Global Toy News

The UK Toy Fair - 60 Years Young

John Baulch,
Publisher of leading UK toy trade magazine Toy World, rounds up events at the recent London Toy Fair

The UK remains one of the few European territories to have its own dedicated toy trade show. The event went through a difficult phase a few years ago, after the show relocated to the unpopular ExCeL venue in the east end of London in 2001 (long before the Olympics rejuvenated the area).
Thankfully, four years ago, the organisers were able to move the show back to the venue which many consider to be its spiritual home, Olympia. Since the return, the show has been re-energised, and each year since has seen an increase in both visitors and exhibitors. This year’s the UK Toy Fair
celebrated its diamond anniversary – and let’s face it, 60 years is certainly no mean feat for a trade show in the current trading climate.

The general consensus was that this year’s UK Toy Fair was a very good show indeed. It’s an intense experience, as the show takes place over only three days. This means a packed schedule of back-to-back meetings, along with numerous snatched conversations in the aisles in between, plus of course
the essential post-show evening networking. The fact I ended up with a croak where a voice should be was hardly surprising. But, without a shadow of a doubt, it was all worth it.

Rain, Rain Go Away

 

 

 

 

 

 

 

 

 

 

 

It is often said that the British are obsessed with the weather, and it’s hard to disagree with that assertion. It’s true that we often begin conversations with a reference to the latest climate conditions, and for the past month, it’s been nigh on impossible to avoid mentioning the persistent rain. In fact, the UK has just experienced its wettest April in the last 100 years. And right there is one of the key reasons for our weather fixation; it’s not like America, where climate can vary dramatically from coast to coast (and everywhere in between). In the UK, we’re largely all in the same boat (or it may need to be an ark if it doesn’t stop raining soon!) Somewhat ironically, this wet spell was immediately preceded by the government’s announcement of a hosepipe ban due to drought conditions (that’s another key British trait, we do love our irony.)

But what has the inclement weather got to do with the UK toy trade? Well, quite a lot actually. After a highly respectable start to the year from a trading point of view, the last couple of months have apparently been less buoyant, and in many respects the rain hasn’t helped. This is the time of year when sales of outdoor toys traditionally make up a significant percentage of the overall volume of toys sold, and I very much doubt that anyone has shifted many paddling pools or much outdoor play equipment over the past month.

Queen, Country and Toys; A View From the UK

 

 

 

For those of you who are thinking "I know that face," I have been involved with the toy trade press in the UK for the past 30 years. Last year saw some major changes in my world; I left the magazine which I’d worked for since 1983 (yes, I know that you get less time for murder!) to launch my own toy magazine, Toy World. Our first edition was published in September, and since then my working life has been a whirlwind – but a thoroughly enjoyable one. I worked with Richard "in my previous life" and after meeting up again in Hong Kong, we both agreed that it was high time we rekindled our collaboration. So from time to time I’ll be bringing you news from the UK, and giving you a flavor of what’s happening in the toy world on the other side of the Atlantic.

It has certainly been an interesting start to the year. Like many Americans, a significant number of toy trade "Brits" also decamp to Hong Kong as soon as the New Year is upon us; this trip is followed swiftly by our own Toy Fair and then Nuremberg, before some lucky individuals round things off with a trip to New York. Six weeks – four dedicated toy shows. Six weeks in which the template for the year is set. The mood in the run-up to Christmas was reasonably good; the UK actually enjoyed a relatively successful festive trading period, and ended the year 3% up at just under £3 billion. This was a highly satisfactory result, especially when compared to general non-food trading results in the UK (which increased 0.2%). The performance also compared favorably with other European territories. Perhaps most importantly, the retail trade appears to have finished the year with little stock carry-over, which always gets the year off to a good start.

These, then, were the positives. But it would be disingenuous not to consider the other side of the coin: general economic woes in Europe, driven by the Greek debt crisis, are not going away any time soon (and that, in a nutshell, is why you won’t be seeing the UK adopt the Euro any time soon!); UK unemployment continues to grow and the austerity measures which the government has put in place are having a significant impact on the level of disposable income and, ultimately, customers’ spending habits. On an industry-specific level, aggressive price reductions on toys - mainly from grocery accounts - throughout the pre-Christmas period presented many specialist toy retailers with the difficult challenge of actually making a profit by selling toys.

The U.K. Toy Fair - a resurgence

First, I'd like to start with an apology. Unfortunately, due to 'circumstances beyond my control' (that old chestnut) I have been on something of an extended hiatus as far as this blog is concerned. Thankfully my 'sabbatical' is now over and I am pleased to be return with a few observations on last week's very successful UK Toy Fair.

I don't know if the phrase translates to the other side of the Atlantic, but as far as the Toy Fair is concerned, 'location, location, location' is the main factor behind its resurgence. Two short years ago the show was in a bit of a downward spiral, exacerbated by being held at ExCel, a venue which was not especially popular with either exhibitors or visitors. Thankfully, following the show's return to its 'spiritual home' Olympia, visitor and exhibitor numbers have increased significantly, and critically, the 'buzz' is well and truly back. I spent an incredibly productive (and rather intense!) 3 days at the show, and the vast majority of people I spoke to were delighted with how it went.

UK retailers to grapple with VAT rise

Last week saw the new British government unveil its inaugural budget,referred to as 'the austerity budget' by some sections of the media (or 'tax and axe' as the less subtle headline writers quickly dubbed it). Immediate reaction from the media and the public was surprisingly muted, perhaps because we had been lead to believe that the measures that were to be introduced would be far more onerous than they actually proved to be (a victory for the new government's 'spin machine' ). The widely anticipated increase in VAT (sales tax) to 20% was the inevitable headline grabber, but as this won't come into effect until January 1st 2011, at least retailers will have 6 months to grapple with the ramifications of its implementation.

