How The World’s Biggest Toy Companies Grew Their Distribution

How The World’s Biggest Toy Companies Grew Their Distribution

The world’s biggest toy companies are $multi-billion corporate behemoths with subsidiaries and employees all around the world. They didn’t necessarily get there quickly though. In fact, the one word which could best be used to describe how these massive toy companies grew distribution in terms of a global footprint would be SLOWLY.

It takes years to build up distribution around the world via sales agents and distributors. And then it typically takes decades for toy companies to set up subsidiaries even in the major toy markets in the world.

There are several reasons why distribution growth is seemingly so slow. The first factor to consider is that we work in an industry with an annual selling cycle, so whatever momentum you can create through the course of the selling cycle can only be built on for the following year. Bearing in mind that many (most!) toy product launches flop or at least fail to succeed well enough to come back the following year, we can see why it takes time to build a compelling must list portfolio of toy products.

Aside from the slow and laborious selling cycle, the process of finding premises for a new office and hiring staff to run them is innately risky and time consuming. For this reason, many toy companies seeking to grow enter new markets via acquisition. By buying an established company with good reputation in the country they seek to enter, with existing and strong relationships with buyers and with a good understanding of the market many years of costly trial and error can be avoided. Needless to say though, while acquisition is usually less risky as you are buying an established business you do have to pay a hefty price, and sometimes things still don’t work out. And to find good companies acquire at a realistic cost is also not easy – this also takes times, often years.

So, the reality is that even the biggest toy companies in the toy business today took decades to grow their distribution capability and capacity to the current levels. Therefore, for toy companies which are far less mature, you have to expect it to take time, and that time is measured in years. There are ways to accelerate distribution growth via sales agents or consultants for instance. This can take years off the process, but even then it will still take time!

We run a Consultancy business for toy companies. We work with major toy companies through to start ups and one person bands. For more information on how we help toy companies grow their distribution around the world: https://www.kidsbrandinsight.com/blog/toy-co-growth-booster-program/

How Many Of This Year’s Big Toy Launches Will Make It To Year 2?

How Many Of This Year’s Big Toy Launches Will Make It To Year 2?

The toy business is a very wasteful business. We have this huge churn of products each year and an annual massive product development effort which sees ongoing yearly investments in tooling, marketing materials, marketing media and manufacturing costs all spent before the product launches.

The holy grail of the toy business is to acquire or build perennial (i.e. selling every year on an ongoing basis) products and brands. These well-known products are easier to get listed by retailers, they are more likely to be bought by consumers and they are far more profitable as they need less marketing investment and far less development investment versus new products.

The challenge is that these products are not easy to come by. There are only so many established brands out there like Rubik’s Cube, Monopoly, Barbie, & Lego. Moreover, most toy companies who try to build their own brands fail to build meaningful brands with genuine consumer recognition. Those who find some degree of success in terms of evergreen products tend to have strong product formulas to keep on driving sales every year versus mass consumer brand awareness, but at least they have some element of recurring busines each year which can only be a good thing. The fact that it is hard to build massive brands or even just established perennial products shouldn’t stop us from trying.

After the investment of $billions in 2022’s toy product line, the global toy business will have to replace at least 60-70% of the product line again for 2023, which is both wasteful and imprudent if there is an opportunity to invest in new products with a better chance of hitting year 2 and beyond.

If we take a mid to long term view, over 5 to 10 years a reasonably sized toy company should be able to launch at least 1 or 2 potential perennial brands each year, and in doing so, over the course of a few years is fairly likely to find something which sticks and comes back again year after year. Then again this takes effort and commitment to creating solid foundations under your business despite the fact it’s a gruelling process.

The choice is yours – chase the quick easy wins each year and stick with the standard hamster wheel approach to the toy business or work really hard to create something permanent and recurring.

