Even though the ‘Kidult’ thing is the big noise nowadays, hobbyists and people buying Toyetic gifts for adults have been around for a long while. Listen in to Episode 99 as we look at these adjacent areas in more detail: https://playingatbusiness.libsyn.com/ep-99-gift-hobby-distribution-channels EP 98 – How The Toy Industry Clears Excess Inventory A few episodes back we looked at why excess inventory is so dangerous - in this episode we move on to look at the practicalities of how our industry manages excess inventory, where they sell it, how it works and some major banana skins to watch out for when selling clearance stock! https://playingatbusiness.libsyn.com/ep-98-how-the-toy-industry-clears-excess-inventory ARE YOU A BUSINESS OWNER LOOKING TO SELL UP/MOVE ON? We are working with companies who are actively looking for acquisitions. If you are a business owner or shareholder looking to sell up, please get in touch & we might be able to help you realise a sales transaction or other forms of investment/takeover. For example, one of our clients is currently looking to acquire companies with the following characteristics:

• Revenues of $1-10M USD (with positive profit).

• Offline distribution as primary sales channel.

• Game brands/products or similar adjacent categories preferred.

• North America or UK based companies primarily.

Please just drop me a line if you are interested… AND FINALLY… TOYFAIR in New York: I’ll be in the 'big apple' for the NYC show and giving a presentation on the future of Toy Sourcing. Here are the details below: Hope you can join me for this presentation. But if not, and you’d like to meet in NYC, please just send me a message & we can book a meeting subject to timings/availability :) I’ll be there to discuss Indian Toy Manufacturing with my clients, friends and colleagues – I’m currently working with strong Plush & Board game factories in India, happy to talk about those. Also happy to talk with you about growing your export sales, or just about Toy & Game business gossip! MY CONSULTANCY BUSINESS – CAN I HELP YOUR COMPANY? 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 department? 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. · Secured Plush manufacturing outside of China for a company seeking to geographically diversify. · Reviewed and scouted available Toy manufacturing facilities in Europe for a major Toy Co. · Advised a leading high end Toy brand on marketing and licensing strategy. · 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: https://www.toyindustryjournal.com/toy-business-consultancy 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

#22 TOY MARKET UPDATE & OUTLOOK FOR H2 2023 (CELEBRATING 100 EPISODES OF PLAYING AT BUSINESS PODCAST

#22 TOY MARKET UPDATE & OUTLOOK FOR H2 2023 (CELEBRATING 100 EPISODES OF PLAYING AT BUSINESS PODCAST)

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 3 MOST IMPORTANT MANAGEMENT ISSUES IN THE TOY BUSINESS: INVENTORY, INVENTORY & INVENTORY!

Q4 2022 was pretty horrible for the Toy & Game business overall, consumer sell through was really poor. The stock market listed companies reported double digit sales decreases year on year and inventory levels in warehouses and in retail soared leaving our industry with a significant inventory overhang heading into 2023.

As we’ve moved further into 2023, there are some positive signs out there in that inflation is reducing in most major Toy markets, although it is still significantly higher than we have become used to in recent years. And while discount channels are going to be overflowing with good product this peak season, most mass-market retailers have gone so conservative on their buying that they are almost inevitably creating a situation where the opposite problem to excess inventory will prevail before too long.

Anyone who has been around long enough has seen the pendulum swing that comes from too much inventory in the trade – normally retailers become so averse to ordering inventory that the overstock soon becomes an understock. Although the current inventory situation is more significant and widespread compared to nearly any other year in the 25 years I have been in this business, we could see the same retailers who are refusing to commit screaming for more stock by the time we get into Q4. Normally this kneejerk inventory conservatism therefore leads to a much cleaner market heading into the following year. Therefore, ‘normal’ would suggest that 2024 will be a much better year for the global Toy & Games business all else being equal. Although these are turbulent times, so anything could happen.