The previous government temporarily reduced VAT to 15% last year in a (vain) attempt to stimulate consumer spending. In practice, many retailers simply used the move to boost their own margins.Conversely, this time round retailers and suppliers will have to work out the best way of accomodating the 2.5% rise whilst maintaining key price points. If this was the only factor to be taken into consideration, it surely wouldn't be too difficult to find a workable solution. But even a cursory glance at what's happening in the Far East complicates the picture somewhat; the impending revaluation of the yuan, ongoing labour shortages, simmering tensions between factory owners and workers and major increases in freight costs all add up to a 'perfect storm' of converging factors that point only one way....an increase in the cost of Chinese manufactured goods.

At a time when UK consumers will have to face the 'greatest tax burden in a generation', retail price increases will be about as welcome as Sepp Blatter at an England football fans day - out (sorry, I couldn't resist one last World-Cup related metaphor!).

In the short-term, 2010 looks set to be a respectable year for the UK toy industry; first-half sales are up, and we have much to look forward to in the second half of the year (including -one would imagine - massive sales of Toy Story 3 merchandise... I saw a preview of the movie this weekend and was blown away! What a great film, and what an opportunity for the toy trade). But one suspects that retailers and suppliers already have one eye on 2011,and will be mindful of the challenges that lay ahead.

'Soccerball' sweeps Europe

It is widely acknowledged - particularly in the political arena - that the UK and the USA have a 'special relationship'. It is also sometimes said that we are two nations divided by a common language. Quite apart from the lingusitic differences, there are also cultural anomalies: one currently pertinent example is the regard in which football (or soccer, as I'm given to understand Americans refer to it) is held by our two nations. Here in the UK - and indeed pretty much throughout Europe - football is a major distraction. Hence the World Cup, currently taking place in South Africa, is a big deal. Retail footfall fell by 4.7% last Saturday, the day of England's first game....and yet the game didn't even kick off until the evening. It appears that many people simply chose to spend the day 'preparing' for it!

This is certainly not just a UK phenomenon. We have an Italian member of staff, who tells us that major Italian cities come to a halt when the national team plays. Many other European, South American and Asian nations are just as fanatical about supporting their national football teams.

Retailers know that there is a significant potential upside to the World Cup. Many toy companies release football-related ranges to coincide with the tournament, some of which sell extremely well (and some of which look like terrible attempts to 'cash in' and fool no-one!). A number of retailers tie in promotions, including money off or even a total refund on certain products if the national team scores or wins the tournament.

However, there is also a potential downside, especially for toy retailers. Less footfall for starters. A tendency for people to spend their disposable income on 'non-toy' product. Young boys in particular becoming fixated by the World Cup, to the exclusion of other forms of entertainment (it's noticeable that most major movies avoid launching over the 4 week period that the tournament is held).

I'm (reliably) informed that the picture is rather different in the USA. Although some 17m American viewers are said to have watched the USA / England game last week (which is apparently one of the highest figures ever for a soccer match in the US!), nearly double that number watched in the UK, a country with a fraction of the population of America. I have two friends who stayed on in Vegas after Licensing Expo, and therefore needed to find a bar to watch the game. They were worried a) that they wouldn't be able to easily find one and b) if they did, it would be full of teenage girls!

Normal service will be resumed in a couple of weeks (or whenever our team goes out!). Until then, if you can't reach us on the phone one afternoon, or don't get an immediate email reply, you might want to check the World Cup fixture list....

UK left hanging by General Election

It has been just under a month since the Great British public delivered a hung parliament, the first such general election result since 1974. The UK is now run by a broadly 'centre-right' coalition government, and the past few weeks has seen the two main coalition parties - Conservatives and Liberal Democrats - negotiating to find common ground for their future policies, particularly fiscal ones. You may well be asking yourself what this has got to do with the toy trade...well the answer is 'quite a lot actually'.

The biggest task faced by the new government is the rather pressing need to reduce a massive budget deficit. The £6.2 billion of urgent cuts announced last week hardly make a dent in the overall figure, which some observers have predicted could hit a whopping £200 billion this year, or 18 % of the country's GDP. Basically, going forward money is going to be tight. Cuts will have to be made, and lots of them. Cuts which could well result in significant numbers of job losses,, and consumer confidence taking another nosedive. And we all know what happens to retail sales when consumer confidence is low...

Yes, the toy industry is partially protected by the old adgae that parents don't like their children to suffer in the hard times. But if the financial crisis of 2008/09 proved anything, it's that the toy trade is recession resistant rather than recession proof.

But before the inevitable cuts bite, the UK has two particular financial issues to grapple with in the short-term: 1. Since the election the pound has fallen sharply against the dollar - and therefore also the Hong Kong dollar, the currency in which the vast majority of UK toys are purchased. If it stays like this, price rises will become inevitable. 2. It has been widely predicted that the new government will raise VAT (i.e. our purchase sales tax) to 20 or even 22%. If this happens, retailers are concerned that it will further dampen consumer sales.

All of these factors are outside of the toy industry's control. But they could have a significant bearing on the toy retail landscape in the UK over the coming months.

On the plus side, first quarter sales in the UK were extremely positve. Everyone is now hoping that this positive performance continues and the country doesn't get dragged into the feared 'double dip' recession.