8 Characteristics Of Toy Companies That Stand The Test Of Time
If we look at those Toy companies that have been around for a long time, we can observe several points.
Firstly, there are a surprising number of companies in the Toy industry that have been in existence for a whole generation or more.
Secondly, there are certain critical factors these companies have in common.
Finally, we can also observe that those companies that don’t stand the test of time have usually failed to follow one of the critical principles their more longstanding counterparts have adhered to.
Here we outline these key factors:
1. Longevity Of Key Management
A ship on a long journey will make more direct and successful progress to it’s destination if it has the same skipper charting the course. In other words, this is an industry which works on extended timescales. We sell primarily in 2 windows per year, with a bias towards one of those windows, and it takes multiple cycles to make progress. Therefore it takes years to get anywhere in this industry. Consistent management, ethos and approach is a key criteria for success.
Take a look at the 3 biggest Toy companies – Mattel, Hasbro & Lego – all began as family businesses, built up product by product over an extended period of time. There are few examples (bar the exceptions that prove the rule!) of VC backed Toy companies lasting the test of time with investors looking for 3-5 year pay back.
2. Clear Positioning In The Market
As human beings we like to put things in boxes/affix easy labels to aid our own understanding. Having a clear positioning allows buyers, suppliers, partners to know what we stand for, what to bring us, what to expect us to bring to them and more. Clear positioning also allows us to assemble expert knowledge, strong carry forward product lines and easier re-listings with buyers who know we will be back to see them this time next year, and thus have a vested interest in supporting their business should our product not sell through.
3. Commitment To Brand Building
Again, if we look at the big 3 Toy companies globally, we can see that Mattel report their own brands accounting for c. 75% of total sales. Hasbro’s corporate strategy throughout the ‘noughties was core brand focus, and Lego is in effect both a company and a hugely powerful brand.
Brands deliver more long term security than nearly anything else because known performers get re-listed by retail, own brands are higher margin due to not having to pay 3rd party licensor or distributor %ages and because brand extensions are a much easier/less risky way to launch new product lines.
And of course brands have huge value within themselves, as intellectual property, and can drive additional revenue via licensing out brands to other companies in different product categories.
4. Retaining Key Staff Members While Being Open To New Ideas
Note there are two parts to this factor – retaining key staff over the long haul, while still maintaining an openness to fresh ideas and ways of doing things. The human capital which is needlessly and sometimes thoughtlessly lost by many Toy companies for petty reasons or for reasons of neglect is a huge asset that disappears down the swannee.
Speaking as someone who has made massive, glaring errors, I’m reminded of the Thomas J. Watson (founder of IBM) quote:
“Recently, I was asked if I was going to fire an employee who made a mistake that cost the company $600,000. No, I replied, I just spent $600,000 training him. Why would I want somebody to hire his experience?”
The reality is that those staff who have been in situ longest inevitably hold the most knowledge, and in this business knowledge very often is money saved or money earnt i.e. reliable, cost effective factories, knowing which QA tests to do, how to deliver the shipment on time etc.
Now having said that, under performing staff don’t remain in situ for that length of time in the most long lasting companies.
Experience and tenure are also no excuses for being closed to new approaches/ways of doing things.
So the companies that get the right balance on this factor tend to be the one’s with most longevity.
5. Excellent And Enduring Product Pipeline
This is a product and feature driven business, innovation is key – but note it doesn’t necessarily need to be your company’s innovation, there are hundreds of long established, successful companies bringing proven products to their market from other company’s R&D investment.
6. Excellent And Enduring Customer Relationships and Effective Sales Team
Let’s be frank, retailers are a hard nosed bunch on the whole, and rightly so, retail is a cut throat business. The strong and very demanding are more likely to survive in their game.
So in reality strong relationships depend on the performance of the products you ship into them as much as any other factor, but customer service and maintaining maximal supply at key times are also important. Inter personal relationships can play a critical role though, with some buyers more than others of course, but nevertheless it’s a given that bad relationships with customers won’t deliver success in the short term, never mind the long term!
7. Reliable Supply Chain
We’ve all nickel and dime’d our way to shaving a few cents off our manufacturing spend. And who wouldn’t, it would be crazy not to, especially as THE biggest expenditure toy companies have is manufacturing cost. However, a few cents less pails into comparison with the carnage that unreliable supply and / or suppliers can wreak on your business.
The companies with most longevity in this business tend to be those who focus on reliability, in essence, risk reduction, from their supply chain, at the same time as seeking competitive costings.
(Feel free to try our Toy Sourcing service to find reliable, cost effective suppliers!).
8. Eggs In Baskets
Why would you ever allow one customer, one supplier, one staff member, one product, one brand one anything for that matter to have the ability to terminally injure your business if you lost it/them? One person departments are all well and good until the one person leaves. Smash hit products are all well and good until the hangover sets in when the hero fades away. Huge numbers via one retailer may be a great bonus, but it should be treated as the icing on the cake – not the basis on which overhead is fixed or expectations are set.
The reality is in this business, and life in general, people move on, products and brands move in cycles, retail buyers move on.
A fundamental factor in companies with longevity in this industry is the ability to survive or even thrive, regardless of the loss of any one ‘basket full of eggs.’
I can think of 3 or 4 Toy companies who disappeared during the difficult times we’ve experienced over the last few years, and they went almost entirely because they relied on one person/entity/thing too much.
So there you have it, 8 Factors common to Toy companies of long term tenure.