MOVIES & THE TOY BUSINESS IN 2023

The bumper movie year we thought 2023 was going to be has in reality yielded mixed results so far. We’ve had the super successful Super Mario Bros movie which grossed $1.35billion at the US box office. We’ve also had the massively publicised Barbie movie, which at the time of writing has nudged over $1billion at the box office around the world. On this later success, I think we need to give a serious hats off congratulations to team Mattel. There was a time not that distant in the past where Mattel seemed to be well behind the curve as social media gave a broad platform to the dissatisfied, there was a time where Barbie’s future was in question. The move towards more diversity, and a brand narrative which was all about empowerment saw barbie & Mattel turn the corner. The massive cultural moment of the Barbie movie release with the accompanying commercial success suggests to me that the Barbie brand is well on track to be a major iconic Fashion Doll brand for the next generation as well as the last few. I can’t remember a movie derived from a Toy brand creating so much ‘noise’ before in mainstream media, and so again we have to recognise Mattel’s success here.

At the same time as we have seen big success with some movies this year, we have also seen an unusual number of flops. Hasbro’s Dungeons & Dragons seems to have failed to meet commercial expectations despite being a critically well received movie with a good cast. 2023 has also been disappointing so far for The Walt Disney Company with more flops than we have been used to seeing. Overall though, as is usual we have had big hits AND big flops, and so from an overall Toy business perspective, the movie business has been more of a help than a hindrance for Toy companies so far in 2023.

SOURCING & SUPPLY CHAIN TRENDS

As many of you reading this will know I spend a lot of time advising Toy & Games companies on their Sourcing efforts, and especially help them review their supply chain risk diversification in these crazy times we live in right now. The good news in 2023 has been that we have seen a major reversal in the exorbitant shipping costs which affected us coming out of the pandemic.

The other major trend is the continuing ebbing away of Toy manufacturing from China. The relationship between the two great powers of the USA and China has become a dominant issue for many of my clients working in the Sourcing function. Some of the biggest mass market retailers in North America are telling my clients that they need to move at least 25% to 35% of their production out of China in the next couple of years due to the sourcing diversification strategies of these companies. Hasbro & Spin Master are already reportedly more than 50% outside of China. The challenge as ever though is that China has the world’s most efficient and (comparatively speaking!) easiest Toy factories to work with.

Capable, experienced and efficient capacity outside of China is limited and in high demand. Sourcing from new geographies inevitably comes with problems, delays, challenges and above all more management time and hassle. In some ways I guess I should be grateful as it is the difficulty of managing new geographies which provides me with a substantial supply of Consultancy gigs, but I don’t take any pleasure in things getting harder for companies in our industry.

The one thing I can guarantee though is this – acting like the proverbial ostrich with its head in the sand is not going to be a better solution going forward. In fact if I can use another analogy to illustrate how I see the current status of Toy Sourcing it’s more like the frog in a pan that doesn’t notice it is boiling until it is too late. The world has changed and will continue to change whether we like it or not, and successful companies don’t just react, they pre-empt and plan for the future.

The New York Times reported this week that China’s overall exports are down 14.5% in July versus July of 2022, and that in the first half of 2023, U.S. imports from China dropped by 25% year on year – by any standards that is dramatic. The reality here is that some manufacturing is moving away from China as the perceived geopolitical risks have risen. My clients (which include some of the biggest Toy companies in the world are now taking bold steps to set up production with factories in other geographies based on perceived risks not necessarily on the reality of what is happening.

I’m seeing a lot of emphasis on Mexico, Indonesia & India for new production as Vietnam capacity is constrained and factories there are tending to be quite full. A couple of weeks back I toured a U.S. company around Toy factories in India. The capabilities in India, along with the depth of supply chain are growing, but like with any new geography, the experience and smoothness of working has a long way to go to match what China can do currently. The new normal is going to be more Sourcing problems as companies balance out diversification with efficiency. Above all though we need compliant capacity first and foremost, with cheap labour second in priority and so we will end up going to any countries which can meet these 2 priority needs.

There is nothing judgmental, negative or political about this perspective on China losing Toy production by the way, it’s just that China’s place in the world has evolved. Going forward it seems unlikely that a developed economy is going to be the right place to manufacture ALL of the world’s Toys when we rely on cheap labour in our processes. China is the world’s 2nd largest Toy market, and we're unlikely to see that changing any time soon with China having 1.4 billion increasingly wealthy people, and with a culture of having fewer children but ‘investing’ more in the development of those children than some countries. China is still manufacturing the majority of the world’s Toys today, and so I don’t see us EVER stopping from having some manufacturing in China, but going forward we will be working with a multi-hub Sourcing situation, and China will consistently lose share of global Toy manufacturing consistently over the next decade.

