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#20 HOW MANY TOY TRADE SHOWS DO WE REALLY NEED…?

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DISTOY 2023 COMMENTARY

Like some of you reading this, I am just back from the Distoy trade show event in London. This show is focused on giving Toy distributors the opportunity to select products from other markets and gives those Toy companies who run their own product development programs the opportunity to show final production products after showing prototypes /work in progress at toy fairs previously.


The Distoy show started in the noughties, when some of the UK’s biggest and most established Toy companies came together to instigate the creation of the show to allow them to efficiently preview to their overseas distributors. At one-point Distoy was almost a secret, with attendance by invitation only. I was running an SME Toy & Game business back in the noughties, and I distinctly remember hanging around the location hoping to access some of the distributors visiting the event.


For several years now though, Distoy has been an open show and one which has grown and grown over time (at least up until Covid hit). As per usual there are some dissenters & moaners about Distoy. To summarise the grumbles I have heard in short:


1. Do we really need another Toy trade show.?

2. Why don’t we go somewhere else instead i.e. L.A. ?

3. The location is expensive, why isn’t it somewhere cheaper?

4. The two hotels used as venues are both expensive and at the same time run down.

5. The lifts (elevators) are limited in number and take too long to travel up and downstairs between showrooms and back down to the foyer.

6. There is not enough open networking opportunity, especially for newer people in the industry.


I’m now going to try to answer those questions:

1. Do we really need another Toy trade show.?

Distoy is a great opportunity to meet international and especially European Toy distributors at the point of the cycle when you have finished products and when your distributors are looking at product selections for the following year.

2. Why don’t we go somewhere else instead i.e. L.A. ?

That is of course an opportunity, but it’s hardly close to Europe, and is no cheaper, it also takes longer requiring more staff time & cost.

3. The location is expensive, why isn’t it somewhere cheaper?

I would agree that the location is expensive, but it is well located for people flying into London and those travelling to the show from elsewhere in the UK. And it isn’t that expensive a show to exhibit at compared with some other trade shows.

4. The two hotels used as venues are both expensive and at the same time run down.

I understand this point - these two hotels have done very well to retain the Distoy business in my opinion. The St. James Court in particular is looking very weathered in parts, despite some new decoration & flooring replacements, other parts of the hotel are in a poor condition…but we aren’t a hotel booking industry, we’re in the Toy trade and the product speaks for itself regardless. I see this as a complaint, not as a barrier to conducting good business.

5. The lifts (elevators) are limited in number and take too long to travel up and downstairs between showrooms and back down to the foyer.

Perhaps we could all benefit from using the stairs and using some of the excess energy we imbibe in both liquid and solid form at these shows! Either way it isn’t as bad as the old Toy building in New York – I remember walking 10 to 15 stories in between meetings back in the day.

6. There is not enough open networking opportunity, especially for newer people in the industry.

Again, I understand this point. I would like to see in particular some more organised events to help new entrants to the industry network with established industry players, as the learnings available from those types of interactions are highly valuable for newcomers. For the established people staying in touch with newness is also valuable to avoid becoming set in your ways. But regardless of this point, there are plenty of networking opportunities around Distoy, and I found no difficulty in findings opportunities to hang out with other Toy & Game people outside of official show hours.


THE BROADER QUESTION – HOW MANY TRADE SHOWS DO WE NEED?

So, the traditional Toy trade show calendar has been disrupted considerably, and the break in play that Covid delivered has in some ways allowed the industry to reassess and redefine what trade shows should be conducted when. Every trade show has always had detractors:

- New York – too late.

- Spielwarenmesse in Nuremberg – too cold and too long.

- UK too small/is it worth it?

- Hong Kong – too far, too expensive, too soon after Christmas, do enough buyers visit post-Covid?

- Distoy – as per above!

I could go on and on, but the reality is that there are negative things about everything in life and business. Trade shows are hard work and do cost money and do take up time for many people in your organisation…


…BUT, these shows offer an opportunity to grab some time with your customers and partners. I don’t know any Toy or Game company who doesn’t benefit from increased interaction with their customers. Having worked with and for both corporate giants, startups and everything in between, I can’t think of any company I know who wouldn’t benefit from more time face to face with the people who buy the products we invest so much in developing.


