Spielwarenmesse: An inside view on European toy markets - Germany

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25. November 2014 / Market

An inside view on European toy markets - Germany

from Steve Reece /  Show comments

Insights into the German toy market

This is the third of a three article series looking at the biggest toy markets in Europe (Germany, France and the U.K.). We began with the United Kingdom and France, now we look at Germany.

(In case you missed the articles on France and the UK)

Germany’s economy is the 4th largest in the world, ranking it above both the UK & France. Germany is also a country with a long and distinguished history of play. These two factors explain why Germany is ranked in the top 6 toy markets in the world in terms of $market size.

However, the German toy market has some very distinctive and different features which it’s important to fully understand. The product mix is quite different in Germany when compared with other major markets, as is the distribution channel matrix. 

Germany is a comparatively new country (created in 1871), before which time it was a collection of smaller states and principalities, this history helps to explain why Germany is a comparatively decentralised commercial market versus the UK & France for instance, where the whole nation looks towards one central power and commercial base.

Retail/Distribution

Partly as a result of this decentralisation, there is no one or two major retailers in Germany who can claim a very substantial market share. Instead the market share is spread between more retail chains and independent toy stores. Clearly this has both positive and negative implications for toy companies – it’s normally viewed as a major positive to not have any one retailer who can make or break your range/business, as it could be argued is the case in the USA or UK for instance. If listings aren’t achieved with one particular retail chain then the negative sales impact is not so strong. However, on the flipside, the negative implication is much more administrative and logistical work to manage and fulfil business with many more customers.

One of the most charming features of the German toy retail marketplace is the large number of independent toy stores. Whereas other markets have often seen a dramatic decline in independent toy numbers to the point that numbers have dwindled to almost marginal/peripheral levels, the same has not happened in Germany yet. For sure the number of independent stores appears to have reduced in Germany in recent years, and it looks possible that this slow decline may continue, but there are still many thousands of independent stores trading happily and successfully. In many instances, companies choose to supply via buying groups (including Vedes and Idee Und Spiel, both covering over 1000 outlets & Spiel Und Spass with over 400) or wholesalers to simplify logistical arrangements/commitments. In terms of toy specialist chains, the ubiquitous Toys R Us has a strong presence in Germany with around 60 stores, operating virtually the same store format as in other European markets and as in North America. 

After the independent stores, we have to consider the department stores including Kaufhof, Mueller and Karstadt. These multi-product retailers are in effect generalist retailers but with extensive toy and game departments. With their premium placement in ‘high street’/central town locations their footfall and sales potential per store can be strong.

The hypermarket/grocery channel is reasonably strong in the German market with many hundreds of outlets carrying toy items. The channel is nowhere near as strong in Germany as it is in France though. Additionally, Germany is a comparatively advanced market in terms of online shopping with Amazon.de operating in a similar way as in other markets and having a strong market share with regards to online toy retail.

Finally on distribution, often international companies will set up an office in Germany which also covers Austria & Switzerland. While Austria & Switzerland have cultural differences compared to Germany, they do (at least partly in the case of Switzerland) share use of the German language, and as they are significantly smaller markets, operations there are often rolled into a German division/subsidiary for easy management. Toy companies can usually do business in Austria from Germany without too much difficulty. However an important point to note with regards to Switzerland is that it is not a member of the European Union. This means that there are import tariffs and bureaucracy to deal with in order to ship products into Switzerland, and to get around this often the Swiss distributor will import the products and deal with the ‘red tape’ themselves.

Product

One very noticeable feature of the German market for toys is the product mix. Some types of low cost plastic products can be perceived as ‘junk’ by German parents. As a result, you find more high end materials in products in the German toy market, especially wood. In addition, toys which encourage over aggressive/violent play are often met with disapproval by German parents. The combination of these two factors explains why the traditional action figure market i.e. those figure toys driven by action oriented, archetypally ‘Boy’ targeted TV & movies is weaker in Germany than in other markets. Having said that, there is still a strong high end figure category in Germany, where products are more based on the animal kingdom and depictions of everyday life versus fantastical movie or TV properties.

The board games category is strong in Germany with dozens of games publishers, with German games consumers being highly educated and with game playing a more usual, integrated part of family life than in some markets. Finally in terms of product, the construction category is particularly strong in Germany, as parents see it as a more worthy/more acceptable play pattern than some others.

Media

Germany has several broadcasters showing children’s programming.- not least of which is Super RTL, a commercial broadcaster with close links to the toy industry. 

Practicalities

Because of the de-centralisation mentioned above, and due to the fragmented retail channels in the German retail market, it can be hard to conduct direct to retail business from a small standpoint in Germany, at least versus other markets, where as long as listings are secured with the 2-5 biggest players, significant sales volumes can be achieved. As such it would be usual to work with distributors/wholesalers in Germany to a greater degree and for longer in a company’s development.

For further information on the toy market in Germany, the official Spielwarenmesse.de blog is a good start point. Also the German toy trade association – Deutscher Verband der Spielwarenindustrie e.V is a good reference point: http://www.dvsi.de/ 

 

Author of this article:

Steve Reece, CEO Kids Brand Insight

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