We run a Consultancy business for toy companies. We work with major toy companies through to start ups and one person bands. For more information on how we help toy companies grow their distribution around the world: www.KidsBrandInsight.com/services

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The Ever-Growing Importance Of China To The Global Toy Industry

The Ever-Growing Importance Of China To The Global Toy Industry

Spoiler alert: this article is not primarily about OEM manufacturing!

For those who have been in the toy business for a long time, China is synonymous with toy manufacturing, and has been for the working lifetimes of most people in the toy trade. China has been an incredible manufacturing resource for toy companies. Much has been written about the pressures on China’s toy manufacturing sector (including by ourselves), with rapid economic development which makes labour intensive toy production less and less viable in China. Labour cost inflation is the primary reason why toy companies are increasingly looking to Vietnam, India and other Asian markets to pick up some slack in terms of lower labour costs.

This manufacturing picture though is not the only picture. There are two major areas where China is going to offer huge opportunity, competition and activity for the toy business around the world:

Domestic China Market

There was a point in time when China’s domestic toy market was primarily generic locally manufactured toys. Over time though, as China’s economy has developed and living standards have increased substantially, China is fast becoming the major growth opportunity in the world today for established toy companies. The fact that Lego has plans to open 80+ stores in China should give a strong indication of just how big the domestic toy market opportunity is in China. If current levels of economic development and brand adoption continue, China could become the world’s biggest toy market in a decade potentially.

China therefore has growing importance to the toy industry because there are only so many countries in the world which offer such a large market alongside significant upward growth. The challenge for many toy companies though is that China (like all markets) has its own quirks in terms of culture, distribution setup, media and consumer wants. To use the Lego example again, Lego has launched products tailored to the Chinese market – this is in itself quite a statement, because Lego’s range is one of the most global in the toy business. The major U.S. stock market listed companies have been investing heavily in China’s domestic toy market for at least a decade because above all they need growth to satisfy their investors.

For smaller toy and game companies it can be daunting to know where to start with selling in China, and just like elsewhere, finding a good committed distributor can be challenging, but nevertheless the opportunities are significant and growing.

Chinese manufacturing companies launching their own brands

China has been the world’s toy manufacturing powerhouse for so long, and many manufacturing groups have generated significant wealth over decades by manufacturing toy products on an OEM basis for other companies. Even from way back though, some toy factories went direct to building their own brands in Western markets supplied from their own factories in China. This method of doing business is growing. Logically speaking it makes sense after all, maybe once a toy factory supplying OEM manufacturing might make 15% profit or more, but today with increased labour costs and constant downward pressure on pricing from customers while costs rise might be lucky to generate 5% profit. It makes sense then that of those thousands of Chinese toy factories some should invest of their wealth to seek to transition from manufacturing toys for other people to designing, manufacturing, selling and marketing their own products and brands.

This could be one of the most disruptive implications of China’s economic development for toy markets around the world, as long- established toy factories with significant expertise move up the value chain to compete with their one-time customers. In the last 12 months, our company has Consulted for more Chinese factories looking to move up the value chain and establish their own brand than we did in the 5 years before that.

China’s role in the world, and especially for us in the toy business is changing. This vast heavily populated country at one point supplied our industry with a large industrial capacity, huge workforce and cheap labour. Looking forward though, while Chinese factories will continue to play a very significant role in supplying toy companies with OEM manufacturing, that role is likely to recede over time. Whereas China’s domestic market is likely to grow significantly, and the number of Chinese toy factories switching from OEM to creating and building their own brands is going to increase significantly which will add competition and new product development streams to the market.

We run a Consultancy business advising toy companies on how to grow their business by a combination of strategic analysis and export sales facilitation. We have helped more than 100 companies grow. Our clients range from $multi-billion FMCG giants through to start ups, from long established toy companies to toy factories and everything in between. We work with companies around the world – recent projects have been delivered for clients in the USA, UK, China, Hong Kong, India, Eastern Europe and beyond. For more information on our process and methodology for growing toy sales: https://www.kidsbrandinsight.com/blog/toy-co-growth-booster-program/