Larger companies have so many ongoing points and issues with retailers on an ongoing basis that a quick hello and chat can often defuse some of the simpler matters which can blow up if dealt with remotely or left to coast along. Big companies also have the challenge of having to preview extensive product lines across multiple categories to multiple buyers within the same retail business. It can take a few ‘impressions’ to ensure customers have fully absorbed all the new products on offer and understood which skus will get the most marketing support and which products are ‘must list’ items.


Smaller companies tend to get a different result from Toy trade shows – they tend to get comparatively little presence in front of retailers and distributors, and as such they benefit most from the ‘speed dating ‘ format of most trade shows. An over worked Buyer can quickly tick off a lot of smaller suppliers in an hour or two towards the end of Toy fair. I know from experience how valuable these quick meetings can be for up and coming companies – nearly all of the major customers we brought on board came due top a quick topline meeting at a trade show.


For people running businesses which are partners to or are supporting actors in the business (like my own business!), trade shows are a golden opportunity to quickly say hello and get or share updates with clients. While Toy & Game companies would not choose to incur significant costs to meet with the likes of myself, they nevertheless do benefit from a quick intense period of pressing the flesh.


DO WE NEED SO MANY TOY TRADE SHOWS – MY THOUGHTS & CONCLUSIONS

All trade shows offer their own unique opportunities. Let’s quickly run through a few of them:

- Los Angeles vs NYC

I’ve read and heard a lot on this. Yes, it is inefficient and frankly a bit painful to have to attend shows on opposite coasts of the U.S. in short order. However, if there was ever a Toy market which could easily justify two shows in terms of size of opportunity and geographical breadth it would certainly be the U.S.A. Some business may prefer to do just one of these shows, but to maximise opportunities in the world’s biggest Toy market (by a long way) both are going to be imperative in my opinion.


- L.A. vs Distoy – the earlier Los Angeles gathering has been contrasted with Distoy, but I am not aware of a mass exodus of international customers to the L.A. show. I can completely understand why it makes sense for the U.S. toy business, or for those trying to break into or expand in the U.S. market from overseas to want to be at this earlier L.A. show, but in just the same way as Dallas was not really a fully international show, I don’t see L.A. becoming THE place to go versus Distoy & other shows. As one well known Spanish Toy company told me this week at Distoy, going all the way to L.A. for nearly a month versus two quick and easy days at Distoy hardly makes sense.


- LA/NYC vs HK – I genuinely think that the one long term casualty of the Covid period will be the Toy showrooms along Mody Road in Hong Kong. Much as I dearly love the place, the reality is that the one trade gathering which may be hard to justify going forward is in Hong Kong, mostly because it is less clear why retailers will visit going forward. Sourcing has changed, China is still very important, but less than previously, and Toys are now being produced all over the world. So, the question then becomes why retailers need to be in HK quite like they used to. There is no doubt mind you that China and Hong Kong will continue to be key players in the global Toy business – there is just too much expertise and capability, which we as an industry desperately need to retain, but going forward the purpose and value of HK trips for retailers, and therefore Toy companies seems to be lesser. There is no doubt that visiting factories in China will continue, and the expertise in Hong Kong sourcing & development teams needs to be and will be retained, but there seems less and less reason for this gathering as part of the annual sell-in cycle going forward.


IN CONCLUSION

I suggest then that the bottom line here is that companies have to prioritise based on their own unique business position, priorities and budgets. The reality for most companies though should be that more trade shows will deliver better results versus less as a general rule, and so I expect Distoy to grow back to pre-Covid levels in the next couple of years, and I expect the L.A. shows to continue with some expansion. I also expect the oldest and biggest shows like the Spielwarenmesse and New York to continue to be critical.