FIND OUT MORE ABOUT TOY SOURCING AT TOYFAIR IN NEW YORK

If you’re interested in hearing more about this topic of Sourcing and why the world is changing away from relying primarily on China as a hub for Toy production, you can hear me present on this topic at the Toy Association’s Toyfair in New York this time round. On Sept 30th 2023 at 9.30am I will be sharing my thoughts, conclusions and a whole load of data with those who turn up to listen to my presentation. https://tfny2023.mapyourshow.com/8_0/sessions/session-details.cfm?scheduleid=3

If you want to meet for coffee, tea or some other form of liquid sustenance at the New York show, please feel free to drop me a line :)

DEMOGRAPHIC CHALLENGES & SUSTAINABILITY: THE LONG-TERM THREATS TO THE TOY INDUSTRY

I’ve written previously in this newsletter series about these two topics, but while we are all focused on the considerable commercial challenges we face this year with the inventory situation and cash strapped consumers, we also need to keep an eye on longer term trends, so I’m going to reiterate:

Firstly, birth rates are falling in all major Toy markets. This is a long-term threat to the Toy business if we stay doing the same things in the same way. The ‘Kidult’ opportunity offers a significant incremental upside to the traditional Kids business. And so if I had to predict how the Toy business would look different in ten or twenty years, I think that nearly all Toy companies will need to diversify their consumer target profile to avoid fighting for scraps in an increasingly reducing pond.

Secondly, the other major risk I see for the overall Toy business from a longer-term perspective is all that comes from the need for ever greater sustainability, and the potential for consumer plastic rejection. We know that we could already make most Toys out of bio-based plastics, but we also know that retailers/consumers won’t pay (en masse) the c. 40-60% price premium for that. We also know that massive upsurge in bio plastics production could adversely affect global food production and food prices. The obvious answer here to me is that all Toy companies should have serious strategies for ‘Plan B’ which includes non-plastic, non-fossil fuel derived materials. Wood, cardboard and other sustainable materials should be an ever-increasing part of your product mix if you want to ensure you remain successful over the next decade.

PLAYING AT BUSINESS PODCAST

100 EPISODES OF ‘PLAYING AT BUSINESS’ PODCAST

Back in 2018 I started the Playing At Business podcast with the aim of sharing knowledge about the Toy & Games business. There were three motives: 1. A genuine desire to help those people and companies who were newer to the business and don't know all the answers 2. An easy reference tool I could refer people to to avoid having to answer the same questions repeatedly 3. To act as a marketing tool for my Consultancy business. And over the past 5 years, the podcast has been fairly successful in all three respects based on feedback from listeners.

So, if you've been with me from the start - many, many thanks, watch out for more episodes coming soon. And if you have yet to listen, why not join the other listeners and check it out...

Anyway, here's the latest episodes here:

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.

https://playingatbusiness.libsyn.com/ep-100-how-to-recruit-good-people-find-new-job-roles-in-the-toy-business

EP 99 – Gift & Hobby Distribution Channels (The Original Kidult Toy Business?!)

Guess what – people have been buying Toys for adults for a very long time. Even though the ‘Kidult’ thing is the big noise nowadays, hobbyists and people buying Toyetic gifts for adults have been around for a long while.

Listen in to Episode 99 as we look at these adjacent areas in more detail:

https://playingatbusiness.libsyn.com/ep-99-gift-hobby-distribution-channels

EP 98 – How The Toy Industry Clears Excess Inventory

A few episodes back we looked at why excess inventory is so dangerous - in this episode we move on to look at the practicalities of how our industry manages excess inventory, where they sell it, how it works and some major banana skins to watch out for when selling clearance stock!

https://playingatbusiness.libsyn.com/ep-98-how-the-toy-industry-clears-excess-inventory

AND FINALLY…

KIDS INDIA, MUMBAI - I'll be attending the Kids India show in Mumbai in a few weeks. If you will be there & want to meet, please get in touch.

And if you want to find out more about my 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. For more information on our services, click here:

https://www.toyindustryjournal.com/toy-business-consultancy

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