Global Toy News

A Conversation with Shirley Price; CEO of Funrise

Let me say this right out in front.  I like Shirley Price.  In fact, just about everyone likes Shirley.  She is gentle, friendly, warm and open.  How then did someone with these personality traits come to be the COO of one of our largest toy companies?I wanted to find that out so I sat Shirley down for a conversation.  Here is what I learned:

Talk to Shirley any amount of time and you realize that you simply cannot fully understand how Shirley came to run Funrise without understanding the person who hired her; Arnie Rubin.  Arnie is one of those rare individuals who have somehow managed to be respected and loved by his peers; not so easy in a sharp elbowed community like the toy industry. 

Shirley (she was the company’s first employee) is careful to explain that Arnie’s intention from the beginning was to create a “work hard / play hard” environment that was empowering to those who worked within it.  His way of encouraging was to allow his employees to make their own decisions and learn from the experience.

Obviously, Shirley was the kind of employee Arnie was seeking and Funrise was the kind of company with which Shirley wanted to stay.  She has been there since its inception in 1987 with her only prior experience working in a bank (which she hated).That tells us a great deal about Arnie but what about Shirley.  What makes her tick? 

The most prominent element appears to be her belief in the concept of the servant leader.  This lifestyle calls upon her to live her beliefs so that her counterparts can emulate rather than just hear what she wants.   Bottom line she believes that to be a great coach you have to live what you teach. 

Then I asked her the big question:  “How did you feel about following a legend like Arnie?”   

“With some trepidation,” she responded.  She went on to explain that Arnie is a great product person and she does not feel she has that strength in kind.  And then she said, and this gave me my clearest insight into Shirley, that that was why she knew she had to surround herself with great product people.  She had to fill in her gap.

Shirley has, what I like to call, “confident humility.”It is that wonderful ability to surround oneself with strong, capable people who compliment us without threatening us.

I then asked Shirley how she felt about being one of the few females in the toy industry who is in the top position.  Shirley feels that the toy industry is simply an extension of society at large in which there are

Why Channel Management is Busted; A Little History

I want to thank everyone who has commented on my posting, “Jerry Storch of Toys R Us Speaks His Mind at PlayCon.”   Jerry’s position that the toy industry is terrible at channel management created a stir on our comments section, Linked In, the ASTRA bulletin board and other venues.   Channel management is, if you will recall,  the process of when and to whom product is shipped.  Mr. Storch points out that the toy industry seeks to secure all channels of trade (specialty, mass, supermarket, drug, etc.) in year one resulting in hypercompetitive pricing, a shorted product life cycle and less profit for everyone.

Brian Torney, in his Global Toy News posting “Opinion-Storch Out on a Limb” made an excellent case for the need for channel management.  As he puts it, the lack of channel management by toy companies has “…reduced product to month-long shelf life and weakened brands by a half-life. If products cost more to produce and market each year, how can we justify fruit fly product lifetimes and diminishing returns?”

So why do we have fruit fly product lifetimes and diminishing returns?  How did we come to this?  To find out, we can look at the history of the toy industry.  If you were to take a time machine back 20 years or so you would have found that the retail landscape was far more abundant in the number of retail chains.  Here is a list of just some of the larger retailers who are no longer with us:

Ames                                        Mass Merchandiser

Best Products                           Catalog Showroom

Bradlees                                   Mass Merchandiser

Caldor                                      Mass Merchandiser

Children’s Palace                       Toy Chain

Eckerd Drug                              Drug Chain

Hills                                          Mass Merchandiser

Jamesway                                 Mass Merchandiser

KB Toys                                   Toy Chain

Kiddie City                                Toy Chain

Osco                                        Drug Chain

Peoples                                    Drug Chain

Pharmor                                    Drug Chain

Service Merchandise                  Catalog Showroom

Venture                                     Mass Merchandiser

Woolworth                                 Variety Chain

Zayre                                        Mass Merchandiser

This is history but not ancient history.  Speak with some of the industry’s veterans and you will hear some great stories (funny, less funny and not funny at all) about doing business with these chains. 

My point is that there used to be an abundance of potential customers so when a company brought a product to market,  it did not have to make sure that it acquired at least two of the big three (Toys R Us, Wal-Mart and Target) in order to run a television ad.  In fact, due to the regional nature o

Worker Safety and Toys; An Interview with Carter Keithley, President of the Toy Industry Association

Safety is a constant concern to all of us who make toys.  For that reason, in light of the recent building collapse in Bangladesh, I thought it might be a good time to check in on how the toy industry is doing in this regard.  To find out, I asked Carter Keithley, President of the Toy Industry Association and a member of the ICTI (International Council of Toy Industries) board of directors for an interview.  He kindly agreed and here is what I learned:

Richard:

All of us in the toy industry and society at large were shocked by the building collapse in Bangladesh.  In this case, a building containing several clothing factories collapsed killing over 1,000 people.  The toy industry had its own problems with safety in the past but fortunately not even remotely on this scale.  How did you react when you heard the news?