In my opinion, the final fallout of the post-Covid trade show schedule will be a shift in importance of the LA shows versus Hong Kong, a moderate increase in international participation in the L.A. show, and a New York show better positioned for the mass market business which is so important to the Global toy trade. So, I look forward to seeing you all around these various shows and let’s embrace the opportunities on offer versus grumbling away…


And finally, if anyone has a better place to be than in front of their customers, persuading them to buy, then that other place must be pretty good!


PLAYING AT BUSINESS PODCAST




Have you listened to the latest episodes of my PLAYING AT BUSINESS podcast:

PLAYING AT BUSINESS PODCAST

EP 97 – UNCHANGING FUNDAMENTALS OF THE TOY & GAMES BUSINESS

We are living through times of massive change and disruption. Technology is advancing at a frighteningly quick rate, and the very fabric of society has been changed by our adoption and development of new technologies.

However, despite that there are 5 unchanging fundamentals of the Toy & Games business. In this podcast we take a look at these fundamentals that have not changed for decades and are unlikely to change in the coming decades despite the huge technological change we have seen and are yet to experience.

EP 96 – 5 CHARACTERISTICS OF BEST-SELLING TOYS & GAMES

There are some recurring characteristics of bestselling Toys & Games. In this episode we run through the 5 most important features. This is not so much creative inspiration as it is a checklist for new Toy & Games products in development.

EP 95 – HOW TO SELL MORE TOYS & GAMES INTERNATIONALLY

Regardless of which country is your home market, the opportunity outside your borders is greater...in this episode we take a look at some simple ways to significantly increase your export sales of Toys & Games.

AND FINALLY…

For over a decade, my company has been helping Toy & Games companies get ahead. If you want to find out more about my Toy & Game business consultancy services, please just click the link below. We have helped hundreds of Toy & Game companies to get ahead and grow sales/make more profit. I have worked on all product categories across a 20+ 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

The Ever-Expanding Relationship between Video Games and the Toy Business: A Long-Term Lucrative Connection

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It’s taken me a few weeks to get around to writing this article due to the demands of work I have been doing for my clients recently. And every few days as I inadvertently delayed writing this, The Super Mario Bros movie kept grossing more and more at the box office!


At the time of writing, this movie spin-off from the long-term Nintendo gaming franchise has grossed more than $1.2billion at the global box office, is currently ranked as the 24th highest grossing movie globally of all time and currently sits at 15th highest grossing U.S. movie ever. Just to put this in context, globally speaking this iteration of one of everyone’s favourite video gaming franchises has outperformed such blockbusters as The Dark Knight, Frozen 2, Shrek 2 & Black Panther: Wakanda Forever. If you had to describe the box office success achieved so far by this instalment of Mario & Friends in one word, then that word would be MASSIVE!

Which is all well and good, but you could ask where the link to the Toy business is, well how about this – Jakks Pacific produced the Toy line for the Super Mario Bros movie, and shortly before the movie released their share price was under $14, whereas on the day of writing the share price sits above $22, meaning an increase in share price of more than 50% (!).

The reality here is that in effect this license has provided Jakks Pacific with a double whammy of an opportunity – firstly Jakks have been making Toys based on the gaming franchise for some time – nearly ten years from what I can find/remember. The gaming iterations of the franchise have offered significant licensing strength to make the Toy line a perennial feature of Jakks Pacific’s line, but then when you add a massive blockbuster movie event with all the eyes on screen and the marketing spend that goes with that, suddenly investors perceive that to merit a massive increase in the value of the company.

The interesting thing here though is that the link between gaming and Toys is hardly a new thing…

A LONG-TERM SYMBIOTIC RELATIONSHIP


The strong link between video gaming and Toys became apparent in the 1980s when mass adoption of home entertainment gaming systems first came to the fore. Classic video game franchises like Pac-Man and Donkey Kong transitioned into toys, bringing virtual characters into the hands of children everywhere in Toy format. This evolution created a strong connection between the two industries, with toy companies recognizing the potential of video game-inspired products.



