Tag Archives: toy industry journal

5 Things Small Toy Companies Can Learn From Big Companies

5 Things Small Toy Companies Can Learn From Big Companies

Apparently the grass is always greener on the other side. In working at major corporate companies and in working for toy companies with a handful of employees, there is often an over estimation of the advantages of being at the opposite end of the spectrum, and a lack of appreciation of the advantages from one’s current company size.

Perhaps it’s human nature to bemoan the challenges we face on a daily basis until they build into mountains from mole hills!

Anyway, to help companies & people in companies keep perspective, here’s 5 things small toy companies can learn from big toy companies:

1. Ruthless stock discipline – big companies are ruthless on stock. They still experience product flops and over ordering on occasion, but they manage the process efficiently and without emotion, because excess stock holding kills margin, increases warehousing costs and ties up much needed cash…in effect, excess stock is like gunk sitting in someone’s bloodstream straining the heart from beating and pumping out vitality. Seriously, if you look at the ever more prevalent bargain stores selling clearance product, you will notice top brands in there. So kill that excess stock holding before it can harm your company.

2. Brand focus – if you analyse the approach of the major corporate toy companies they are not focused on products to the same degree that smaller companies are – they are more focused on building, nurturing and exploiting brands. Brands are key in the toy biz because proven brands drive retail listings and consumer sell through on an ongoing basis often, leading to greater long term stability and prosperity…more’s the point, brands get sold for big bucks in the toy business – ever year sees brand acquisitions for tens or even hundreds of millions of $$$.

3. Process driven – in smaller companies things tend to get done in a more ad hoc, less structured way. In big toy companies process drives everything, there are routine milestone meetings to ensure sufficient product is delivered, that the product is right for the market, that all markets buy in, that the TV advertising developed is fit for purpose, engineering is driven by a process, manufacturing etc. Sometimes all this process gets in the way of delivering great products to market, but overall it greats a systematic approach which is less likely to screw up. Clearly smaller companies don’t have so many products and people to point in the right direction, but still, in most cases in our experience from the Consulting side of our business, more process is usually a good thing for smaller toy companies!

4. Longer term focus – the toy business is cyclical, and the cycle runs around a calendar year. Yet one of the major differences with big toy companies is their longer term process – they will be more likely to be looking at least an extra year ahead versus a smaller company focused nearly 100% on the current cycle. Larger companies need to avoid one good selling cycle being followed by a bad one because: a). they are often accountable to the stock market where such a roller coaster effect is frowned upon and b). because a sales downturn means organisational upheaval/layoffs. When working with smaller toy & game companies we find that pulling together a 3-5 year plan can, and usually does, lead towards more stability and both short term and long term success. As the saying goes, if you don’t know where you’re going you aren’t going to get there!

5. Consumer Testing – the major corporate toy companies conduct ongoing testing of their products and brands with consumers (we know this for sure, as our Consultancy business conducts playtestiing and qualitiative consumer research for many of them!). Smaller companies have a tendency to ‘chuck things at the wall and see what sticks’. Which is not logical when you look at the facts…published research suggests that between 65-75% of all new toy skus in market are new every year. YET, published research also shows that new skus account for just over 1/3 of total sales i.e. carry forward products account for around 2/3rds of all sales, and critically they tend to deliver more profitability as they don’t need new R & D expenditure, tend to need less marketing and less trade marketing spend. Moreover, proven products which sell year after year make stock ordering considerably less risky! The big companies know this, and so they conduct consumer testing to increase the chances of their products working and to increase the chances of getting carry forward listings. (For more information on how toy research works, here’s details of how we go about doing it for reference: http://www.kidsbrandinsight.com/?page_id=169

So there you have it – next time we’ll look at what big companies can learn from smaller companies.

