Lessons Learned

After a tough year, toymakers detail the insights that will guide their efforts in 2010

By Pamela Brill -- Gifts and Dec, January 1, 2010

After a rather tumultuous year at retail, toy manufacturers are looking forward to the clean slate that the New Year brings. Playthings spoke to several companies about how they'll approach their business in 2010, what they are most excited about this year and what concerns them most in the months ahead.

What lessons did you learn in 2009 and what impact will they have on your business in 2010?

"We have a better understanding of our puzzle consumer and that is a direct result of the research we do in this area. We are particular about what artists we choose to partner with, what licensors will work and keep our noses to the grindstone until we find that right image. Moving forward, we will continue to partner with well-known artists for puzzles, expand our existing puzzle lines with additional titles and introduce never seen before on puzzle partnerships."

—Paul Dedrick, president, Buffalo Games

"Consumers are more price-conscious. And because they are focused on products they need over ones they want, consumers are looking for products that serve a greater purpose. We will continue to listen to our consumers and provide products that are both wants and needs."

—Nader Hamda, president and CEO, Cloud B

"I think that DuneCraft, like most other companies, learned to become leaner and more efficient by cutting costs and streamlining business processes. We will continue to look for ways to cut costs to allow us to be most competitive in the coming year. It seems our specialty clients, by and large, have been hit worse than the second-tier and mass accounts. I think a strong relationship both with the buyer and the organization will be even more important going forward."

—Grant Cleveland, president, DuneCraft

"We have learned that even in a downturn in the economy, our company could grow with innovative new product. We will continue to innovate in 2010 with many, many new products and expect the same growth in 2010."

—Goldi Miller, product development, Fashion Angels

"The most important thing that we learned in 2009 was that customers desire our brand. Even in difficult times, our customers kept coming back to Playmobil. They appreciated that we were way ahead of the curve in terms of the safety standards that became so topical in 2009, and as always, we provided an...array of new introductions that piqued the creative play possibilities within our most important clientele: the children."

—Patrick Brennan, director of sales and marketing, Playmobil USA

"In 2009, I noticed that the buying habits of retailers have shifted to having a more conservative approach to inventory levels and SKU numbers. Several of our larger venues, and also smaller ones, reduced the number of SKUs to better control inventory levels. With an unstable economic environment and high unemployment, retailers are cautious about what they purchase and how much. I noticed a pattern of more frequent, smaller orders to better control their inventory. At Safari, we also carefully monitor our own inventory levels and continuously adjust our stock levels based on demand. We have always run a tight ship so we are well-positioned in 2010 to meet any of its demands."

—Ramona Pariente, president, Safari

"We learned that the marketplace is looking for lower price points given the economic times. We introduced a new price point this year with our $9.99 Clay Play line. We will continue to feed this price point with two other lines and plan to launch a series of $14.99 products in 2010. Both of these price points come well below our historic average."

—Aaron Tibbs, VP, SmartLab Toys

"This year, we learned a lot about listening to our customers. Close communication is important for us because we need to know what is going on at store level, whether it is reactions to our new products, the success of promotions, or even ideas for popular themes we are missing with our kits. We apply knowledge we learn from our customers on a daily basis to every level of our organization, whether it is managing inventory needs or our product development team knowing what is in demand. Listening to our customers sounds simple enough, but we really are going to focus on this and it is how we will approach 2010."

—Melissa Milne, VP, North American sales, The Orb Factory

"2009 reaffirmed our quality-over-quantity approach. The CSPIA legislation had little effect on us because we were already inspecting 100 percent of our products and individually identifying every unit produced. We were also able to better identify our dominate customer base, as they began to stand out more. We noticed our higher priced items were selling very well, yet our lowest priced items could not compete with the discounters. So, we looked further into this and discovered grandparents were emerging as our primary customers. When asked why, they told us they would rather buy one nice gift for the whole family than five cheap ones. With our gifts, they actually felt they were getting a bargain."

