Many a well-planned business projection will have found its way into the bin over the last 12 months.
Unprecedented economic pressures and the toy market’s own unique problems of a retail base undergoing a major reshape have sent plenty of suppliers back to the drawing board.
Some, like Tomy, have had to take some big decisions in order to adjust to these changes.
European chief Robert Mann explains how the firm had to make hard choices to survive: “We had to rip up our plan at the end of September because everything changed so dramatically. The plan had to be re-worked and we re-budgeted for the rest of the year.”
The collapse of Woolworths had a marked effect on Tomy’s prospects.
“Woolies was a big proportion of our business. The question was how much had moved to other parts of the industry? And where would that take us in the fiscal year 09/10?”
Ultimately, the overhaul lead to the loss of 42 people’s jobs across Europe, 31 from the UK, including some long-serving, popular faces. Not a choice taken lightly.
“The decision was driven financially from Japan. I knew where we would end up if we took no action. We either had to increase sales by 20 per cent or look at reduction in costs and change the working of the organisation.”
Not many are seeing 20 per cent sales increases right now. Physically it meant a reduction in office space and organisationally, it means the sales and marketing departments have been combined and are now headed up by Paul Fogarty.
The good news is the painful process seems to have worked.
“If you take the first quarter of the current year on our budget plan and this year we will move from a trading loss to an operating profit.
So all of the changes have had a marked effect. Sales have been very good. We’re ahead of budget and up on last year.”
The change to the product line-up has seen a more focused line, but a widening range in the area of boys, girls and tech toys.
“Rather than seeing our Woolies items in other retailers we’ve seen a much broader range in other areas.
“Lines are being introduced to new customers. Many customers wouldn’t buy into certain categories.
Aquadraw was a loss leader for Woolies but now without Woolies it has re-established itself in the market,” Mann explains
Head of European marketing, Joanne Gray, says: “Rather than treating it as a whole toy market, we recognise that certain products work better in certain areas. So as a team it’s more of a category management, challenge-specific approach.
“Whereas in the past we have concentrated on ten different things we’re now concentrated on doing four or five better.”
Thomas is moving to Mattel at the end of the year, which has much to do with Tomy extending elsewhere.
“We lose Thomas at the end of 2010,” says Mann. “But the team are working hard to overcome impact from that. The real opportunity is to see Tomy emerge with a more defined boys and girls range.
“With what is happening now we’re confident we can navigate successfully and be repositioned as a different company. From our perspective, the future bodes well and we’ve got some winners in our portfolio. With that in mind the Thomas effect will not be as evident as if we stood still. We’ve got an extra year compared with most people.”
Mann sees the slimmer range as key to the future in a risk aversive retail environment.
“Companies that are slimming down their range will have a future and those that are not will have a very different business in a year to 18 months’ time.
“There’s still going to be change within the industry, no question. I don’t think we’re ever going to see large fascia on the High Street again. Stores will have a smaller footprint but will be able to trade with greater product line-up because of online.”
And online is another battleground which the new-look Tomy is keen to take on and integrate into its sales sheet with a new offering, Webcare.
“Online is a big challenge for suppliers like ourselves. We are grasping it as a business. We’ve set up Webcare, which is a system which allows us to supply direct to consumers through retailers. So a retailer has a site which draws the traffic, they take the order and we fulfil it. The retailer takes on the cost of the distribution to the customer but not the stock.”
Like it or not, online is going to be part of a manufacturer’s offering going forward. The only variable is the amount of retail involvement. In a market that doesn’t take change lightly, Tomy’s quick response to fast-shifting trading conditions shows the tough choices having to be made.
The hope is that a stronger firm will emerge and that, should the trend prevail, a stronger industry too.