Of the major launches due this year, which toy – not from your portfolio – would you put your money on?
Michael Hick (Sales director, Mattel UK): I’m interested to see if Tamagotchi can do it again.
Paul Bennett (Sales director, LeapFrog): I would put my money on a particular theme – the World Cup.
John Hutt (Chairman, HTI): Minecraft.
Fiona Wright (UK general manager, LEGO): Personally I am not one to make bets, especially not in this market, however I like WikiBear and the VTech Kidizoom Smartwatch.
Graham Canning (Sales director, VTech): I don’t think you need to look much further than The LEGO Movie this year; that’s as close to a safe bet you get in the toy industry.
Do you think there could be any other major acquisitions on the horizon (following on from Mattel/Mega Brands in March)?
Clive Smith (General manager, Bandai): Organic growth is extremely difficult to sustain and consequently companies determined to grow their market share, or indeed move into other sectors of the toy market, may look towards acquisition as a solution. I have no doubt that this will continue. However, finding the right opportunity, whether as a worldwide or local initiative, is not an easy option, and as we have witnessed recently, rarely a cheap solution.
Nick Thomas (Commercial director, Vivid Group): I think the major companies are always looking to widen their portfolio and de-risk their businesses by adding strategically to them. It makes sense to have a balanced portfolio supported by brands that can grow, evolve and stand the test of time.
John Hutt: Yes, almost definitely. Consolidation is a common theme whichever industry you belong to. As the world becomes more globalised this is inevitable as the big global players fight it out for market share.
Which category do you think will help to turn around the trend of slight market decline we experienced over the past few years?
Jacqueline Taylor-Foo (UK sales director, Spin Master): The independents like a craze to drive footfall into stores. The boom in the technological category combined with a possible peak in tablet sales may help to see some growth on the traditional toy side this year.
Michael Hick: Well, of course with our exciting new launch into the outdoor category, this will be the one to watch.
Fiona Wright: Building sets, of course, and I believe pocket money and others will see an improvement this year, with the impact of the yoyo craze, LEGO Minifigures and Mixels.
John Hutt: Apart from tablet and technology-based toys, I am a firm believer (surprise surprise) in traditional role play toys that are aimed at six years and under, together with non digital games.
Graham Canning: The market that was covered by the NPD audit was down, but that did not cover the whole market, so it’s not clear for me if the market was actually down. I think the categories that will get the boost from entertainment properties such as Minecraft and The LEGO Movie will grow, but closer to home categories that are getting innovation through technology will grow.
With children spending more time on streaming media, where traditional adverts are not visible, where do you see the future of toy marketing?
John Hutt: More investment aimed at building direct relationships with the consumer via various social media platforms, combined with the further big investment in IP holders’ brands via big budget movies.
Jacqueline Taylor-Foo: I don’t see an immediate change in where suppliers invest. Digital is growing and things are changing, but as yet there aren’t many hard testimonials to support moving away from traditional media in terms of best return for your money. That said, it’s also product dependent and some of the alternative channels may be more effective depending on the range/item.
Paul Bennett: Children’s media consumption has changed over the last couple of years, however I think it is important that toy brands continue to embrace traditional media as well as new methods when marketing to children. I believe that there is still an important role for TV advertising to play, but it is crucial that toy marketers utilise new opportunities to be more creative and to provide deeper engagement with customers.
Michael Hick: The toy marketers job is certainly more challenging; you have to be wherever children are and create engaging ways for them to interact with your brand. TV still represents a powerful tool, but there are lots of new and exciting channels that can be used to develop programmes – whether that be through social engagement, experiential marketing, as well as the many new media channels that we know kids are using, like YouTube.
With more aggressive discounting in Q4 – meaning lower retailer margins – do you think there will be a long-term negative impact on the space allocated to toys in multi-category retailers?
Fiona Wright: It’s a great question and, of course, the ideal situation is that as manufacturers we produce products that hold their value and do not require discounting (just like Apple or Pure Radio’s do), and retailers hold their nerve while shoppers decide to get ready for Christmas later and later every year. If this is the case, toys should continue to earn space.
Graham Canning: No, I think the opposite. There is price competition in toys, of course, but that exists in most other categories. Sales of toys are pretty stable when you compare to magazines, music and video, TVs, cameras to name a few – there are a lot of categories in decline. I started in this industry 30 years ago with Fisher-Price where I first came across aggressive discounting … what’s changed?
Clive Smith: I may be old fashioned, but I still find it quite bizarre that as an industry we find the heavy discounting offered in our peak season as something acceptable. We need every area within our business to be profitable as this can be the only solution to industry growth and, more importantly, investment. If we cannot sustain a profitable business for all, then where will we find the resources to drive innovation?
Michael Hick: With many retailers now taking the omni-channel approach, consumers have a variety of ways to buy and you will see different mixes of toys on different channels, so their online offer might be much broader with just a selection of key items in-store. It’s all about the right offer, at the right price point, at the right time, particularly in quarter four. We work with retail partners to make sure we offer them the right product mix and differentiation that fits their consumer profile and their formats.
How about the growth of discount multi-category retailers? Will that affect traditional toy shops?