Both Mattel & Hasbro were involved in the console gaming space in the 1980’s– Mattel’s Intellivision reportedly sold more than 3 million units and was at one point considered a serious threat to the market leading Atari 2600 console, although Atari’s machine sold 30 million units and was eventually the clear winner. Hasbro also had a console in development – the NEMO was in development around the mid to late ‘80s, but despite Hasbro’s reported hunger at the time to be in the business of video gaming and consoles, they eventually had to pull the plug reportedly due to the high demand for personal computers, which lead to a worldwide shortage in VRAM chips and a commercially unviable price point.


MOVING ONTO THE 1990s & NOUGHTIES

Toy industry behemoths Mattel and Hasbro didn’t stop there though. Around the time I joined the Toy business at the turn of the millennium, both Hasbro & Mattel were in the process of getting bloody noses from their forays into the gaming space. I remember working on consumer research projects for Hasbro Interactive 20+ years ago and can vaguely remember through the sands of time that the products were well programmed, fully functional and fun to play…but they lacked the tween/teen kudos which was and is often necessary in that space. Initially Hasbro Interactive was successful, and in a fairly short time became the No. 3 video games publisher. But after a while Hasbro struggled to keep the company profitable, and following the dotcom crash and the company’s widely reported woes of the early noughties the assets of Hasbro Interactive were sold off. Around the same time Mattel were also taking a beating on their The Learning Company business, eventually describing it as a loss-making distraction as they ditched the video gaming space and refocused on Toys.


LEGO TURNS INTERACTIVE


Whereas Hasbro & Mattel suffered via their involvement with video gaming in the noughties, Lego on the other hand rose like a metaphorical phoenix from the flames on the back of their partnership with the Star Wars franchise for among other things a console game in the mid noughties. It’s hard to believe today with Lego’s massive success in recent times, but Lego was struggling back then. One of the issues reported was that while parents loved Lego for the functional and developmental benefits it offered to children, the kids themselves didn’t find Lego that cool compared to other hot Toy products which had more ‘playground currency’. By partnering with Star Wars, and using video gaming as the touchpoint, Lego effectively made Lego ‘cool’ among kids as well as parents – this is truly the holy grail as far as the Toy industry is concerned, and Lego have never looked back since that point.

Now having given Lego great credit for using video gaming platforms to reinvigorate their mighty brand, it has been suggested that the one major strategic mistake Lego have made this century so far is to allow someone else to effectively ‘own’ 3d block building in the digital space. Minecraft has been a huge driver of both kids’ interaction and time commitment, but Minecraft as a Toy license has also been hugely successful – to the extent that Lego even hold the Minecraft license for several products themselves. More than ten years after launching, Minecraft is still getting c. 140 million monthly uses, which in turn is still driving Toy sales.

Skylanders: Video Game and Toys Fused Together


Back in 2011, Activision launched Skylanders – a new franchise which fused console gaming with physical Toys. The Toys could be played with offline of course, but then could be placed on the ‘Portal of Power’ to integrate the characters into the game. Commercially speaking, Skylanders were hugely successful with more than 175 Toys sold, and with total revenues in excess of $3billion. Skylanders will be remembered due to the level of success achieved and for the successful execution of a fused analogue/digital play experience. However, there was one fundamental business model disadvantage with Skylanders which eventually influenced the brand fading away from the market: when you look at console gaming & Toys, you can see two very different cost structures. Video games tend to have very high development costs i.e. just to put this in context, some estimates suggest that a major AAA title like Call of Duty can cost $250m to develop (!), but once developed, the physical inventory and distribution costs are relatively minimal for the publisher. With Toys the opposite applies – Toys are comparatively cheap to develop, in fact it costs peanuts to develop a new Toy versus a major video game, BUT the inventory cost represents a high percentage of the sales value in comparison i.e somewhere between 25% to 35% of Toy company revenues are spent on direct product costs. This means that the decision to fully commit to develop a video game is the biggest financial decision, whereas with Toys the biggest risk is the inventory commitment. Skylanders then, although it was truly brilliant, combined the two riskiest elements of both the Toy & gaming business models – high development costs & high inventory risk.