—David Schreiber, president, Uncle Skunkle Toys

"Because Winning Moves is primarily a specialty game company, we saw a shift in consumer spending from specialty to the mass market, driven by the desire to stretch dollars. We reacted quickly by offering more lower-priced games and reducing cost, and therefore trade pricing, on several enduring games."

—Phil Orbanes, president, Winning Moves

"The toy industry is resilient, even in the face of an economic crisis. If you have designed an innovative toy with an eye on staying one step ahead of the latest trend, it can be a success in any climate. Better still, companies that step outside of the box and create a trend of their own, like we did with the Star Wars Force Trainer or Cepia did with Zhu Zhu Pets, will have a significant advantage in the marketplace."

—Frank Adler, executive VP, Uncle Milton Industries

"I learned that even when the global economic news looks bleak, you have to just keep going and not let the news get you down. I've learned that sometimes you have to just turn off NPR and put on some good music! On the practical side, we learned to be more accurate and precise with our inventory planning, to reduce overstocks and improve our turnover."

—Ted McGuire, president, Thames & Kosmos

"As I think everyone has seen in all sectors of consumer products, people are more price sensitive now than ever before. Although we are beginning to see a slight trend away from this, we at Aurora are doing everything in our power to be conscious of our price points on new product. We have been creating line extensions to meet the demand for the lower price points while still maintaining...quality by offering smaller sizes in our best selling lines. This way we can maintain our brand integrity and still offer the retailers and consumers a product that they can afford."

—Tina Waldmier, marketing manager, Aurora

Debbie Kurlansky-Winer, VP, marketing and product development, ScratchArt

"Most of our line is impulse-priced. This is a formula that continues to work well for us; the bulk of our line retails for $5.99. We will continue to offer impulse-priced products as we expand our offering."

Liza Abrams, VP, licensing and corporate communications, Sakar

"In terms of licensing, I'd say the main thing we learned is that a property must have a clear fit with the product and demographics. Even when there seems to be a strong synergy, licenses don't always work. It's a gamble—there is no 'sure thing.' I think we scrutinize properties a lot more closely. Although we are licensing more, we are much more particular with the properties we choose."

In addition to applying general lessons, what will your business be doing differently in 2010 than in 2009?

"Cloud B will be adding several new products to our product line that will continue with our mission to provide products with a greater purpose. We will be focusing on our brand awareness, along with transitioning our plush to characters."

—Nader Hamda, president and CEO, Cloud B

"We will be attending additional trade shows targeting the badly hit specialty toy sector. We will be implementing a business-wide system that will make us even more efficient and allow us to respond more quickly to developing trends on the customer, supplier and product category sides. We are reducing advertising in some industries where it is not effective and we will be expanding our facilities to accommodate our growth and distribution deals."

—Grant Cleveland, president, DuneCraft

"In general, we will actually not be doing things that differently since we have a solid business plan that has worked well for us, but perhaps one of the things we will be doing differently is listening even more carefully to what retailers need to keep them healthy. We will run more promotions during strategic buying periods to assist in cash flow with extended dating and other perks. Additionally, we will make sure to produce toys that are even more price-sensitive."

—Ramona Pariente, president, Safari

"Our line has many gift-oriented SKUs therefore we will look for new business within the gift channel in 2010."

—Aaron Tibbs, VP, SmartLab Toys

"Next year we will be expanding our customer base and expanding the depth of our line. We really want to bring more to arts & crafts than just Sticky Mosaics, and this directly relates to our desire to grow our customer base."

—Melissa Milne, VP, North American sales, The Orb Factory

"The market is changing at lightning speed. What worked two years ago, does not work today. Innovation is our strength and we will be applying it more broadly than ever before in marketing, manufacturing and to our internal operations. We are also going to hold firm to our product distinction in 2010. It will be more important than ever to be different than everyone else. We will continue to be more strategic about where we utilize our resources, especially in logistics and production schedules. We have found we can save more money by producing during the slower production months and when the shipping/oil prices are lower than trying to compete with the 'just in time' rat race during the third quarter. With this strategy, we get higher quality products from our factories and we know exactly how much product we have to work with."

