You have to feel for Woolies sometimes. Currently unloved in the City and financial press, barracked by its major shareholders, pilloried by the toy trade for its terms and conditions. It can’t do right for doing wrong at the moment.
But customers? Customers do seem to have a special affection for the chain. Granted, in a price-driven environment this is not being reflected in sales at the moment (down 19 per cent so far this year), but the brand and the store occupy a special place in the nation’s shopping psyche and would leave a massive hole in the High Street if, as quite a few commentators predict, the unthinkable happens.
And for the toy trade it would be a huge blow. More than 800 stores all carrying toys is not an easy amount of sales to replace if you’re a supplier. The toy trade may have had its run-ins with Woolies over the last couple of years, but they need each other.
Some 18-20 per cent of Woolworths business is from toys, so it really is a two-way street. Commercial director Steve Jebson has great optimism not only in the Woolies business but also in the firm’s toy offering and does not subscribe to any of the pessimism that the market so often seems beset by.
He believes the chain can grow its toy business in volume and value and sees no reason why the market itself shouldn’t be growing too.
“Toys goes up and down with the fashions. They have been a number two for quite a while in Woolies. But they’ve been closer to getting to number one in recent years. This year will be tough. Video games are booming. But, the expectation for the next four to five years is if we do what think we can do and the customers like it, we have a good chance.
“Toys is a fashion industry and as such we rely on the product development of suppliers to unlock their unlimited potential and from my perspective I don’t see why we can’t grow share and why the market can’t grow. We’re probably at the end of a sustained deflationary period.
“The challenge for the toy market is at the age of up to six years old. Up to that age it is very strong and that is growing and will grow at a ¬rate none of the other sectors will catch. The challenge is after that.”
As Jebson points out, the toy market doesn’t want to finish at age six and parents certainly don’t want their children growing up too fast.
“What I’m seeing tells me that there’s enough stuff in the short-term that will mean we can gain customers and children more than we have today.”
Woolworths is all about mums and children, and toys is central to that offering. If the chain does not have a strong toy offering then it is not serving its core market, believes Jebson.
Expanding that toy offering is possible but it is not quite doing enough to justify more space in-store and the firm is striving to find the right balance across its business. Which critics says it is finding tricky.
That and the sheer volume of toy product available makes the task of getting the right mix a difficult one and Jebson believes the market is a little saturated with product.
“I do think we will see some shake out. The number of toys on the market is way above what anyone can carry. That natural selection is driven as much by what the customers want as the retailers. So my team respond to what the customers tell them.
“We back the ones we think are going to win.
“And we have to be nimble enough when we do get it wrong, because we will get it wrong occasionally, everyone does.”
“It would be much easier to deal with five suppliers and 30 product lines because we do not have elastic shelves,” he says.
But even though space is tight, Jebson insists Woolworths remains a level playing field for the smaller supplier and the major alike.
“We don’t treat big or small companies any differently. At least I hope we don’t. But the more evidence they have to support their proposition the better. In the end we’re looking for great ideas.
“I hope we haven’t made it difficult to get a foot in the door. I would be disappointed if the small guy didn’t feel he could talk to Woolies and get a fair shot.”
It’s not possible to stock everything, of course, and there will always be choices made which some people like and others.
“Suppliers look for Woolworths to be clear on what they want to achieve and for toys to be more at the heart of what Woolies does.
“One of the shocks to me coming into the toy trade is this fixed autumn/winter, spring/summer split. That’s not how customers shop. They don’t say ‘it’s March, time for new toys’. I would expect more fluidity in the range changes.
“20 per cent of the SKUs will be 12 per cent of the sales and these are some of the things that surprise me. It’s not the usual 80/20 split with sales and product. Which gives us real opportunity.”
Jebson has tried to buck some of that seasonality with a summer TV campaign for toys. The first time it has run such a campaign at that time of the year. Upping the marketing spend in difficult times isn’t unusual and toys are traditionally resistant to tough market conditions.
“It’s always tough getting money out of customers’ wallets but all the evidence suggests toys are holding up well,” says Jebson.
“Ben 10 we would love to have more of. High Street Musical is doing very well and pre-school is very strong from Roary the Racing Car to In the Night Garden. Lego is doing awesomely well and that gives me heart to see that parents want their kids to play with toys like that.”
But growth? Real growth in the toy market? Is that still possible? Could toys even save Woolworths?
Jebson seemingly believes in the power of positive thought or at least, positive forecasts.
“If you plan for a flat year that’s what you’re going to get. Value growth is inevitable because of inflation. The real challenge is how we get volume growth.”
A challenge not just for Woolworths, but for the toy industry in general.