To put this in further context, we shouldn’t just look at the most successful iteration of fused Toy & gaming products – we should look at something that didn’t work and the costs of that. THQ was once a mighty force in video gaming, but alas suffered greatly from the flop of their uDraw product which was another Toy/gaming fusion product launched around the same time as Skylanders. To cut a long painful saga short, the product failed to excite and at one point THQ reported a revenue shortfall of $100m+ on the product and an excess inventory of 1.4m units. In this case the failure of the product combined with the excessively risky business model was a major factor in THQ’s eventual demise.

FROM VIDEO GAME RETAIL TO TOY STORES?

I could go on and on looking at products and franchises which prove the clear symbiotic relationship between gaming and Toys (I didn’t even mention Fortnite, Angry Birds and so many more), but by now you probably get the point – because of the crossover in consumer between the two adjacent industries, and the strength of characterisation with clear Toyetic appeal, there is always likely to be a link. The Kidult Toy trend about which I have written extensively elsewhere is only going to strengthen the links between Toys & gaming.


One clear physical symptom of how the world has changed is the fact that many video games retailers with physical stores are now handing over more and more of their in-store footage to Toy products. Over the past few years, as the delivery of gaming has transitioned to an ever-increasing extent to online via download or live play, there appears to be a revenue gap these retailers need to fill. This trend began with the obvious links – at one point the Toys you would see in stores like GAME in the UK would be those with clear links to gaming – like the perennial Super Mario Toys referenced earlier from Jakks Pacific, but in recent times, alongside the growth in the Kidult Toy trend and the rise of Funko, these stores seem to be stocking all types of Toys where they fit with geek culture.

Toy Companies Back Playing in this Space: Hasbro and Spin Master

Arguably the biggest trend we can observe in this space of Toy & gaming industry fusion currently is the return of long-standing Toy companies to the gaming space. The first example of this would be Spin Master, who having come up as a Toy company across the last 30 years or so didn’t have any of the baggage of failure that some other companies did in gaming. Spin Master’s acquisition of gaming companies like Nordlight & Toca Boca give the company a clear footprint and set of new revenue streams from the digital gaming space.

Hasbro also has a strong footprint back in the world of digital gaming these days, with leading subsidiary Wizards of the Coast having several gaming development studios in house and various gaming projects in market or under development.

There are of course many other companies working in and across these two spaces, but by this point hopefully you get the point...

IN CONCLUSION

So look, here’s the bottom line – there is a clear link between Toys & digital gaming. Sometimes the flow goes one way, sometimes the other way, but the symbiotic relationship between the two has lasted a very long time now, and looking forward, the factors pointing towards greater interactions seem greater than those pointing towards less. The current success of Super Mario Bros at the global box office shows us that gaming franchises as cultural and commercial phenomena can be as mainstream as mainstream can be.

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


PLAYING AT BUSINESS PODCAST

Have you listened to the latest episodes of my PLAYING AT BUSINESS podcast:



PLAYING AT BUSINESS PODCAST

EP 97 – UNCHANGING FUNDAMENTALS OF THE TOY & GAMES BUSINESS

We are living through times of massive change and disruption. Technology is advancing at a frighteningly quick rate, and the very fabric of society has been changed by our adoption and development of new technologies.

However, despite that there are 5 unchanging fundamentals of the Toy & Games business. In this podcast we take a look at these fundamentals that have not changed for decades and are unlikely to change in the coming decades despite the huge technological change we have seen and are yet to experience.

EP 96 – 5 CHARACTERISTICS OF BEST-SELLING TOYS & GAMES

There are some recurring characteristics of bestselling Toys & Games. In this episode we run through the 5 most important features. This is not so much creative inspiration as it is a checklist for new Toy & Games products in development.

EP 95 – HOW TO SELL MORE TOYS & GAMES INTERNATIONALLY

Regardless of which country is your home market, the opportunity outside your borders is greater...in this episode we take a look at some simple ways to significantly increase your export sales of Toys & Games.


