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22. February 2017 / Marketing

How to find new distribution channels for toys

from Steve Reece /  Show comments

We in the toy business can tend to get very focused on our existing (traditional) retailers. In markets like the USA, France and the UK, just a few retail chains per market have a very significant market share i.e. Walmart & Target in the US, the hypermarché and toy specialist chains in France and Argos in the UK and tend to demand a large degree of focus and care from our sales teams. But there are more distribution channels in which toys fit perfectly. 

The German toy market is unusual when compared to these other major toy markets. It has a very fragmented retail base, with its preponderance of independent toy retailers and not one retailer accounting for a very large share of the market, it is somewhat unusual. This difference shifts the challenge from managing one or two highly demanding super-sized retailers to ensure you can leverage as many listings/shipments as you need, to a challenge of managing a fragmented sales network and the need for more substantial sales infrastructure.

There is a place for toys in almost every store

One distribution factor that is present in mostly equal measure in all these markets though is the concept of ‘alternative distribution’. Away from much cherished toy specialists like Toys R Us, and highly valued but very demanding multi product retailers, is a different world where toys can be present but aren’t necessarily integral/essential to the retailer in question.

While Toys R Us obviously must stock toys, and the mass market generalist retailers use the toy category to drive in store traffic and to ensure they capture as much family spending as they can, why would a book store, a furniture store or a multi-media retailer stock toys? Especially when toys are sold on a ‘firm sale’ basis i.e. the retailer buys them and keeps them, not like sale or return to supplier which is typical for books or multi-media for instance? Moreover, do these retailers merit focus and attention when they tend to take a narrow range of products from a limited number of suppliers?

Alternative distribution for smaller toy companies

The value to toy companies of such customers probably comes down to business strategy and place in the market. The 80/20 rule would probably suggest that such retailers are not worthy of the time of the sales departments in larger companies like Mattel, Hasbro or Lego for instance. Such non-core customers are more likely to be passed onto wholesalers by these big players.

However, for smaller companies there may well be value in targeting such alternative distribution, because the value of the potential opportunity may well be more significant to a company that doesn’t have full distribution into all traditional channels. My own experience would suggest that sometimes it is easier to be one of a few suppliers in a particular category than it is to be one of many. For smaller companies, a broader base may mitigate the risk that gigantic customers pose in terms of ongoing sales/listings stability and inventory.

These alternative retailers may sometimes appear to be uncommitted to the toy category – some years they are in, some years they are not, but the reality is that they do offer incremental opportunity. Sometimes they may increase their toy line around events i.e. a major book launch, or a particular season of the year. Toys can help them broaden their offer to the consumer and draw in more families to their outlets.

Toy and toy themes for particular retailers

While consumers may not be looking in such types of stores for toys specifically, the research I have conducted suggests that the average consumer does not think “I’m in a book shop, I am only here to buy books”, rather they look at and eventually purchase items which they want or even need, regardless of where they are when they buy them. Certain types of toys can fit very well with a particular retailer, i.e. the Lord of the Rings and The Hobbit film toys (& other merchandise) appear to have achieved significantly more in store space than the general line of toy products offered usually due to the clear link between the movies and the books they are derivative works of.

Toys may not seem such an obvious fit with some of these alternative distribution channels, but they still offer revenue opportunity for those willing to step outside the usual and place a sales call.


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Author of this article:

Steve Reece, CEO Kids Brand Insight

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