This Year's Model
Toy manufacturers on the challenges—and opportunities—that lie ahead
By Karyn M. Peterson -- Gifts and Dec, 1/1/2009 12:00:00 AM
Just ahead of the new year, Playthings spoke with dozens of toy manufacturers about their plans for 2009.
What did they say is on the horizon for the industry? Most executives agreed that the slate of new safety regulations—which some called confusing and many redundant—will have a big impact, requiring companies to cut internal costs, find efficiencies and reapportion their budgets in order to accommodate added testing expenses without impacting their customers too strongly. In addition, the anticipated longer lead times likely to be necessary to move products from development to store shelves with testing results in hand has also led executives to question whether innovation might suffer in the short term.
At retail, value will become a buzzword in 2009, with toymakers attempting a number of strategies to court consumers, from marketing the caché of their time-tested, trusted brands and kid-favorite licenses to introducing lower price-point items and increasing efforts at going green.
What lessons have you learned in 2008 that your business will be carrying over into the new year?
“If 2008 reinforced anything, it was that the economic environment can change quickly. We need to balance the necessity for long-term planning against the reality that, by the time products are ready to ship, the market could be quite different than originally expected. After a year like this, contingency planning takes on a whole new level of priority.” —Eric Levin, president, Techno Source
“We need to clearly identify where to be nimble and where to remain steadfast. Despite pressures from higher costs ... we need to maintain the core integrity of our products. It has also been a good year to stay in close contact with our best customers to ensure they are getting the support they need, [whether that is] the latest communication regarding regulatory compliance, or by doing an additional in-store activity.” —Jamie Gallagher, CEO, Creativity for Kids
“You can never be too prepared. With the change in the world's economic outlook, everybody must investigate new ways of conducting business. This means tightening controls and being more efficient in every area of our business.” —Michael Rinzler, general manager, Jakks Pacific's CDI division
“Only those companies who are willing to innovate across all the areas that impact today's bottom line will thrive. This means being able to step outside the old models and do business in an entirely new way, while maintaining the integrity of what the toy business has always been about: great product.” —John Lindsay, president, Cadaco
“A positive attitude is key! We're going into 2009 with a winning attitude.” —Alita Friedman, director of operations, Pretty Ugly
“There are still great opportunities if we continue to look for them and don't adopt a reactive 'bunker' mentality. We must work closely with our international partners to understand their markets, and we need to manage inventory better and more diligently than we have ever done before.” —Frank Adler, executive vice president, Uncle Milton
“In 2009, Hasbro will continue to work very hard at creating immersive brand experiences.” —John Frascotti, chief marketing officer, Hasbro
“Our troubled economy made us face the challenges related to the consumer's declining disposable income. We saw the sales of our higher price points dip while sales of lower price points accelerated. Going into 2009 will find us developing more value-packed products at lower price points.” —Elaine Kollias, marketing director, Folkmanis
“It's very important to stay involved [with] TIA and ASTRA, [who] have made important information readily available to all of us. The change in the toy safety regulations certainly has brought manufacturers closer together to one another, which will only help in making the toy industry stronger.” —Esther Novis, president, Young Scientists Club
“We have done fantastic[ally well] with our lower-priced impulse items and will continue to aggressively expand our offerings at $5.00 and below. [Also in 2009], we will be executing many initiatives, including more direct customer visits and service; strengthening relationships with our existing customers is a very effective way of growing revenue.” —Grant Cleveland, president, DuneCraft
What will your business be doing differently in 2009?
