About Us

Steven Reece We are a leading Consultancy to kids entertainment brands including TV, toys & games. Our services include cutting edge qualitative consumer insight and consulting with entertainment brands to maximise their merchandising potential.

What Toy Companies Can Learn From The X Factor…!

Posted in Uncategorized on 26 November 2013

What Toy Companies Can Learn From The X Factor…!

This weekend just gone, the smash hit TV show The X Factor celebrated it’s 10 year anniversary.

It’s also likely to celebrate it’s umpteenth UK Christmas No. 1 when the eventual winner releases their single.

Which is all very nice, but actually there is a really important point of learning in that for Toy companies…

…integrating marketing messages into media content is a highly effective sales driver.

The X Factor hugely empowers the public to vote en masse for and pick their favoured mass appeal pop stars.  So in a sense The X Factor is a champion for consumer choice!

It’s also though fantastic artist launch testing and integrated marketing for those involved in the music business side of the output of the show. There’s a reason why Simon Cowell is always smiling!

It isn’t just the music industry though that has taken this alternative and highly effective approach to engaging a media audience to promote a product. This weekend I read Mark Burnett’s book – if you haven’t heard of him, he created the hit reality TV shows ‘Survivor’, ‘The Apprentice’, ‘The Contender’ and others. he entered the TV world almost accidentally, as he was setting up a massive scale eco/endurance challenge, and needed financial backing which he partially found via TV companies. Where he really got his business model to fly though was when he integrated advertising messages directly into the programming to prove his programming would return for the TV networks and himself.

The point of all this comparison with other industries is that most Toy companies could do an awful lot more to follow this approach. Now don’t get me wrong – there are significant regulatory and ethical hurdles to consider and overcome, because we are selling to children, but in the end, there is always an ethical way of getting things done.

Two examples from our industry – a massively capable colleague of mine once negotiated for a difficult puzzle product to be placed into a famous TV reality show as part of a challenge/exercise. Total media value c. $300,000. Total cost – a standard licensee royalty %, no advance, nothing paid until success was achieved.

The other example I would use is a major Games company which placed giant versions of their games into a kids physical challenge TV show, and saw massive sales uplift…not surprising when the show effectively demonstrated the products to the target audience while keeping them highly entertained.

These are just 2 examples from my own experience, but there are many more out there.

The challenge is that many companies and marketing teams become lazy, and get caught in the TV advertising addiction i.e. let’s just place it on TV. This is fine as an overall strategy, but sometimes to achieve exceptional results we need to take exceptional steps. It’s hard work negotiating an integrated media campaign. It takes more work and effort to make it work sometimes also, but as the X Factor proves – it can really, really work in commercial terms…

So, how can you implement this in your business…?

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Wakey, Wakey Toy Industry – Next Gen Consoles Are Upon Us…

Posted in Uncategorized on 15 November 2013

Next Gen Consoles & The Toy Industry

Video Game console cycles have historically been one of the greatest competitive threats to the Toy trade.

And in the year of a new console launch, and the following year, there has usually been a demonstrable negative effect on Toy sales.

Yet this time around, our industry appears to be (rightly) focused on embracing the new opportunities technology has offered up in terms of fusing technology driven play and traditional toy play patterns. There is no questioning the massive juggernaut success of Skylanders for instance.

However, we have to look at multiple threats/opportunities at once in this day and age, and it’s been surprising how little ‘noise’ there has been in our industry about this looming iceberg of a threat.

Historically, new Xbox or Playstation consoles have been must have items for many kids. So the question is will this be the case this time around…?

Well, when we’ve conducted focus groups with kids this year, we’ve consistently and resoundingly heard about aspirations to getting highly desirable tablet devices for Christmas – in the same reverent tones as we heard about the PS2 over a decade ago.  The historical truth has been that the cannibalistic effect on Toy sales has been strongest at the crossover age ranges where kids can be expected to be moving on from Toys to other interests i.e. anywhere from 6-9 years, with the majority at 7-8.

This time round however, even kids as young as 4 or 5 are already aspiring to owning their own iPads and other tablets, so what place is there for the new Consoles, and will this increase the competition for the headline, show stopping, major Xmas gift this year and next (bearing in mind that in the vast majority of cases there is one main/hero product per child each festive season).

Inevitably the new Console cycle WILL increase competition and have an effect, not least because of the huge marketing budgets that come behind the launches. The only uncertainty is over the size and longevity of that impact.

One thing’s for sure – ignore the next Console cycle at your peril Toy companies!