Carter:

I was dumbfounded by the Bangladeshi disaster.   In addition to thehuge number of fatalities,it seems likely that many more workers were permanently injured.  The United States learned of the need for effective worker protection measures more than 100 years ago in the Triangle Shirtwaist Factory fire that resulted in “only” 146 fatalities.  The scale of the Bangladeshi disaster is beyond comprehension.This has to be a lesson to the Bangladesh government about the need for worker protections.  I understand that they are trying to “bootstrap” their nation into 21^st century prosperity, but moral responsibility aside, it would be foolish for them to think that they can prosper at the expense of the safety and wellbeing of their workers, which are their nation’s asset.

Richard

The press has been keeping a great deal of pressure on the clothing industry in reporting how it is reacting to the collapse (Disney has pulled out of Bangladesh).  How do you feel that toy industry retailers and producers reacted to the toy industry’s problems and how does it compare with how clothing retailers and companies are reacting to the Bangladesh event?

Carter:

The toy industry did not encounter worker protection problems anywhere near the scale of the disaster in Bangladesh, but I am proud to say that the global toy industry’s response when some issues emerged in toy factories is one of our finest achievements.  When worker protection issues emerged in our industry, toy brands and retailers alike began to react with individual programs to try to assure that their companies were not sourcing from producers that were not treating their workers fairly.  As a result, there was a proliferation of programs, and if one factory produced product for several customers, it could be confronted with multiple and conflicting demands.  So the toy industry got together to form the industry-wide “ICTI CARE Program” under the auspices of the International Council of Toy Industries (ICTI) to assure ethical treatment of workers in toy factories.  The toy industry is nowhere near as vast as the clothing industry, so perhaps that made it a little easier for us to develop a collective response.  But the achievement of relatively reliable standards for worker protection by our small industry is stunning.

Richard:

Can you tell us a little about what the toy industry has done proactively since experiencing problems with safety?

Carter:

In response to the reports of worker abuses about 8 years ago, the toy industry raised more than $5 million to capitalize the development and implementation of the “ICTI CARE” program, consisting of

The Dollar Generalization of Wal-Mart

Scott McCall, Senior Vice President for toys, seasonal merchandise, and celebrations gave a speech at PlayCon that was a unsettling to those with whom I spoke, and I have spoken to a large number of attendees.  Their concerns centered around Scott’s emphasis on the importance of promoting products at prices under $1.00.  He gave considerable attention to two examples, both of which sold in multiple millions of units but at very low price points.

Now, let me be very clear.  Scott also spoke about the productivity loop, crowd sourcing, being customer centric and being first to market with innovation.  No one who discussed the speech, however, mentioned any of that. 

In reviewing my notes after the fact, I came to the conclusion that Scott's speech was about more than low, low prices.  I think it was about a company that may be losing its more affluent shoppers and is repositioning itself to battle Dollar General and Family Dollar for the low income shopper

Consider these points made in the speech:

• Scott noted that many Wal-Mart consumers are not able to shop online because they don’t have credit cards.  They can only pay cash.  As a result, Wal-Mart is allowing them to purchase on line but pay in cash at a local store.  Those without credit cards are among the lowest income shoppers.  Why are they singled out for attention?
• Wal-Mart is opening new small format stores that are running from 2,200 to 4,000 square feet in size.  That is actually smaller than Dollar General and Family Dollar store footprints which run to about 10,000 square feet.  Dollar General and Family Dollar focus on low income shoppers; shoppers in many cases without credit cards.
• The importance of focusing on prices under a dollar is also reminiscent of Dollar General and Family Dollar, not to mention Dollar Tree.  Again, it appears that they are going after the low income shopper.

So, here is what I think: 

Wal-Mart is losing the war for the more affluent customer to online completion (think Amazon).  As a result, they are left with bricks and mortar customers who use cash and are attracted to low retail price

Jerry Storch of Toys R US Speaks his Mind at PlayCon

Jerry Storch, CEO and Chairman of the Board for Toys R Us had a message for the PlayCon audience.  He stated that he had never seen an industry that was as poor at channel management as the toy industry.   He didn’t sugar coat it; he put it right out there.  Jerry had other things to say but it was that comment that stood out for the boldness of how it was stated.

First, however, let’s step back and define “channel management.”  The Rubicon website defines it as well as anyone:  “The process of balancing allocation of product inventory and pricing across distribution channels.”

In terms of the toy industry, channel management means how you balance distribution to the various channels (mass merchandisers, ecommerce, toy stores, supermarkets, drug stores, etc.) in such a way that you maximize distribution without hurting brand value.  What Mr. Storch was pointing out was that the toy industry tends to sell into all channels at the same time; flooding the market with goods; crushing the retail price structure; damaging profitability for everyone and ultimately shortening the life of the product.

Anyone who is familiar with the toy industry recognizes the truth in what Jerry has to say.  Simply put, the life cycle of toys has largely become reduced to months instead of years.   By flooding the market with goods, the excitement of product shortages and the frenzy they can create dissipates into shelves of post-Christmas markdowns.  Heavy discounting by retailers who see toys as loss leaders drives down prices and damages margins for those who depend upon toys for their living.