P.S. Our toy review service TheToyVerdict.com has just opened entries to The Toy Verdict Awards, for more information and to enter, just click here: http://www.thetoyverdict.com/the-toy-verdict-awards/

 

by Steve Reece, CEO of Kids Brand Insight www.KidsBrandInsight.com,  a leading Consultancy to toy, game and kids entertainment companies around the world, which helps companies find the right toy & game factories, consumer research test their products with kids and parents and secure export distribution/market entry around the world.

The European Toy Market – Large But Fragmented!

The European Toy Market – Large But Fragmented!

The European market might appear exotic and potentially lucrative at first glance. With the 2nd and 3rd biggest retailers in the world based in Europe (Carrefour & Tesco), with a population of c. 730m and a combined economy ranked by the IMF as the largest in the world, it is an opportunity too big to ignore.

Those wandering over there bright eyed with $$$ signs in their eyes however,  should beware, because while Europe combined is huge commercially speaking, it’s also highly fragmented, and very easy to bite off more than you can chew. There is a large degree of homogeneity (in practical terms) about the US market for instance, but Europe doesn’t work like that.

While Europe may be of a similar(ish!) size geographically speaking to the USA, there are 44 sovereign states with their capitals in Europe, and 50 who have some territory within Europe. And for every one of those there are local customs, laws, retail differences, and in general bucketloads of cultural, legal and commercial diversity.

Furthermore, there’s a very significant language barrier to doing business, with 23 official languages of the European Union, and a mind blowing 230 languages and dialects in total. An English only speaker can’t always easily operate in every market as a sales person. To illustrate this – imagine you want to sell to retail in France or Spain, but you don’t speak French or Spanish. What can you do? You can dial head office anyway and speak English, but as we all know, it’s often fruitless calling retail switchboards in markets where you can speak the language, it doesn’t get any easier when they don’t speak the same language as you!

You can engage a distributor, which generally would be recommended to begin with, but there are market dynamics at play which complicate matters. For instance, if you sell to 2 distributors, with one in France, and one in Benelux (Belgium, Holland and Luxembourg), then their retailers might overlap territories, and generally pricing is lower in Benelux, so grey market shipment by retailers could destroy your French business and leave you with an irate, alienated distributor.

Of course product localisations are needed, with some markets needing 3 languages per product or more, and in the same way as a typo would look outrageous on English language packaging, so an error in any one of those 23 official languages will also.

Our journey to securing European distribution has yet another hurdle to over come yet, in terms of customs regulations and movement of goods. Now the good thing is thanks to the European Union, trading is harmonised across EU member states, with a mostly effective ‘free’ market in operation. The challenge comes when trying to ship in Europe outside of the European Union, which at the time of writing means Iceland, Liechtenstein, Norway and Switzerland (the EFTA countries – don’t ask!), Russia, the Ukraine, Croatia, Bosnia, Macedonia, Turkey & Belarus. Now frankly, the majority of the opportunity is within the EU countries, especially UK, France, Germany, Spain & Italy, but every extra roadblock laid reduces the low hanging fruit.

As if this wasn’t all complicated enough so far, currency is another major factor. The UK has the £pound, the other EU states mostly have the €Euro, stock is bought from China in $USD, and there are a litany of other local currencies to boot (most notably in Sweden, Denmark, Poland and Switzerland)! Currency management is a vital part of trading in Europe, if you don’t want to deal with that complexity, you’d be wise to trade $USD FOB only!

Staffing is even more complicated with different employment laws in each country, as well as European wide legislation which tends to be more employee friendly than in North America. Commercial agents have guaranteed residual commissions owing to them across the European Union, so beware on that front. And if you considered hiring staff in France, my advice would be don’t do it lightly without due diligence. There is a disgusting but perhaps not inaccurate saying that it’s easier to chop off your own hand than to fire a French employee!

There are numerous other significant barriers to doing business which I don’t have space to go into here, but nevertheless, we can clearly see that while the opportunity is large in Europe, it’s not that straightforward, and ‘gung ho’ megalomania should be tempered with a harsh dose of practical reality!

