How Toy Companies Can Most Effectively Achieve Sales Growth & Margin Protection While Dealing With RetailersPosted in Uncategorized on 13 February 2014
How Toy Companies Can Protect Margin In An Ever More Brutal Retail Environment
Recently a good industry friend of mine jokingly criticised this Blog for steering away from the real hard nitty gritty reality of day to day trading in the toy world. It’s all very well looking at trends and consumers, but the main challenge for most toy companies is dealing effectively with retailers (he said!).
So, here follows some thoughts on how to maximise listings, stock intake and to protect margin in a brutal retail environment:
1. Understand Where You Fit In First – you need to be clear on what piece of the supplier/product ‘jigsaw’ you are/can be. For instance if your company is a global giant with huge brands and marketing investment, you are likely to offer high turnover, footfall driving effect and on the flip side lesser retail margin. if however you are an agile small company with an innovative approach, a constant stream of cool new products and nowhere near the bureaucracy or apparent inflexibility of a global giant you offer something different and complimentary. If on the other hand you have a selection of ‘me too’ products, offer average (or worse) retail margin, and are awkward to deal with…then best of luck to you!
2. Negotiating Is As Much A Reflection Of The Balance Of Power As It Is Your Wonderful Negotiating – we’d all like to think we are brilliant negotiators, but the reality is that the circumstances of the relationship and competitive pecking order of suppliers is really what fixes the parameters for your trading. For sure you might be able to shave 1/2 a point here or there, and make sure you do when you can, as such savings become critical when seeking to maximise profits, but if you are towards the back end of the retailer’s supplier list in terms of perceived importance, you’re going to have to work an awful lot harder to trade on anything approaching your terms versus the must list suppliers/category leaders.
Once you understand and embrace this, it actually becomes easier to play the right kind of role. if you are a top supplier that the retailer effectively has to trade with, expect lots of whingeing/hissy fits, and listings. If you are just about hanging in there, expect a fair degree of indifference, lack of focus and only so many opportunities to impress. Save the histrionics, for the sake of your business you have to justify your company as a supplier at each and every contact point!
3. Setup/Maintain Chains Of Sign Offs / Communications – allowing yourself the opportunity to agree anything of substance in a pressured meeting situation is normally a mistake. It’s human nature, regardless of how battle hardened we are, to be influenced by professional buyers who now how to crank on the pressure, and who can hold the fates of our careers and companies in their hands. The best way to avoid having too much ability to agree on the spot under pressure is to have a sign off process/system that means you can’t agree on the spot whether you want to or not…and by the way this applies especially to owner managed companies. If you have to let the ultimate decision maker near the negotiations, invent a system or at least a pretend system which gives you a get out on the spot! CFO’s or Financial Directors are the easiest to blame, as most business people expect them to be the person/department that says ‘NO’!
Big companies do this best, because by default they have more layers of management all of whom need to ‘stick their oar in’ on decisions large and small. So while this can often be a frustration for customers, it actually usually works in the favour of the supplier. If your positioning is to be smaller and nimbler than the big guys, then make your excuses, discuss on the phone on the way back to the office (while complying with relevant driving regulations!), and call the buyer back when you get back with a decision/counter proposal.
4. Listen, Question, Probe – Then Repeat! – without wanting this to sound like a corny sales training program, listening is the first part of any selling. The more you listen, question and probe, the more you understand what the customer needs/is looking for. Keep repeating this process until it is abundantly clear what is required, then repeat back tot he buyer what they so painstakingly said they wanted…humans like to remain consistent, so many a time I have seen buyers asked what they wanted feeling like they should take what the company brought back, because not to do so is to potentially lose credibility in negotiations…admittedly consistency is more obvious with some buyers than others…mostly with those whose buying is based on rational analysis versus gut feel/personal preference/my kids like this etc. (no names supplied!).
5. Deliver More Smash Hit Products To Market – the one sure fire way to move the balance of power in your favour is to deliver more smash hit products to market. Retailers need hit toys – they drive footfall at key spending periods for mass market retailers, and for specialist Toy retailers they pay the way for all the other slow selling range they have to have to keep the stores full!
So there you go, a bit more nitty gritty from the sharp end in honour of my honourable friend!
P.S. If you’d like to receive our e-newsletter with more articles, hints, tips etc, please feel free to sign up for it by entering your details on the right hand side of this page…