“Our philosophy continues to center on re-imagining, re-inventing and re-igniting our brands ... We will continue to work very closely with Universal to produce at least four motion pictures based on some of our best-known brands. We are also accelerating efforts in two key areas: first, our alliance with Electronic Arts, where we will launch some great new games; and second, we will continue to invest in emerging markets, including Brazil, Russia and China.” —John Frascotti, chief marketing officer, Hasbro
“When money is tight, consumers tend to cut risk out of their buying decisions. While we will continue to focus on innovation, our line will also have a 'back-to-basics' simplicity to it. We want to make it as easy as possible for both retailers and consumers to feel comfortable with our value proposition.” —Eric Levin, president, Techno Source
“We will most likely run more specials as well as diversify where we will be selling our products.” —Esther Novis, president, Young Scientists Club
“We'll take a harder look at our return on investment [and] will put more effort into creating partnerships that will allow us to continue to bring innovative products to market.” —Daniel Grossman, pres. and CEO, Wild Planet
“With a soft economy, we may be more mindful about providing promotional opportunities to our retail base to help them bring more consumers into their stores.” —Andrea Schauer, CEO, Playmobil
“In past years I've produced things I didn't think would really sell because I just wanted to see certain beautiful things made. I definitely will have to curtail some of that this year. In the short term we will be focusing on expanding our stronger categories. Overall, we are watching expenditures, and trying to work smarter.” —Mia Galison, president, eeBoo
“Consumers are looking for products that provide extended play for their kids at price points that don't strain their pocketbooks. We have shifted the focus of our new lines to lower-priced items that still address the 'open, active, imaginative play' mantra upon which were founded.” —Craig Storey, CEO, Sprig Toys
“We will be more tightly defining who we are as a company, creating a more complete base in order to successfully forge ahead to the next level.” —Elena Patrice, co-founder, Nana Star
“We have already made great strides in better communications with our partner factory this year, but will be working even more closely with them in 2009. Our biggest change will be better organization, creating a definitive roadmap for our business to guide us.” —Barbera Aimes, president, ImagiPlay
“There's a constant and renewed need to exceed safety and quality demands ... We will be expanding our green product lines to reach niche customers and keep pace with important initiatives.” —Paul Roche, senior vice president of sales, Aurora
“Partnering with our retailers will continue to be our focus so that we can ensure they are able to feature our products in the best way possible.” —Andrea Barthello, chair and co-founder, ThinkFun
“We will be investing more in marketing, focusing our programs and innovation to be as targeted as possible.” —Soren Torp Lauresen, president, Lego
“While we're cautiously optimistic about 2009, we will cut unnecessary spending. However, we will not cut back on product development, the number of products we introduce, our quality standards, attendance at trade shows or our marketing efforts.” —Elaine Kollias, marketing director, Folkmanis
“We will develop some innovative products that are designed to stand out from traditional toys and offer parents and kids unique play opportunities. We will also be aggressively pursuing the specialty industry.” —John Lindsay, president, Cadaco
“We will be doing more consumer marketing to help stimulate business for us and our retailers.” —Barbara Isenberg, president, North American Bear
“We will be doing much more to connect directly with our consumers. Our [web]site will prove instrumental in branding ourselves.” —Jeff Holtzman, president and CEO, Goldberger Co.
“We'll be choosing promotional opportunities very carefully so that discretionary money spent provides the maximum benefit for the dollar.” —Steve Velte, president, RSV Productions (Jishaku)
What challenges does your company face in the new year?
“The entire industry is facing serious challenges in price fluctuations, reduced vendor availability and increased testing requirements and timelines. In addition, it will be critical to manage and justify the new price/value relationship that has emerged in the past 12 months.” —George Irwin, CEO, iToys
“We have a strategic plan that involves engaging children, families and schools in a new and radical way ... we believe 2009 will be the year of evolution for ThinkFun to start to fulfill our potential.” —Andrea Barthello, chair/co-founder, ThinkFun
“In such an environment as this, the best direction to take is to be conservative and weigh all options when making business decisions. Keeping costs down by spending smarter and tuning the business based on the possibility of a future slow down.” —Ramona Pariente, president, Safari
“After 30-plus years in the industry our challenge is to always be fresh and new while still offering the ongoing legacy product consumers expect.” —Barbara Isenberg, president, North American Bear
“Uncharacteristically strong demand in 2008 creates a situation where we have to carefully plan for 2009. Of course the economy will continue to create uncertainty for our industry, and though we are planning for growth in 2009, we also are building in scenarios for various macroeconomic variables.” —Soren Torp Laursen, president, Lego
“Another challenge we all will face is in the continuing consolidation of retail and the inevitable bankruptcies that the current economic climate facilitates. Knowing who to ship to and who not to will be key.” —Grant Cleveland, president, DuneCraft
“Our two biggest challenges are increased costs and managing inventory. We have been able to remain very competitive with our price points but we are struggling to maintain this. On a separate note, health insurance costs are crazy and I'm hoping for some government reforms that can help small businesses that are trying to do right by their employees.” —Mia Galison, president, eeBoo
“Independent stores will be harder to write business with as they see diminished profits from discounted sales. On the other hand, the nationals will be—or should be—looking at lines that provide richer margins to offset their discounted retails. Board games, while not thriving in this environment, will hold their own.” —Kevin McNulty, CEO, Endless Games
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