AND FINALLY…

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 20+ 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

#18 The Ever Growing Impact Of Amazon As A Launchpad For New Toy & Games Companies

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


In the Toy & Games business Amazon has been a hot topic for a long time now. I can clearly remember ordering from Amazon in the early noughties and becoming hooked on the ease of ordering at a time when many people still relied on ultra slow dial up internet connections at home! Twenty plus years on since then Amazon is a major player in the market, and is spoken about in the same breath as such mighty retail behemoths as Walmart, Target, Carrerfour and others. Those of us who have been in business throughout these two decades of massive growth for Amazon have typically grown our own Amazon businesses alongside Amazon’s own rise. BUT one area which I see as being under appreciated by established players in the Toy & Games business is the power of Amazon as a launchpad for new businesses.



In the last five years or so, an increasingly prevalent part of my Consultancy business has been advising relatively new companies who launched via Amazon and who have achieved considerable success on Amazon across multiple markets who then need help to understand and access ‘Traditional’ distribution for Toys & Games. I’m not going to share the trade secrets of my clients, but I can share the following data without revealing any confidential information: my recent clients include multiple companies who have achieved revenues of $10m+ via Amazon alone, from a standing start and from companies and people with no track record of any kind in the Toy trade. I have advised companies who were in effect a single person running a $multi-million business, through to companies who have had several rounds of investment funding and teams of 100+ people. Many of these clients partnered up with my toy industry contacts and are now strong players in the Toy business, having started out just selling direct with a small team on Amazon.



This is a real and growing sector which is having a strong influence on the overall Toy & Games business. If you look at the top sellers on Amazon, while there are plenty of well-known brands from long established Toy companies, the top 50 or 100 products generally include a significant number of products from smaller Amazon focused companies.

The first major product/brand which I can remember building significant commercial success via Amazon was Cards Against Humanity. (If you remember an earlier example, please add in the comments box!). This simple but thoroughly compelling game concept was initially funded by a successful launch on Kickstarter, which saw the game exceed the original funding goal of $4,000, eventually hitting more than $15,000 pledged. This was a strong result based on the average Kickstarter campaign at that time, but hardly worthy of mention in terms of the overall Games category. However, the game was widely pushed and sold very well via Amazon before traditional distribution was accessed. By May 2013, estimates suggest that the game had generated an estimated $12m in revenues, which clearly represents a massively successful product launch by any standards within the Game category.



Why and how then can companies without track record, and without following all the standard ways of operating in our industry achieve so much success on Amazon…

4 KEY FACTORS DRIVING THE SUCCESS OF TOY & GAME COMPANIES WHO FOCUS SOLELY ON AMAZON AS A SALES CHANNEL

1. Capabilities Specific To Maximising Via The Amazon Platform/System

It seems clear that if you build your business based on selling to mass market box shifting retailers then the needs of these customers will drive your organisational setup, structure and capabilities. If you prefer to focus on specialist Toy retailers and independent or ‘mom & pop’ sales outlets, that will also push your capabilities and structure in a different direction. But in both these cases your efforts will be focused on a). Persuading these retailers to buy your products b). Persuading consumers to buy the products from these retailers c). Managing the process of producing & delivering inventory to the right places in the right way as per the needs (or demands!) of the retailer.


On the flip side, if you start with Amazon as your only sales channel you probably won’t invest in hiring top Sales talent who have relationships with your key customer targets, you probably won’t do broad stroke ‘shotgun blast’ style marketing campaigns and you won’t need to worry so much about a disparate set of 3rd party logistics arrangements.


Those companies who sell only on Amazon instead tend to invest in more technical knowledge – knowing how to work the Amazon system overall and knowing how to work with and in sync with Amazon’s algorithms which drive much of how Amazon decides which products to show which website visitors.


Whereas established Toy & Game companies have to balance the resources and structure needed to drive sales via Traditional channels with the requirements of Amazon, which is always going to represent a split focus, companies who launch with Amazon alone from the start instead grow the necessary departments to win on that platform.