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5 Tips For Toy Company Owners Who Want To Sell Up

Posted in Uncategorized on 13 November 2013

5 Tips For Toy Company Owners Who Want To Sell Up

It’s hard to miss the fact that owner managed firms abound in our business. even where the original founders pass on or retire, there is often a retained family management team. The 3 biggest companies in the industry all started as family firms.

Not every Toy company owner wants to pass their business on though. The allure of a big cash-out to sail off into the sunset can be compelling. However, anyone who has actually tried to sell their business, or actually succeeded will tell you it’s not always a walk in the park.

We’ve worked on around half a dozen company disposals in recent times, and while the end result was rewarding, the process itself left exhausted and frustrated people behind!

It doesn’t have to be that hard, our service aims to streamline the experience so that you don;t have to go through the entire A-Z process with no previous experience/expectation to guide you.

As a taster, here’s some tips to help those aspiring to selling up:

1. Prepare Thorough, Professional Company/Due Diligence Presentations

You wouldn’t try to sell your products from a hand scrawled sales sheet (at least I hope you wouldn’t!). So why would you expect to be able to sell your company with a random selection of documents presented as if they’ve been thrown together with no thought or focus on what the potential purchaser will care about.

We’ve worked with companies who created hundreds of pages of tailored, insightful information, insight and analysis.

We’ve also worked with companies who printed off sales and stock reports and not a great deal more…

…guess which company successfully sold up?

2. Have A Clear Target Purchaser In Mind

Maybe you want to sell out to competitors, or to other companies who want to enter the space you’re in.

Maybe you’re in a good place to be bought out by venture capital/hedge fund/investment firm money.

The point is though, that you need to have an idea of which kind of companies might find your business attractive. For example, a company which will clearly gain ‘synergies’ from buying you out and bolting on your business to theirs may be a good target.

3. Have A (sane) Sale Price In Mind, Factor In All The Assets

Forget your emotional investment in the company, sorry, but nobody cares! look instead at objectively valuing your company.

The process of selling a company is a grinding process. So be ready for the grind – have an idea on what value you expect/can justify/you think the other party may pay for each asset type.

4. Plan For Management Transition In Advance

The more pivotal you are to the running of your business, the more difficult and lengthy will be the process of extricating yourself after sale. It’s normal for owner managers to be tied into their businesses for upto 2 years, or even more, with payments split between initial and staged milestones over time.

However, if you are selling a business with existing management structures which don’t need you, then clearly you are more likely to be able to sell and move on more quickly.

So before doing anything, we suggest planning for transition, hiring a CEO/MD, and you may need a couple of appointments before you get that right. You then also need to manage the management you put in place through the process to ensure they are motivated/incentivised to stay on & deliver after you depart.

5. Prepare For The Rest of Your Life

This is less a business tip than a tip to aid your transition into a different life. Those who have been working in/on a Toy business for years have invariably had a highly immersive, challenging full time (or more!) occupation. The day that stops is going to present you with different challenges.

For sure you may be looking forward to that cruise, or more time on the golf course, but the reality can often be dull and unfulfilling, so plan in advance how to manage that / keep stimulated…

…and in the meantime, keep building your business, because selling a company doesn’t happen overnight in the vast majority of cases.

 

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Carving Out A Niche For Your Company In The Toy Biz

Posted in Uncategorized on 13 November 2013

Carving Out A Niche For Your Company In The Toy Trade

Unless your company is an established huge global conglomerate with thousands of staff, forget about trying to do everything at once in the Toy industry.

The most successful and sustainable companies in this business carve out a niche, or a few niches which fit well together, and only when they are fully established and reached maturity in those niched areas do they look to diversify into more categories of Toys, alternative retail channels, new markets etc.

In my opinion, the word ‘focus’ is very over used, but clearly there are advantages in focusing in one or a just a few areas, establishing reputation, reliable supply history, brands, carry forward evergreen products and more. Your company will benefit hugely from being one of THE players in a space much more so than just chucking a load of random stuff out there and seeing what sells.

Trying to go full on into everything is a recipe for chaos and setbacks. The key drawbacks are lack of differentiation and competitive advantage. If you’re basically doing the same as dozens of other companies, the reasons for retailers and consumers backing your product offering become more random and arbitrary, which doesn’t create strong foundations for your company’s future growth prospects.

If you imagine a scenic back road, with not too much traffic and a fair chance of having at least part of the road to yourself, and compare that to the freeway, where it’s bedlam with juggernauts bearing down on you from behind if you don’t get up to speed and get out of their way – this is a fair comparison with what happens when you try to do everything in this business versus specialising and carving out a reliable niche.

Take over the whole world later, start by carving out and protecting your own little defendable island…where you have innate advantages and a ‘moat’ around your business.

…then you can think about everything else, but even then carving out your own space will bear fruit.

