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31 Jan – 4 Feb 2018
If anything, the toy business has proven remarkably resilient in the face of such a big blow. There have been many success stories in 2018, from the surge in collectables to certain tech driven toys through to a raft of much needed acquisitions and consolidations which will make the toy industry stronger overall going forward.
The reality is that there are no fewer children in the world than a year ago, therefore consumer demand has not disappeared. And while such disruptive forces as Amazon undoubtedly contributed to the difficulties of Toys R Us faced, in some ways Amazon and others now offer big opportunity for late sales. The toy industry of 20 years ago may not have seen Toys R Us fail, but it also would not have been able to bounce back so quickly and resolutely.
In the end, consumer demand will limit the lost sales impact of all those Toys R Us stores closing in the USA and some other markets (not all markets clearly - the brand, or at least the stores themselves, survive in some markets). The genuine challenge for the toy business going forward though is the loss of TRU as a shop window and as the physical store with greatest range. As toy companies are still trying to catch up with the social media revolution versus our long-term reliance on TV advertising, we now face the challenge of where and how to create critical mass on products which are less blockbuster, less mass market. Doubtless other retailers will step up (as has already happened in some key markets), but in the short term it is this shop window effect which will remain the true loss to the global toy industry.
On this trend, the UK can offer some positive prospects – back in the noughties when Woolworths (then No. 2 retailer in the toy market) went under, things looked bleak – however, in the decade or so since, we have seen the rise and rise in the UK toy retail space of Smyths and The Entertainer. The growth of these two retailers in the UK allowed the UK toy market to more easily ride out the loss of Toys R Us in 2018, but perhaps more illustratively for the rest of the world showed that tough times ease, and new players rise over time!
On a brighter note, and looking away from the pressures of retail, the outlook is actually quite rosy for 2019. We’re looking at a year where we have big news on some big brands. Too many to list here, but for instance Hasbro applying their global might to Power Rangers will be sure to have a big impact in the ‘traditional’ action figures space, while the collectables space looks likely to remain on an upward trajectory as this category redefines ‘impulse’ price points further upwards, which may not be seen as a good thing by parents, but is definitely a good thing for margin challenged toy companies.
Furthermore, that traditional driver of the global toy industry – Hollywood, is set to deliver a pretty good 2019 in terms of box office. 2019 is set to see new instalments of Toy Story, The Lion King, Aladdin, Frozen and Star Wars, as well as a new Marvel pic featuring a lead Captain Marvel. Following the success of Wonder Woman at the global box office – in excess of $800m – it will be interesting to see how another action movie with female lead performs both at the box office and in toys.
We’re seeing some interesting adaptations of technology heading into 2019. AR/VR are forever in the headlines, and we’re seeing seismic developments in robotics and artificial intelligence, but with toys it is more about where the fun is at versus how clever the technology is. When speaking to tech driven toy companies, I always ask – how is this fun? Why is the play better/more fun because of the technology? A child is less likely to care that something is ‘cutting edge’ or has never been done before because they have not seen what has gone before. They just react to why something is fun or not. There are some interesting toys involving robotics which are built around the fun factor, with new technology facilitating better play instead of just being a feature, these products will come to market in 2019 and could prove to be landmark robotics products.
In terms of the outlook for toy marketing, we are clearly getting further away from our old standby of TV advertising as the fulcrum of our marketing efforts. When the number one top selling toy is largely driven by YouTube/other social media, that’s time to sit up and take notice. Like with all things, we can all see a trend is coming, and we can often see this trend coming for a decade or more before it matures e.g. most of us thought Amazon would come to be a very significant force in global retail for nearly two decades at this point. So, it was no surprise when other, longer established retailers found themselves going out of business as Amazon slowly bled market share from them.
For those toy companies which have yet to embrace the power (& risk) of social media – 2019 may be the tipping point or not, but either way that tipping point is not far away (if we are not already past it). It is not easy to launch something to be a smash hit in terms of content – there is so much content out there. It is far easier to create authentic and entertaining content than it is to cut through the mass of stuff out there, and this is the main barrier for many toy companies – above all we loved the certainty of TV advertising.
We may sometimes have launched an ineffective advert, maybe we missed something key about the target market, or the product or the competitive space, but we knew that if we TV advertised it our retailers would be much more likely to list it, which would drive up our topline sales. Then how profitable we were was driven by consumer adoption – if consumer adoption and sell through was high, we were profitable, if not we were less profitable as we then had to fund (one way or another!) retail markdowns and clearance activity.
Today things are not so simple. If we have a good product, which plays well to the audience and helps to make for an entertaining demonstration, and if we invest in online PR to send out products and get them onto popular ‘unboxing’ channels, we have a chance, but we are all doing that so it hard to stand out from the crowd. For some of us, we have the business model which allows us to invest in our own content, but as ever, in the same way as some movies hit and some miss, so some of this content will work and some won’t. The trick, as with technology and toys mentioned above is to focus on the end user experience.
We should entertain and engage first and sell second. The risks are high, but so are the rewards – so my number one prediction for 2019 is content, content, content – the winners will develop and successfully launch good content, and good content sells toys.
The opinions expressed in this article are those of the author and do not necessarily reflect the views of Spielwarenmesse eG.
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