2. Focus On Growing Sales On Amazon

Which leads nicely into the second key factor driving success for these companies who launch on Amazon first and foremost…and that is focus on the needs and concerns of this one platform/retailer only. When I talk to Toy distributors these days about taking products from my clients and selling into their markets you routinely find among the first few questions comes the requirement to be able to manage Amazon in their market to try to finesse things to cause less disruption to their other customers. This disruption is caused of course by several factors, but perhaps the weightiest factor is Amazon’s impact on retail pricing.


Whereas we normally look at key price points in traditional retail channels, with every price ending neatly in .99 i.e. $9.99, $14.99, $19.99 and so on, and with clear expectations of product specifications at each price point. The algorithms on Amazon do not automatically follow those old rules. In the end, Amazon allows us to bend many so called ’hard rules’ from packaging sizes and formats through to price points, and those companies who have the focus and therefore flexibility to amend their approach to maximise results on Amazon as opposed to sticking to rigid format from other retailers tend to do particularly well on the platform of Jeff Bezos.


3. Product Selection & Development Based on Amazon Alone

The other key point here is that while Amazon is a major customer for nearly every medium to large Toy & Games company out there, product development for those Toy Co’s tends to be driven more by the reactions and inputs of other major retailers. In the same way as retail Exclusives can be good sales drivers where the Exclusive product really fits that retailer, so these companies who focus solely on Amazon can develop products around what will work best on the Amazon platform. The most obvious example of this would be a product range with multiple iterations – just for the sake of illustration, let’s look at the iconic Monopoly board games brand. If you are trying to sell to Walmart, Carrefour, Smyths Toys or others, you will only get a limited number of versions on shelf - even for an iconic brand like Monopoly. In fact, 20 years ago, I remember joining a meeting at Hasbro with one of the major UK retailers with my role being by way of brand support to the sales team. The retailer advised that they would only take 3 versions of Monopoly, and firmly outlined that the number of SKUs would not change, but he was open to which three versions to select, and asked the sales team for advice on which versions would work best based on his stores & consumer profiles. Bear in mind this is Monopoly - a brand with many many product iterations, and a major retailer could only fit 3 versions into their planogram, and therefore opportunities in that case inevitably become about focus on fewer bigger things, and not about adding more and more SKUs.


We don’t have this restriction with Amazon. In practical terms there is not really a limit to how many Monopoly games could be (and are) sold on Amazon. When you type in ‘Monopoly board game’ into the search box on Amazon.com, more than 1000 results are returned (!).


Moreover, when you choose to buy, or even look at one product within a range, Amazon will tend to show you other products in that range, and in the future will suggest more items similar to what you previously bought before. Therefore, Amazon will tend to favour those brands which have multiple product iterations with some points of difference maybe driven by theme, consumer target, size, price point and so on. This therefore logically pushes companies who have a successful product to focus on brand extensions first, ahead of developing completely new items. Whereas with traditional bricks and mortar retail, the limits to how many products they can take per brand pushes us towards developing more totally different products across multiple product categories.


4. Driving Sales Via Amazon’s In-Built Marketing Options

I count myself as fortunate to have been trained in classic ‘blue chip’ marketing in the pre digital age, because the fundamental principles of marketing apply more today with a bemusing number of marketing options and platforms than ever before. Amazon offers several ways of driving success via marketing activity. At the most basic level is the product listing, which favours more product images, video and strong and slightly longer than is typical copy. Then we can look at the paid for marketing options. The challenge for those coming at Amazon as an addition to their Traditional distribution is that the marketing %ages which work in general in the Toy & Games business are lower than those who don’t have the same organisational cost structures can profitably justify. This again gives those companies solely focused on Amazon an advantage, not only can they afford to spend more per unit on Amazon marketing, but by being solely focused on this platform their entire organisation is deeply engaged in the ins and outs of the platform.



