viewpoint Richard


Gottlieb Global Toy Experts


A conversation with Isaac Larian, CEO of MGA


In this day and age, when the toy industry is driven by big corporations, it is easy to forget that it was once led by people with oversized personalities, big ideas and powerful passions. Think Ruth Handler, Louis B Marx and Marvin Glass, and you will know what I mean. If you want to get a feeling for what those times


were like you have to go no further than MGA Entertainment’s Isaac Larian, one of the most interesting, passionate and, not surprisingly, controversial people in today’s toy industry. If you base genius on results, you can certainly make the case that he is one of the few geniuses in the modern toy industry. Anyone that can bring two huge hit dolls to market (Bratz and Lalaloopsy) has some powerful insights on what today’s children, and obviously little girls, are looking for in play. “Isaac,” I asked. “You have brought Lalaloopsy and Bratz, two huge hits, to market. Do you think


David


it is surprising that it was you, a man rather than a woman, who managed to perceive what little girls wanted in dolls?” Isaac responded immediately that his success is not his alone, but due to his having a strong team in place. In the case of Bratz and Lalaloopsy, he and they looked at many other girls’ concepts before choosing them. In making that decision, he said he tried to put himself inside the mind of a modern child. Modern is the operative word here, as the trick is not thinking like yesterday’s child, but today’s. He believes that children are constantly evolving, and how they want to play and what they want to play with is constantly changing as well. In the case of Bratz, his research at the time showed that girls aged 7-11 years had little with which to play. In fact, girls over six were no longer interested in Barbie. He saw his opportunity as deriving from this hole in the marketplace. In order to be aligned with the world in which girls lived, Bratz had to reflect the tastes of the time; and they did. Girls liked what they saw, and Bratz went on to become a mega hit. Following our line of discussion around dolls, I asked Isaac why Lalaloopsy, the first pre-school fashion doll, seemed to be in a category of its own. Lalaloopsy is now in its third year and is a smash hit. Isaac’s voice became exceedingly warm as he described how Lalaloopsy, a rag doll, came to life when the last stitch was completed. In his words, “girls immediately got it”. But what exactly did they get?


I thought about Lalaloopsy after the call, and it


Ripley Chief Operating Officer of Winning Moves


Don’t call it a comeback


It is encouraging to see Argos pull out of their slow and steady decline over the past five years and post recent like-for-like gains of 2.1%. The extensive business review that was undertaken in Milton Keynes and the subsequent transformation plans, which included heavy investment and focus on digital channels, appears to be bearing fruit. My title reference to LL Cool J’s 1990 hit, Mama said knock you out, is based on the fact that this is not a comeback, and despite only being in existence since 1973 (the stores were converted from the Green Shield stamps company), Argos


62 Toyworld


has become a heritage retailer and truly one of the longest-standing traditional high street stores in the UK. My parents would often buy my own toys from either Woolies or Argos, which were 20 metres apart in my local town centre. Does anyone remember the licensed Professionals (Bodie & Doyle) sniper pistol accessory set made by Salter toys?


Earlier in the year I predicted that online toy sales would reach a market average of 63% of total toy sales, leaving just 37% to be sold in person at bricks and mortar establishments (actually visiting a store; “how quaint”, I hear you say). Argos has revealed that, across their total product mix, last year internet sales accounted for 42% of the total, with broader multi-channel sales hitting 51%. It is incredible to see the pace of change and


how the retail ‘space race’ has been turned on its head to the point that the race is now to reduce stores and sell off undeveloped land banks. Tesco recently took a cool £804m write down on devaluing its own portfolio of undeveloped sites that were, until recently, due to become new stores. As a Tesco graduate starting out in the ‘90s, the corporate focus and indoctrination was always on more stores, more sq ft, more ranges and,


occurred to me that part of this doll’s charm is not so much a turn to the future, but a return to the very origins of storytelling. The reason that so many fairytales are girl-centric is that storytelling was what women engaged in with their daughters as they spun thread on their spinning wheels. It was a way to pass the time, and if you think about it Lalaloopsy could easily have been a story they told. Maybe what Isaac grasped was that in a virtual world, where one expects magic on demand, there was still a special mystery in creating life with a simple and very real world, needle and thread. You might think that Isaac is only interested in girls, but his success with Little Tikes certainly belies that notion. Founded in 1969 and purchased by MGA in 2006, Little Tikes is known as a maker primarily of plastic, oversized outdoor toys for the pre-school market. I asked Isaac what attracted him to the purchase and he responded that he bought the company for the brand. His research showed that Little Tikes had 98% brand awareness, as big as Fisher-Price. As he put it, with that kind of brand equity he was half way there. All he had to do was add differentiated product and great pricing and he would have a winner. It appears that it is working out that way; Isaac reports that Little Tikes was up 23% in 2012 and he is projecting the Infant/Pre-school segment to be up 90% this year. That is a formidable accomplishment when you consider that the pre-school segment has been struggling for the last few years. But what drives Isaac Larian? As much known for his protracted and ultimately successful legal battles


therefore, with the right product mix, more sales and profit. This strategy now goes directly against the grain in commercial terms. If 45% of your sales are being serviced directly from the warehouse, what capacity has this created in the bricks and mortar locations? Only part of these store costs are variable, in the main they are very fixed cost heavy. The retail race now is for share of voice, brand and clicks online. The investment online is just as expensive and continuous, however the reach is boundless and has redressed the balance of power between very large and very small retailers. Amazon is testament to that as the fastest-growing retailer of all time, with revenues from all business streams in 2012 of $61bn, from a standing start in 1995, and still only operating in 10 countries worldwide, whilst delivering to several more. Many independent toy stores and toy products specialist start ups, focusing on a single product category specialism, have been very successful in the same way. With the stores servicing customers as intended and also acting as fulfilment centres for online. There will be many more significant changes in shopper habits and ‘ways to buy’ before the end of this decade, and any quick adopters will have the chance to stay ahead of the retail revolution.


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