Or you could take the risk and become juggernaut roadkill!

 

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Selling Toys: Farming Versus Hunting

Posted in Uncategorized on 03 November 2013

Selling Toys: Farming Versus Hunting

There are 2 different approaches to selling:

HUNTING – whereby the sales person targets the sale itself, and relies on natural regeneration / depth of targets to find the next victim.

FARMING – whereby the sales person nurtures their supply of opportunity, just like a farmer tends a field so that it can keep on producing year after year.

This analogy can actually be applied to nearly any type of selling, but in our industry where there is definitely a finite choice of targets, and where retail buyers have long memories, we literally can’t afford to dump and run.

Nurturing relationships and doing our utmost to deliver value and solutions to our customers is the only way to go.

Even where a buyer/distributor represents a comparatively minor account, burn them at your peril, because buyers move around, and one year’s victim is likely to become another year’s problem.

All this is not to suggest that we ignore commercially prudent trading terms, or that we bend over and let our retail partners shaft us. There is clearly a point in the sand beyond which we should not go…

…But nevertheless, in this industry of all, a successful sales career depends on farming and cultivating.

 

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The Toy Biz: How To Know When You’re Ready For International Distribution…

Posted in Uncategorized on 01 November 2013

The Toy Biz: How To Know When You’re Ready For International Distribution…

Lately we’ve received many enquiries from companies wanting us to help them get international distribution.

This by the way is completely fine, we do offer this service, BUT, only for Brands which are ready for it! if you just launched a new one product company two months back, you need to focus on building in your home market first, before we or anyone else is likely to be able to deliver international distribution for you!

Here’s a list of factors in Toy and Game products which are ready for International Distribution:

1. Successful Sales In Home Market

This seems blindingly obvious (but perhaps not obvious enough!), but the first question any potential distributor/overseas retailer will ask you about your product is ‘How has it sold in your market’? if you don’t have an impressive answer to this question, save your time, effort and money, and get one first, before you even consider distribution elsewhere!

2. Proven / Integrated / Ready To Go Sales/Marketing Model

The reason why distributors distribute other people’s products versus sourcing their own is so that they can have products to sell with a ready to go formula. If they have to create / plan all marketing, then they can go one step further and create their own product to not need you. How & why is your product going to get on the shelf versus all the other thousands of products competing for that shelf space? How & why is the consumer going to take the product off the shelf and purchase? Answers including ‘Because it’s a great product’ indicate something not ready for international distribution in the vast majority of instances.

To be blunt, if you don’t have either/both a). impressive sales record and b). Ready to go TVC, then you are not likely to be ready for international expansion!

3. Toy Fair Testing

Often times, you know your product/s are ready because international distributors tell you so. If you exhibit at Toy Fairs in your home country, a significant portion of the attendees will be overseas distributors looking for new products. If you do exhibit and get no credible enquiries, that is not a promising sign!

To a degree the question of international (or any) distribution becomes chicken and egg – i.e. we could TV advertise if we had the sales, but how do you get the sales without the advertising.

The reality though is that international distributors know how this works, and frankly won’t care that you’re finding it hard. If you look at those who’ve got beyond this point, they tend to have a large degree of faith, persuasiveness, determination and a massive battle chest of war stories.

So, we suggest you build your own domestic business first…and when you’ve done that, feel free to get in touch & we may be able to open up international markets for you.

We have toy company and game company clients -looking for successful sales track record and ready to go marketing – in the following markets:

  • USA
  • Canada
  • Mexico
  • Brazil
  • UK
  • France
  • Germany
  • Spain
  • Benelux
  • Scandinavia
  • Eastern Europe & Russia
  • Australia/New Zealand
  • Japan
  • China
  • Others

So if you feel you have a truly compelling proposition, and need distribution into any of these markets, feel free to drop us a line, and we’ll see if we can help…

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Toy Industry Brand Managers Academy Day

Posted in Uncategorized on 01 November 2013

Toy Industry Brand Managers Academy Day

We’re running a one day training course for Toy industry Brand Managers on Friday December 6th in Central London (England).

This intensive all day training program covers the fundamentals of brand management, including:

  • Toy industry fundamentals.
  • Brand building tools and processes.
  • Product development processes.
  • Marketing strategy & execution.
  • What brand managers need to know about Licensing.
  • Consumer research – understanding the target consumer.
  • Concise reporting/sign off inputs to senior management.

The format of the day is informal and interactive, with a combination of presented content and interactive exercises.

Suitable for brand and product managers of all levels of experience, the level of content goes through from basics to advanced level.