Clive Smith: I think we have to accept that the discount multi-category retailers are here to stay and cannot be ignored. From a toy perspective, it is difficult to see how these retailers can survive on our general toy business, which tend to be TV advertised brands at higher retail prices (not necessarily something their target consumer would be seeking). I do expect to see more low priced products manufactured and targeted towards this retail sector in the future.
Jacqueline Taylor-Foo: In the same way as discount grocers have affected major grocers, they will take some share. Consumers are more savvy than ever – with branded toys it doesn’t matter where they are purchased from, so the traditional toy retailers need to be offering something more to keep customers and drive loyalty: price, customer service, product knowledge and so on. With new stores opening, those retailers also look the part, offering a pleasant shopping experience and are positioned in increasingly more attractive locations.
Nick Thomas: I do see this area continuing to grow, and with many new High Street locations it will have an impact especially via strong close out offers.
Paul Bennett: In my view, dedicated toy retailers benefit from the bigger and broader opportunities in the industry, offering a trademark of toy expertise and experience, as well as selling the best and newest launches, which discount retailers simply cannot rival.
Graham Canning: I think they are filling a gap left in the market. I also think that offering straightforward offers is their strength, as consumers are getting wise to all the ‘fancy offers’. I think they will grow, but maybe a little slower than in the past. Their size cannot be ignored from a supplier’s view in a competitive market.
Do you think that 3D printing will do to the toy industry what music downloads have done to the music business?
John Hutt: No, at least not in my lifetime.
Fiona Wright: I think that 3D printing can offer children great extensions to their creative play experience, but that the accessible household technology still doesn’t provide the quality of current toy manufacturing. This is certainly the case for LEGO elements anyway.
Nick Thomas: Wow, a big question and obviously a long-term potential change to many industries not just toys.
Jacqueline Taylor-Foo: No, although as it becomes more affordable I suspect that it might affect certain toy categories more than others.
Clive Smith: No, I don’t. I think the comparisons cannot be made, as one involves children with their impatience and need for instant fulfilment, and the other is young adults who are seeking a quicker, cheaper and more convenient way of consuming their music. My kids have long since grown up, but I could not imagine them having the patience to print their own toy before playing with it. We had a job stopping them from ripping open the boxes before we left the toy store. Have children really changed that much, or is it us as parents who think they need the latest technology? Let’s not lose sight of traditional play patterns and values.
Michael Hick: At the moment I can’t see it developing in that way. We are always receptive to new technology and the benefits it can bring, but I think it is early days and it will be interesting to see how the consumer embraces it. There will always be the consumer that wants the physical aspect of a toy for their child, so I can’t see it bypassing the toy industry just yet.
Where do you see the future of bricks and mortar stores?
Nick Thomas: Most bricks and mortar retailers have or are developing both online and retail-based strategies which need to work hand in hand and appeal to the needs of today’s consumer. They demand the full range of shopping services: in-store, online, click and collect, in-store collection, home delivery, as well as the retail shopping experience and in most cases a combination of all of these. The retailers that can provide the full range across all these areas will have a strong future.
Jacqueline Taylor-Foo: Those retailers that can are staying ahead with a good online offering or even selling via their competitor’s websites. Those who are more traditional without online need to focus on driving footfall locally through great customer interaction, activities that make the children want to visit the stores whenever they can and good implementation of local deals to make their customers want to come back and feel they are getting special attention that online just cannot provide.
Fiona Wright: Many toy purchase decisions are made at store level, I strongly believe that there is room for all types of toy retailing in the UK. A trip to the toy shop for birthday presents, trying hard, pocket money treats and Christmas presents is still a very important part of a child’s and family life. The trick will be for the retailers to convert the purchase through great product selection, great in-store theatre, an easy shopping experience and knowledgeable store staff.
John Hutt: It’s all about engagement with consumers, creating theatre and enjoyment combined with a simple and clear offer that is easy to understand. Underpinning all of this is the absolute need to be competitively priced. Yes, there is a future though only retailers completely on top of their game will prosper.
Clive Smith: We are all aware that online retailing is growing and will continue to do so. However, we may be in danger of believing that online retail opportunities are exclusive to online retailers, when this is definitely not the case. Bricks and mortar retailers should (and in many cases do) see this as an additional arm to their retail offering. A good online presence should be expected to deliver incremental business. It is true that some sales may be at lower than the traditional margins, but is this any different to a sale/promotion in-store?
Graham Canning: We used to talk about supermarkets driving down price, now it’s online. Bricks and mortar still represents 67 per cent of the toy industry according to NPD. So, still a clear majority. From a manufacturers point of view it’s about balancing our investment. On a personal note, I am one of the 11 per cent of true shoppers that go to the High Street undecided!
Michael Hick: I think bricks and mortar stores will always have a key role; consumers still like to touch and feel what they are buying and the pleasure that a child gets from the trip to the toy shop can still be a magical experience. But as an industry we have to work across multi-channel formats. It’s important that retailers have the right mix of toys for the right format.
Paul Bennett: Being able to touch a product, seeing how it works and speaking with a knowledgeable staff member are all key factors of the in-store experience which sets bricks and mortar stores aside from online retailers that cannot offer that personal touch. I think it’s also important not to underestimate the power of children in decision making. Toy shops embody the fun of the products and offer that wow factor brands are trying to portray. This overall experience which is so important for toy purchasing cannot be replicated online and offers the USP which physical toy retailers need to capitalise on to ensure their future.