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31 Jan – 4 Feb 2018
Most public domain sales indicators (inc. NPD’s reports, earnings calls & trade association press releases) indicate a global toy market which is in strong growth phase. Not just a one or two per cent growth either, but significant growth above 5% in some markets/according to some reports. This is genuinely great news for the toy industry, because a strong overall category increases the number of stores globally stocking toys & increases the amount of shelf space given to the toy category, which further drives & perpetuates sales growth.
There is one major reason/factor which can’t be ignored when trying to understand what has created this growth: a more consistently ‘toyetic’ movie slate - with a larger number of successful seemingly perennial blockbuster franchises releasing each year. Whereas historically the movie slate would have ‘gap’ years where there were simply fewer movies likely to drive toy sales, we appear to have entered a golden era of movie slate management as far as the toy industry is concerned.
Behind this massive influencer are several factors – as I have previously written about here, Disney’s acquisition of both Lucasfilm (Star Wars) & Marvel brought three behemoths of the kids entertainment world under one roof, and created a corporate imperative to manage the expanded movie slate to avoid quarterly dips in revenue. Whereas previously the 3 separate entities would have put movies out as & when it suited them, leading to inevitable cannibalisation of sales opportunity/customer share at some points and dips at other points, now there is a corporate benefit to co-ordinating the slate & ensuring those gaps/cannibalisations occur less.
The second major influence of course is toy companies themselves becoming major entertainment players. Both Hasbro & Lego have made major strides in this regards as a result of a strategic focus. Hasbro most notably have become a major player via the mass hit Transformers movie franchise (& other franchises in addition). Lego have 2 major movie launches in 2017, The Lego Batman Movie already released to great success & later this year, The Lego Ninjago Movie.
Aside from movies, the world of ‘TV’ content has been greatly affected by the fragmentation of content viewing by kids. Kid targeted content previously relied on a limited number of TV networks per country, who could only support a comparatively limited amount of content brands. You Tube (primarily) & other platforms have opened the gates to a greater array of ‘TV’ content producers & brands, creating yet more highly popular kids entertainment brands for toys to be derived from.
Aside from content driven toys, crowd funding has allowed product inventors & originators to
Retailers tend to be risk averse by way of their business model which sees them take a high level of stock risk to achieve a comparatively low margin – they are not in the business of taking major risks on new things. Toy companies have traditionally therefore been incentivised to deliver formulaic products (albeit with a twist) en masse with only a few genuine (riskier) innovations, because they were understandably looking to supply their customers with what they want.
Crowd funding allows originators immediate access to end consumers, in order to validate concepts without the same barrier of conservative/risk averse gate keepers in between. For instance, a game like Cards Against Humanity, which has been one of the smash hit games products of the last decade would have struggled to launch via the traditional route, but crowd funding & the resulting word of mouth created a super-sized hit outside the usual channels.
A further major driver of toy sales growth is technology – one clear observation we can make of the toy industry today versus 10-15 years ago is that total sales value of toys selling at much higher price points is greater. 15 years ago a €50-100 price point would have been a more limited opportunity, but today many of the top selling products are far above traditional price point barriers.
Clearly selling 100,000 units of a product at €50 will add up to greater sales than 100,000 units at €20 which may have taken that same shelf space 15 years ago. Technology is the major justification for these kind of high price points. In a world where children often receive smart phones as presents with a purchase value of €hundreds, what’s €50 on a smart toy?
A final driver is the growth of certain key economies from the once developing world. Increasingly toy companies are as focused on markets such as China for growth as they are western markets. As China’s economy inevitably moves to a hybrid or post manufacturing model, so it’s growing middle classes will seek aspirational toy brands for their children.
So, the key question now becomes will this growth in the toy industry continue or will it flatten out? Well that’s an almost impossible question to answer with any degree of certainty. Personally, I would be surprised if we don’t see further growth year on year in 2017 & 2018 as the drivers listed above have probably not yet run their course, but with uncertainties relating to trade shipped into the USA & Brexit looming large, perhaps my view is over optimistic…time will tell!
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