State of the Industry EMBRACE THE GRIND TO SUCCEED IN EXPORTS by STEVE REECE, CEO, Kids Brand Insight THERE IS A BIG WORLD OUT THERE. Around 75 percent of the global toy market lies outside the borders of North America. Things change once you go beyond these borders—consumers, business culture, media, families, distribution and retail channels, and the attitude toward play all change. Unless your company has a raft of hot licensed products with global rights, or unless you create a global brand of your own, you will find that export sales is 50 percent pure grind, 30 percent quality products (that are easy to do business with), and 20 percent sheer luck. <strong>The</strong>re are millions of toy products on sale worldwide at any point in time. More than a million products are on display at the Spielwarenmesse international toy fair in Nuremberg every year. Product selections resemble a massive washing machine spinning cycle, spitting out a few placements here and a few placements there. <strong>The</strong> reality is that you can be as strategic as you want, but decisions to take on new products or retail listings (once you move away from the aforementioned must-have licensed or power brand heroes) are—to a degree—arbitrary and driven by getting your product in the right place at the right time as much as by demonstrating Power- Point charts indicating your global distribution touch points. In my opinion (based on tens of millions of dollars in toy sales in countries outside my own), the secret behind growing a successful export business is to “embrace the grind.”Go to more of the international toy fairs than your competitors, develop more international contacts than anyone else, and build relationships that can work for you for the rest of your career instead of dumping volumes of stock and running. 76 THE <strong>TOY</strong> BOOK | FEBRUARY <strong>2016</strong> | <strong>TOY</strong>BOOK.COM To put all this in a formula: Export success = effective presentation x quality of product x number of products x number of companies presented to x frequency of presenting to those same companies. So, forget the glitz, forget the pretentious strategizing, and just embrace the grind! Having said that, cultural and market awareness is another area I would include in “effective presentation,” because understanding how your product or approach might need to change from one market to another is pivotal to maximize your chance of success. Those companies with an inflexible, one-size-fits-all mindset are the ones that want to do things exactly the same way in other countries despite huge disparity and fragmentation of the global toy market outside the U.S. For example, if you are used to doing more than 50 percent of your business with two mass-market retailers, you won’t find that kind of opportunity outside the U.S. Of course there are major retailers in other markets, but the volume potential is significantly lower. You may be able to sell a large volume via a single customer account in the U.S., but that number may be more like 10,000 to 30,000 in the UK, 5,000 to 10,000 in Holland, 10,000 to 30,000 in France, or 5,000 to 10,000 in Australia. We can see from these rough estimates that you have to build an international portfolio to make the numbers stack up versus domestic numbers. Another major point to be aware of is how toy and game distribution varies by market. For instance, the UK has Argos, its own distinct market leader in catalogue and online-based retail. Clearly in this kind of format, a thumbnail-sized image versus shelf presence is what sells a product. Or take a look at Germany, where no single retailer or channel has the market leadership position. In fact, Germany is a fragmented distribution market. What you get in Germany is a very large independent “mom and pop” channel with thousands of small retailers at the heart of a fragmented, wholesaler- or field sales-driven market. Finally, a thought on chasing exotic distribution markets such as China, Japan, and India: While China and Japan make up the second and third largest toy markets globally, they are not easy to reach. Non-branded toys shipped directly from Chinese toy factories saturate China. Consumers do not always know western brands, so it can be an uphill battle to progress in the Chinese market. Japan is so culturally distinct that even major corporate toy companies use third-party distribution partnerships. While Japan is a large-scale established toy market, it’s probably the hardest major toy market for western companies to enter. India is a fast-growing market, but with very little structured distribution. Up to 95 percent of the Indian market is in independent retail without any major buying groups to simplify distribution. In several cases, the low-hanging fruit for North American companies is often found in Europe. <strong>The</strong>refore, in order to succeed in the global toy industry, the key is to embrace the grind! » Steve Reece is the CEO of Kids Brand Insight, a consultancy to the global toy industry offering export sales; factory finding in China, India, and beyond; and consumer testing on toys and games.
STAT SHOT Kids at Play: How Do <strong>The</strong>y Spend <strong>The</strong>ir Time and Money? <strong>TOY</strong>BOOK.COM | FEBRUARY <strong>2016</strong> | THE <strong>TOY</strong> BOOK 77
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