WHY COMPANIES WHO LAUNCH & ACHIEVE SUCCESS ON AMAZON TEND TO HAVE SUCCESS IN TRADITIONAL DISTRIBUTION CHANNELS AFTERWARDS

From a boring financial perspective, the Toy business is primarily a business concerned with risk management. OK, it’s also great fun, our products are cool and we get to make a positive impact on millions of young lives…but nevertheless from a business perspective, our business is about managing the risk of product launch failure. If you think about both retailers and distributors, they actually have a terrible business model, whereby they have to invest more in each unit than they make back in profit. So, they want to work with known and trusted products and brands which consumers will buy in sufficient numbers to avoid inventory hangovers.

Well guess what, a top seller on one platform or in one retailer is usually a safer bet than something completely untried and untested. Therefore, when distributors and retailers are offered products which they haven’t seen before, but which have already sold millions of units, then they are usually quite keen to take on those products, because consumer demand is fully proven.

I have been fortunate enough to have worked on some of the very best-selling products and brands in our industry, and unlucky (or stupid) enough to have worked on some of the worst selling. and the funny thing is I take exactly the same approach to selling each time, often meeting with the same people I have dealt with and met with for a couple of decades…and sometimes the products I am working on have clear appeal and are very compelling for the people I am presenting them to and they can’t wait to buy them. And sometimes they are literally of no interest whatsoever! My approach is the same each time, but the propensity to buy comes down to the product proposition – does it tick the boxes for the people I am presenting to. Anyway, the point is this – those product ranges I present which are established already on Amazon and are clearly appealing to Amazon’s consumer base are typically fairly easy to sell. OK, you sometimes have to talk to a few different partners before closing deals, but the fact that these products already have a commercial track record of success makes them more appealing than many others. Of all my clients who enjoyed success on Amazon first, all have gone onto achieve success via other distribution channels – my role is to accelerate the success they would most probably enjoy eventually regardless of my input, but if I can save them a couple of years by way of the right introductions that would seem to be a worthwhile outcome all round.


AMAZON AS A LAUNCHPAD FOR TOY & GAMES COMPANIES: THE FUTURE PROSPECTS

So, what does all this mean for the rest of the Toy business? Will Amazon continue to be a springboard for new Toy & Game companies? Will there be more companies building fairly large-scale businesses out of left field? In short, I believe the answer is absolutely yes!

There are some clear advantages for companies launching on Amazon and focusing on building up that business first before looking at any other distribution channels. Amazon is not going away – in fact, there is an argument to suggest that as artificial intelligence advances, Amazon as a leading tech firm with massive resources and grasp of technology may move even further ahead in a competitive context.

Either way, we can learn a lot from these companies who build their businesses on Amazon first and then to look to rollout further into other distribution channels. But there may also be a myriad of successful distribution opportunities out there for those companies quick enough to spot successful Amazon focused companies who need a helping hand accessing other distribution channels.


OTHER CONTENT


PLAYING AT BUSINESS PODCAST

EP 97 – UNCHANGING FUNDAMENTALS OF THE TOY & GAMES BUSINESS

We are living through times of massive change and disruption. Technology is advancing at a frighteningly quick rate, and the very fabric of society has been changed by our adoption and development of new technologies.

However, despite that there are 5 unchanging fundamentals of the Toy & Games business. In this podcast we take a look at these fundamentals that have not changed for decades and are unlikely to change in the coming decades despite the huge technological change we have seen and are yet to experience.


EP 96 – 5 CHARACTERISTICS OF BEST-SELLING TOYS & GAMES

There are some recurring characteristics of bestselling Toys & Games. In this episode we run through the 5 most important features. This is not so much creative inspiration as it is a ticklist for new Toy & Games products in development.

EP 95 – HOW TO SELL MORE TOYS & GAMES INTERNATIONALLY

Regardless of which country is your home market, the opportunity outside your borders is greater...in this episode we take a look at some simple ways to significantly increase your export sales of Toys & Games.

AND FINALLY…

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 20+ year career in Toys & Games, and genuinely love sharing knowledge, contacts and facilitating greater success for our clients.

As per the content of this newsletter, if you have successfully established a business selling via Amazon and want help, advice and hands on help with setting up distribution into ‘Traditional’ sales channels for Toys & games, you can find out more about our Company services & get in touch 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

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