—David Schreiber, president, Uncle Skunkle Toys

"We are working as closely as we can with our buyers to ensure we are giving them what they want in terms of design, packaging, product features. They know their customers best and we encourage them to be involved in the entire planning process."

—Liza Abrams, VP, licensing and corporate communications, Sakar

"We are publishing our 2010 catalog two months earlier than in years past, to get it into retailers' hands earlier. We are bringing in a line of smaller, less expensive science kits. We are upgrading our ERP system to help us project inventory demand more accurately and manage our supply chain better."

—Ted McGuire, president, Thames & Kosmos

"We're introducing a broad assortment of items under $20. The overall value we're building into the line isn't new or different, we're just more sensitive to what consumers are going through and asking for in price points. We're not abandoning all our items over $20, instead we listened to what consumers wanted and we built it, resulting in a robust line with quality items in key price ranges."

—Frank Adler, executive VP, Uncle Milton Industries

Phil Orbanes, president, Winning Moves

"We anticipate that as long as unemployment remains high consumer spending will be muted and more gift-buying will come at the last minute. We will spread our expected monthly business, accordingly."

What most concerns you about the toy business going into 2010?

"The proliferation of EDI is very concerning, which adds cost and complexity for the manufacturer. In addition, it is yet another source of chargebacks and fines."

—Grant Cleveland, president, DuneCraft

"What concerns us most is the dollar in the global economy."

—Goldi Miller, product development, Fashion Angels

"My biggest concern is the high unemployment rate, which impacts buying patterns. Until this is lowered, we will continue to see patchy buying with retailers remaining conservative and maintaining tight inventory levels. However, in general, the toy industry has not been impacted as much as other markets, such as travel and fashion. Yes, I have my concerns, but I also understand that there will be a gradual improvement in summer 2010. So 'reinvent, renew and regain' are good concepts to focus on going into the New Year."

—Ramona Pariente, president, Safari

"I would say our greatest concern is the toy industry's dependence on Asia as a manufacturing source. Being a company whose product labels read 'Made in Canada' not too long ago, we have learned a lot about offshore manufacturing the past few years and it being, really, the only option."

—Melissa Milne, VP, North American sales, The Orb Factory

"The specialty retailers that have survived seem to be doing well this year. Unfortunately, there may not be enough of them left to act as the great incubators for new product and new companies they have been in the past."

—David Schreiber, president, Uncle Skunkle Toys

"I'm most concerned about the lack of retail space. Shelf space is always shrinking—or being re-shuffled—or both. And retailers continue to fail. I am hopeful that we'll see a leveling off of both next year."

—Liza Abrams, VP, licensing and corporate communications, Sakar

"What concerns me most is that retailers and manufacturers alike will hedge their bets, being unsure about what the overall economy and consumer confidence will be like in 2010. The risk in that uncertainty is that manufacturers will worry too much about what retail will buy and so they short-change product development. Retailers, in turn, don't see the breadth of product they want to stock and consumers don't see anything that's new or exciting enough to justify spending. It's a vicious cycle that can only lead to a lose-lose-lose situation. We—manufacturers and retailers together—all need to do our parts to make sure we don't end up in that spiral."

—Frank Adler, executive VP, Uncle Milton Industries

"There are a number of concerning topics—the continued impact of the CPSIA, for one—but I am most concerned about how the rise of e-commerce will affect our small, independent brick-and-mortar toy stores, which play a crucial role in the toy industry. This year we have seen severe price erosion in online retail prices, and I am concerned about the economic sustainability of this. How manufacturers and retailers will deal with this trend in a fair and legal way is of great importance to our entire industry."

—Ted McGuire, president, Thames & Kosmos

Paul Dedrick, president, Buffalo Games

"We're excited with our position in 2010, although looking a little further out the economy is still a concern. Our core products are a great value and have held up extremely well so far in this soft economy, but if consumers keep having less discretionary money, that's going to eventually affect everyone in the industry."

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