Having emphasised the difficulties, there are some clear forward paths we can look at now. The first and most prevalent of which is to utilise distributors, at least in the first instance, who understand the local nuances, have the retail relationships and take legal responsibility for trading in each market. This may not be a long term strategy you are very comfortable with, but it took even the Hasbros & Mattels of this world decades to set up an office in every decent sized market in Europe.

The second option is the ‘beach head’ strategy, whereby you pick one market to trade direct to retail in, thus establishing your beach head and branch out from there over time. For English speaking companies e.g. from North America or Australia, in most instances the beach head market would be the UK, as we tea drinkers speak (nearly!) the same language, the Licenses tend to convert as well here as anywhere (although we don’t play the same kind of football, so sports doesn’t tend to cut it), and this is one of the three biggest individual toy markets in Europe. Latin American companies may head to Spain first as their beach head market due to language similarities.

The third option is to sell to distributors and retailers on an FOB basis meaning only outlaying the cost of two sets of air fares and hotels at risk, versus everything that comes with setting up offices.

And in case you’re already established in one or more EU markets, here’s my rough list of priority for your distribution efforts and why (although this will depend to some degree on your product category, as category strength per market varies, it’s not a bad starting point):

The UK, as mentioned is one of the three biggest markets. France of similar size as a toy market, although with significant local challenges & diversity factors. Germany would be next on my list, it’s a large market, but very decentralised, and retail is massively fragmented – in fact Germany is home to the largest specialty market in Europe, plus the product mix tends to differ in Germany versus many other markets. Spain would be next, although expect to TV advertise everything, closely followed by Italy. Then the next tier would include the Nordic countries, Holland, Poland, the Czech Republic and other markets East of Germany!

Rolling out all those markets would keep most businesses busy for a decade or more, so I’ll write another article in 2022 with some suggestions on where to go to next!

How has Designing Toys Changed?

“In The World of Limitations, there is a Universe of Possibilities and a Galaxy of Opportunities”.

By Peter A. Wachtel, Chief Creative KID @KIDToyology® (designer+inventor+teacher+writer=creator)

Many of us (at one time or another) have asked “what happened to the good old days”. It is no any different in the toy industry. Ten or fifteen years ago there were more than triple the amount of toy companies as there are today. What has changed? Everything. The economy, technology and the internet, as well as people’s lives. However the need for good, creative, fun, affordable and reliable toys for kids and themselves is still here.

Technology, the internet and today’s fast paced lifestyles has given us the need for more sophisticated toys that really challenge our imaginations, skills and knowledge. Toys have become more than just a fun thing to pass the time, but a way to learn and grow and experience life. In the past a toy would take up to 2 years to take to market. Now, toys are conceived, designed, manufactured and distributed within 6 months. Toy designing has changed by ways of safety, style, play value, manufacturing, retail distribution, cost, as well as brand awareness. The designer must think like a kid and an adult at the same time. Today’s designers have evolved as well. They now must be not only a designer, but also an educator, a marketing person and sales person- “An all in one design machine”.

I used to think about the possibility of becoming a child psychologist, a neurosurgeon, or a lawyer. I never followed those career choices but, I took what each did best- listen, think, learn, hand skills, knowledge, history and the ability to prove your idea worthy. All skills needed when we design, invent, market, sell, teach and write about toys- we are a “Jack of all Trades and Master of even more”. Toys have become a way of life and not just a profession for us. We as designers are here to inspire, entertain and innovate the world. Everything that is around you is worthy of exploration and use. Our kids and our futures depends on it. Here are ten features of a “Good Toy” that have stayed with us over the years.

Ten Features of a Good Toy:

  1. Fun to use
  2. Interesting to the child
  3. Is safe and durable
  4. Stimulates creativity and imagination
  5. Encourages inquisitiveness and resourcefulness
  6. Is a tool for learning
  7. Is challenging yet not frustrating
  8. Invites repeated use
  9. Involves child interaction
  10. Addresses developing needs

 

@KIDToyology® Playful Product Design & Innoventionhttp://about.me/KidToyology