NPD Column
The NPD Group’s Frederique Tutt looks at why the UK toy market is not growing as much as it used to, or could.
Time for a growth spurt J
ust weeks before the Autumn/Winter season kicks in with the launch of the Argos catalogue and its flurry of new Christmas products, we ponder over the market conditions for the months ahead. Some expect ‘a blood bath’ at retail and promotions even bigger than in previous years, whilst data from The NPD Group highlights how the vicious circle around promotions is somewhat preventing the toy market from growing. Up to 2010, the UK toy trade was used
to growing at a much faster pace than the European industry overall. Consumption was fuelled by character licences, often home-based and UK kids were the envy of their European counterparts for receiving up to double the number of toys in any given year. Own label brands were numerous and competitive, but didn’t stop global and local brands from developing healthily. (see graph 1) But in the last two years, we have seen the rate of the growth in the UK market slow down in comparison to the European average. Why is that? One of the reasons is that from 2008 to 2012, the average price paid for toys has only increased by 1% in this country. How much have production, sales and marketing costs risen by in the same time? By comparison, toy prices have increased by 11% in France, 10% in Italy and 14% in Germany over the same period. If the price of toys had risen by the rate of inflation each year since 2008, the market would have been £386m bigger in 2012. On top of that, generally speaking, toys are much cheaper in the UK than they are on the continent. Take the number-one, best-selling toy in Europe last year: Innotab. Its average price was €72 in December in the UK (exchange rate = £1 = €1.16) against €95 in France and €92 in Germany. (see graph 2) Another reason is that the UK is the market
where online sales are the most developed. Despite having already the highest penetration in Europe, there were almost two million more consumers buying toys online in 2012 compared to 2011. And when consumers are online, they compare prices and this places a greater pressure on retailers to be more competitive. Loyalty becomes harder and harder to establish as convenience and offers have become consumers’ number one priorities. In line with this, more than one toy out of three was bought on promotion last year; that is to say almost 144m boxes. These 144m boxes included multi-buy, money off, coupons, free deliveries;
Share of Promotional Sales By Country Full Year 2012 / 2011
10 15 20 25 30 35 40 45
0 5
UK FR GE IT SP Note: Results based on customers’ perception Source: NPD Group | Consumer Panel Service 41 41 38 34 27 Aggressive Retail Environment Drives Promotion Sales
Graph 1
Europe 5 toy industry growth YR/YR UK Toy industry growth YR/YR
2010 v 09 +5%
+11%
NPD Consumer Panel Data. 100% coverage of the toy market. Graph 2
2008
Toy Market NPD (£m) Inflation
Retail Price
2008 Toy Average price + Annual Inflation Cumulated Gains
£2,806 3.6% £6.81 £6.81
2009
£2,667 2.2% £7.52 £7.05
2010
£2,882 3.3% £6.61 £7.21
2011
£2,969 4.5% £6.89 £7.44
2012
£2,995 2.8% £6.89 £7.78
£386m
you name it. And of course, promotions are wiping out cash from the industry in turnover and margins. In 2012, 71% of consumers bought at least
one toy on promotion. Is this a self-inflicted punishment? Do we need to promote toys that much? In fact, looking further into the data, it seems that for a fifth of all toys bought on promotion, the special offer didn’t have any
impact in the product’s choice whatsoever, in other words, the consumer would have bought this item anyway...if only we knew which ones to do without then. In fact, if only the toys bought on promotion (those 144m boxes) had been bought at an average price just 5% higher, the UK toy industry would have grown by 2.3% in 2012.
2011 v 10 +3% +3%
2012 v 11 -1% +1%
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