For further details and to buy tickets, please follow this link:

https://www.eventbrite.com/event/9107078517 

 

To see the announcement regarding the course on the UK’s leading Toy trade magazine – Toy News, please click here:

http://www.toynews-online.biz/news/read/toy-brand-product-managers-academy-day-to-launch-in-december/041221

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Thoughts On Toy (Retail) Pricing Inflation

Posted in Uncategorized on 18 October 2013

Thoughts On Toy (Retail) Pricing Inflation

This week I had cause to search out some Toy adverts from the 1980s for a project we’re working on.

You Tube is a marvelous bank of old Toy TVCs, so I fairly quickly found what I was looking for.

The advert in question featured a recommended retail price of £13.95. Which aside from not really being a true price point based on modern day pricing structures, was also just £1 less than the modern day RSP of £14.99.

Yet this TVC dated from 1985, in fact I remember watching the TVC as a scruffy 10 year old back in those days!

The point of this meandering trip down memory lane is to compare pricing differences separated by 28 years of Inflation.

According to my calculations, UK price inflation over that period (according to the Bank of England’s price inflation calculator) would mean a retail price of c. £35.79, versus the mere £14.99 it is in reality.

This one example seems to be indicative of the broader macro trend…the Toy industry is delivering signficantly better consumer value than it has done historically, and so we’ve either created huge efficiencies along the way or taken a massive margin hit – take your pick!

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China’s Perennial Role In Toy Manufacturing

Posted in Uncategorized on 18 October 2013

Toy Manufacturing Trends

Clearly one of the major trends in Toy manufacturing in the past few years is the ever increasing labour costs, and therefore overall manufacturing costs out of China. And bearing in mind that cost of goods makes up by far the largest single expense item on Toy company P&L’s, any upward trend is a legitimate concern for the Toy industry.

In our experience, and based on stories and press releases in the trade press, there are definitely more North American and European companies who have moved manufacturing back to their home regions or are seriously considering it.

However, those who call this the death knell of Chinese Toy manufacturing are dreaming! Because while thing’s have changed for certain, there are still some HUGE factors in favour of Chinese Toy production. Cheap labour costs historically has been an important advantage, but there are other factors to consider. Here are a few of them:

1. Capacity – the reality is that if Chinese Toy production was shut off tomorrow, there would be literally no way of delivering the c. $70-90 billion of Toys (at retail value) we sell each year. if we do some quick math/s, presuming a total global retail market value of $80 billion, total net selling value for Toy suppliers will be roughly $50 billion. Manufacturing cost should normally be c. 15-25% of net selling price, so let’s call it 20% – that’s $10 billion of manufacturing spending. If we presume an average cost per unit of $3, that means (very approximately) 3 billion Toys manufactured every year globally.

You can’t just switch on new manufacturing to deliver that kind of capacity. It took China decades to get to current capacity levels, it will take any other country the same.

So in a sense, the reality is the Toy industry en masse actually has no option but to keep producing in China to fulfil the current level of demand.

2. Expertise and Talent Pool – way back in time, China may have been preferred primarily on a price/costing advantage basis, but over time the depth, breadth and scale of expertise developed has been mightily impressive, and again means that a massive proportion of the Toy industry’s human capital when it comes to engineering, design, tooling, manufacturing, innovation, R&D etc. rests with the Chinese Toy production industry.

3. Geographic location – the Asian Toy markets are growing overall. So while many European and some North American countries see China’s location as a disadvantage due to cashflow tied up in boats on the water, the upward trend for Asian Toy sales is a definite positive in China’s favour. With over 4 billion of the 7 billion people on the planet living in Asia, clearly China is well placed to benefit from fulfilling ever increasing Toy demand in Asia.

4. Efficiencies of Scale – clearly we expect scale of demand to drive serious reductions in manufacturing costs. So because of factors listed above, while labour cost advantages may equalise over time, the scale of production and component sourcing itself can drive cost advantage for China.

There are more factors in addition to these, but the point is, to those harbingers of doom – you’re dreaming if you think China Toy production is over!

P.S. A significant part of our business is based on helping Toy companies to work with reliable, cost effective factories who pass the toughest ethical factory standards/audits to keep your licensors and retailers satisfied. One of our guiding principles is to perform our own due diligence based on reputation and customer satisfaction…we validate for certain that each factory delivers reliable service, consistent quality and strong customer service over time. We won’t work with factories who don’t deliver on this, because their delivery = our hard earnt reputation.

We work with facilities in China, other regions of Asia, North America, Europe and beyond.

If you’ve been let down, or need additional trustworthy capacity, please feel free to get in touch…

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8 Characteristics Of Toy Companies That Stand The Test Of Time

Posted in Uncategorized on 08 October 2013

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.

 

 

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