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08. June 2017 / Market

The Canadian toy market: a missed opportunity for distributing toys?

from Steve Reece /  Show comments

Canada has been in the European news lately, with CETA (Comprehensive Economic And Trade Agreement) promising free trade as well as tariff reduction with Canada after eight years of gruelling negotiations. Canada offers significant opportunity for toy companies regardless of the new macro level political and legal framework. 

The more contentious legal aspect which potentially cedes local, national, and EU wide legal sovereignty and control over workers’ rights and other highly politicised issues to global corporations has attracted huge publicity & lead to public protests. When you add in the Trump administration’s apparently negative stance on NAFTA (North American Free Trade Organisation, allowing ‘free’ trade between the USA, Canada & Mexico), all the media noise could give the impression that trade with Canada is too difficult. But I believe that being deterred by all this ‘noise’ would be a mistake.

Taking a look above the US

Over the years, I’ve consulted with many toy companies seeking to establish or grow distribution in North America. Most often though, toy companies focus on the biggest wins of all – namely the US toy market. However, Canada is in itself a very significant toy market, and one which can offer significant incremental opportunities. The Canadian toy market is estimated at between $1.6bn-$2.5bn USD at retail value. This places Canada on a par with many European toy markets. While it may be smaller than the UK, France & Germany it is not that far behind. I am not aware of any other toy market in the world of such a size which is given so little focus by many toy companies.

Covering Canada with toys individually

The typical justification for paying little attention to Canada is that you can cover much of the market via the same retail chains. Walmart have a significant presence and market share, as do Toys R Us. However, both have separate buying offices and teams to cover the Canadian market. When we sell to Toys R Us in Germany do we expect to automatically get listings or sales from Toys R Us France or UK?

Bearing in mind that it is often difficult to convince buyers within the same buying teams in the same locations to all support the same brand initiatives, why would we expect automatic uptake of our product lines from one buying office to another? In fact, it is very difficult for buying teams, even where the will exists, to co-ordinate product lines in an industry where there are over 1 million individual Stock Keeping Units (there are 1m+ SKUs on display at Spielwarenmesse® each year, with an estimated 100,000 new products each year).

Clearly a robust commercial strategy cannot rely on cross border listings decisions being automatically passed on from one team to another. So then the question becomes is there significant enough opportunity to chase an opportunity with the Canadian buying teams versus the USA teams. The latest store count I can find for TRU in the UK is around 80 stores, while in Canada the count is c. 70. Yet because TRU USA is on the doorstep with over 850 stores, many companies I have dealt with would ignore TRU Canada. The same applies for Walmart Canada & nearly every other chain with stores in both countries. The same companies that might have a 10 strong team in the UK, would have no one or just 1 single sales person in Canada quite often.

Many companies expect to pick up a sufficient degree of sales from these Canadian retail subsidiaries to not have to apply further management head space or resources to the opportunity. Yet this becomes even more illogical when you consider the local store chains in Canada. Giant Tiger, Chapters Indigo & Canadian Tire Corporation have c. 1,000 stores between them. Canadian Tire Corporation might not sound like a toy retailer, but we estimate they stock c. 900 toy lines. I would be surprised if a majority of people reading this have even heard of some of these major retailers!

How to get access to the Canadian toy market

Practically speaking – toy companies can increase focus & sales in Canada by recruiting a broader rep network, by working with a reputable Canadian distributor/wholesaler or by hiring staff. If you have a rep group covering North America, ensure they are taking Canada seriously and have access to on the ground sales resources either via their own staff or via another (Canadian rep group).

If you go with a distributor, you need to ensure they are reputable, as it would be difficult to ensure product is not shipped from Canada to the USA causing issues there (although this is not much different to trading in Europe e.g. France & Belgium).

If you want to hire staff, you may be able to begin with one member of staff – a country manager or head of sales who can link together a sales & distribution network for you before you invest any further in the Canadian market. One practical point – be aware that Canada has two official languages – English & French. Product packaging legally MUST feature all mandatories in both languages. This should not be too difficult for European companies to manage, as typically we are used to working with multiple languages, but we’d suggest not taking chances on this to avoid issues.

While the current political environment is quite turbulent, and trade deals like NAFTA and CETA become political ‘footballs’ for politicians to kick around, there is a significant and likely under exploited opportunity in Canada’s toy market waiting for you. For more information on the Canadian toy market, the Canadian Toy Association is a good start point. 


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Author of this article:

Steve Reece, CEO Kids Brand Insight

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