Viewpoint
to learn and adapt. Unfortunately, we appear to be working in an industry where more of the risks are placed on the manufacturer than the retailers, which means that, when you’re on your own, you are more likely to take a tried-and-tested route from the past, than try new opportunities. However, as with all experiments in the ‘art of science’, collaboration can often provide the most effective outcome. 2013 is a great opportunity to drive greater collaboration between retailers, manufacturers, and media buying/PR and production agencies, in order to share the risks and reap the rewards. Having worked as a consultant for a year on the launch of Skylanders, whilst no-one could decide whether it was a toy or a game, and therefore how it should be marketed, it was by collaboration and working together as a multi-disciplined team with clients, agencies and retailers, that the risks (while massive) were dissipated across the teams. And having passed the $1bn retail mark, everyone at Activision can at last breathe a sigh of relief and watch as competitors launch this
David
year to grab the slice of what has become a new breed of game toy (not to be confused with app toys). Even though negotiating margins and placement in stores, catalogues, etc, is the dominant concern between retailers and manufacturers, each with their own internal objectives, potentially with a more collaborative approach with the end consumer and an understanding of their behaviour in mind, a few more innovative approaches in the world of toys may deliver greater successes. Which brings me on to one of the missing pieces of the planning mix; research. While some see it as an excessive cost, many decisions in the toy industry are based on hunches or on the views of a few family kids and their friends, which in today’s world means more risk taking. I appreciate that when it comes to kids and their fickle natures, even research has it’s limitations. But, in an uncertain world, anything that you can do to minimise the risks with a new product launch are not to be sniffed at.
Ripley Former Tesco and Woolworth executive
Online versus offline
The NPD full-year market overview presentation at Olympia Toy fair was packed full of industry stats that showed the toy market fairing reasonably well at -1%, when compared to other consumer product industries. The first toy industry decline since 2008 shows the resilience of the industry. These figures also only capture a fragment of eBay toy sales; a snapshot in February showed that eBay had 930,000 brand new toys listed for sale. Amongst the 50+ presentation slides shown by NPD, five very simple numbers really stood out for me: 16%, 17%, 19%, 23%, and 29%. These figures represent the last five years online sales participation of UK toy sales as a percentage of the total toy market. Based on this accelerating growth trend, very few observers would bet against the online toy market achieving a share of 38% of total market in 2013. This level of growth must, at some stage, plateau, but at what level does the market ‘online versus offline’ start to balance out? 50/50, 60/40, 70/30, 80/20? Based on current growth rates over the next three years, the split of toy sales ‘online versus offline’ could conceivably reach 60/40. 2013 will get close to 38/62, with a 48/52 split in 2014 and a watershed
moment could occur in 2015 when online sales become the majority purchasing channel, and could finish with a 60/40 split by year end. Could the current toy store infrastructure in the UK survive on just 40% of the total toy market revenues? What happens to toy space in the grocery and general merchandise channels when only 40% of all purchases are made in-store? My prediction, based on nothing more than human social behaviour and the ongoing reinvention of the offline shopping experience, are that the online growth trend will slow and settle at close to 55/45 by the end of 2015 with minimal increases in favour of online each year thereafter. To combat the rise of customer’s show-rooming one Australian shoe retailer has started charging customers $20 to try on shoes if they fail to purchase any items from the store, this could be a lucrative revenue stream for any toy retailer brave enough to charge customers for browsing without buying. In the aftermath and ongoing restructuring of
HMV, it was interesting to see that many financial commentators were quick to highlight a gem from the HMV 2002 annual report relating to their online business: “Contrary to some forecasts in recent years, the internet has settled down to become a worthwhile but minority channel to market. For example, internet book sales have plateaued at just over 5% of the market, and it seems unlikely that there will be sufficient demand to enable multiple operators to develop profitably.” An interesting prediction back in 2002, all too easily mocked with the benefit of hindsight. Many more retailers made the same predictions, although not quite as publicly, and have suffered similar fates.
I hope something can be salvaged from the HMV business and all other retail businesses currently in administration.
Richard
Gottlieb Global Toy Experts
The toy industry is dead
It existed back in the 20th Century when it was the only game in town for those who wanted to play. In the 21st Century, however, toy companies are just one part of the greater play industry which consists of those who create video games, develop apps, manufacture tablets, and create immersive digital worlds. And just wait, we are soon going to have to include 3D printing companies as well. In other words, the play industry includes any entity that seeks to provide play or a platform for it to take place. If you think that what we call our industry is just a matter of semantics, think again. Let me assure you that if you believe you are in the toy industry, you are going to get steamrolled by any company that recognises that the battles are no longer for shelf space in a toy department, but for time and mindshare in an eight-year-old’s brain. The challenge that we all face is that our institutions have not yet caught up with that reality. Retail stores continue to separate play products into different departments rather than merchandising them in one big family play centre. The Toy Industry Association continues to put on a Toy Fair which is still almost entirely a showcase for traditional toys. NPD provides industry analysis that puts traditional toys in a separate $16.5b category from the $13.3b video game hardware and software sector. Euromonitor, on the other hand, counts video game hardware and software, and traditional toys and games together ($42b estimated for 2012). As a result, the toy industry is currently like one of those 15th Century explorers whose maps included whole parts of the globe that were marked ‘unknown’. In short, we don’t just need a ‘bigger boat’; we need a better map.
What can be done? The industry first must recognise who its true competitors are. Once done, it must demand the data and analysis it needs to effectively compete in the 21st Century world of consumer play that is far more vast and weird than anyone in the 20th Century could have ever imagined. NPD needs to emulate Euromonitor and start
tracking the entire play industry as one sector. If they do not, the lack of true competitive information will continue to have a negative impact on toy industry decision making. The Toy Industry Association needs to provide
everyone with a ‘Play Show’ that includes all the ‘players’ and not just those who deal in the material world. If they don’t, someone else will. The toy industry is dead. Long live the play industry.
Do you have a response to, or opinion on any of our Viewpoint articles? Email
tom@toyworldmag.co.uk 32 Toyworld
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