WHEN THE GOING GETS TOUGH: 5 PRODUCT TYPES WHICH SELL DURING TOUGH TIMES…
After a buoyant couple of years in which the toy & game business soared, despite, or perhaps because of a global pandemic, 2022 is turning into a tough year for many businesses and for the industry as a whole.
Cost of living crises are rolling around the world caused by higher inflation than we have seen in most western economies since the 1970s. As a result, we seem to be heading into unknown territory whereby even toy sales have a tough time. This is something most of us haven’t really experienced. Even during the global financial crisis, things were more difficult than before in our business, but more for reasons of finance and the general pressure our retailers were under. Retail sell through was not catastrophic during the financial crisis of the late noughties. Global toy sales stayed more or less the same throughout this period and returned back to single digit growth by 2010 based on some old reports I dug out of my archives recently.
Normally the toy business is famously recession resistant, but that’s based on recession i.e. an economic contraction. But most of us haven’t worked in an environment where inflation erodes consumer disposable spending in a stealthy way like is happening right now. It’s one thing to be buying toys for your children when things are tight financially speaking, but when the more fundamental human needs are so much more costly than we are used to, if a parent has to decide between keeping their children warm, feeding them or buying them toys, then the toys will come a distant 3rd. This is why I believe that we could see the first major regression in the value of the global toy market (in real terms) of most of our working lifetime in 2022.
So, the question is where should we be focusing our efforts in the light of the tough times we are living through? Which products should we proceed with for 2023 and beyond? Which products should get more of our marketing spend and sales team focus?
Clearly, it’s difficult to answer that product specifically for every toy & game business, but there are some key factors to consider based on what happened during the global financial crisis when toy companies battened down the hatches:
1. Lower price points – there is a clear risk of consumers ‘trading down’ i.e. buying toys for their kids still but buying cheaper lower spec products instead of the more expensive ones they may have bought previously. The one fundamental decision to make for toy & games companies now is do we have the correct balance of price points in our product portfolio for these difficult times? One positive feature that came out of the global financial crisis was that the major toy companies who had generally paid less attention to lower priced toys really embraced the collectibles categories which have been some of the most vibrant over the last 10 to 15 years. It could well be time to focus on some lower cost toys & games for the next couple of sales cycles.
2. Consider cancelling any speculative products in development – most toy & game businesses have been through tough cycles before and understand what type of products to develop in general perfectly well. This though may not be the best time to launch that new really out there concept that your creative team are really keen on. This is more a time to focus on stable, dependable product formulae…unless you are so sure of your major new initiative and have the ‘minerals’ to put your money where your mouth is and to invest heavily in marketing to drive sales at a time when many companies will cut marketing spend.
3. Focus marketing spend on sure bets – retailers don’t normally like taking inventory risks, but in a climate like this when inventory is hanging around retail like a stale old sandwich, your customers will need persuasion to make stock commitments. Regardless of where you are spending, if you spend (comparatively big) to drive retail sell through despite considerable consumer resistance then you are more likely to sell in and to maintain sales revenues as close to previous as possible. In these tough times, marketing can really work and give you competitive advantage versus competitors who reduce their marketing budgets.
4. Known brands – another reality we need to face in the current climate is that struggling consumers and struggling retailers buy known brands that they trust. This may be licensed products, it may be your own already established brands, but this may not be a prudent time to launch completely new IP.
5. Brilliantly compelling products can sell regardless of the above rules! – Hasbro launched various new iterations of Furby during the tail end of the financial crisis last time around at prices above $50 and topped the charts. The boom in kids’ tablets launched by Vtech, Leapfrog & KD Group also happened towards the tail end of the financial crisis. The reality though of course is that Hasbro & the tablet companies invested heavily in marketing to get these more expensive products to sell.
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/
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