How should the toy industry’s toy companies manage distribution?  Mr. Storch suggested that specialty toy stores and, yes, Toys R Us, get exclusives in the first year.  In the second year he suggested that the product be pushed out to other retailers.  This would, he suggested, lengthen the product cycle; expand profits and keep consumers interested.  It would, in the long run, enhance brand value and generate greater revenues with fewer markdowns.

Some expressed to me that they thought Mr. Storch was correct but that his speech was self-serving in that his company would benefit greatly from such an approach.  I recall him saying

PlayCon 2013; great content with a little spice

This is part one of a three part series on PlayCon 2013.

Based upon my own experience and that of many others I spoke with; this was the best PlayCon in memory…and the most well attended too.  I was told that the total attendance was around 175 people (roughly 75% bigger than last year) who came to hear a series of speaker deliver content with value.  Content, as John Barbour, CEO of Leapfrog, likes to say, you can take home.

And speaking of John Barbour; again based upon my experience and those of others who heard him speak; he has emerged as the toy industry’s leading voice.  His keynote address was delivered with a mix of passion based in reality; belief grounded in experience; humor mixed with gravitas and hope grounded in realism.

There were a number of other excellent speakers with messages that were to the most part high value in terms of content and delivery and in some cases a bit controversial (a little spice never hurts).  There were, however, two speakers who stand out in terms of their controversial messages (there is that spice); one was Jerry Storch, CEO and Chairman of the Board of Toys R Us and the other was Scott McCall, Wal-Mart Senior Vice President for toys, seasonal merchandise, and celebrations.  I will write about what they had to say in my next two postings.

 

Childhood, Animals and Toys

Why are parents and their young children so fascinated with animals?   That is the point of a nice, but possibly overly complex, look at why animals are given so much prominence by adults when nurturing their children.

The article “A Child’s Wild Kingdom,” written by John Mooallem, appeared as an opinion piece in the New York Times Sunday review section.  Mr. Mooallem makes the point that animals, in profusion, show up in pre-schools, children’s literature and even ancient toys (“…many of the oldest, prehistoric toys discovered include animal-shaped rattles and little wooden crocodiles”).  Let me quote him as he describes his daughter’s preschool:

It can be a little alarming to step back and realize just how animal-centric the typical American preschool classroom is. Maybe the kids sing songs about baby belugas, or construction-paper songbirds fly across the walls. Maybe newborn ducklings nuzzle in an incubator in the corner. But the truth is, my daughter’s world has overflowed with wild animals since it first came into focus. They’ve been plush and whittled; knitted, batiked and bean-stuffed; embroidered into the ankles of her socks or foraging on the pages of every storybook.

Lest we think it is just his experience of the world, he cites a Purdue University child psychologist who reviewed 100 randomly chosen children’s story books; only 11 did not include animals.  He notes that what was common was for animals not to act like animals but to act like humans.  Anyone who has read Richard Scarry’s “The Early Bird” knows the discomfort of seeing the “Father Bird” eating a hard-boiled egg for breakfast (Father Bird obviously would have fared well with the Donner Party).

The article engages in a vibrant discussion of society, pre-history, parenting and brain development; even Freud has his moment.  I don’t dispute any of his arguments as to why children and their parents are

The End of the Cash Register; Checking Out With Your Smartphone

The cash register is dead; yes, dead.  That according to a Columbus Dispatch article by Anne D’Innocenzio titled “Cash register could join endangered-gadget list;” and it's not just the register that's going away but the people who run them.

It seems that the experience of waiting in line to pay for your purchase is on the way out as retailers turn to clerks with smart phones to take care of purchases on the spot.  Not only that, some companies are allowing consumers to do it themselves on their own smartphones and tablets.

Here is how D’Innocenzio describes the motivation behind the change:

Stores like smartphones and tablets because they take up less floor space than registers and free up cashiers to help customers instead of being tethered to one spot. They also are cheaper: For instance, Apple Inc.’s iPads with accessories such as credit-card readers can cost a store $1,500, compared with $4,000 for a register. And Americans increasingly want the same speedy service in stores that they get shopping online.

Is War the Gamification of Politics? Some thoughts on H.G. Wells and “Little Wars”

If you move to the last inside page of the May 5, 2013 New York Times book review, you will find a fascinating tribute by mark Wallace to H.G. Wells on the 100^th birthday of his game invention:  “Little Wars.”  It seems that Wells was not only an early Science Fiction pioneer (War of the Worlds, The Time Machine and The Invisible Man to name a few) and of serious non-fictioin (The Outline of History) but also the progenitor of war gaming; both the play and the serious kind. 

Trace a line back from military video games like “Call of Duty” or whole genre like Dungeons & Dragons and you will find that they all trace back to Mr. Wells’ invention.  Wells, according to Wallace, was “inspired by a child’s discarded toy soldiers and breech-loading cannon.” Upon spying them, he was inspired to write down a set of rules for playing a war game with toy soldiers, books, blocks, cardboard houses, and other contrivances.

Lest you think that the game has vanished into the mists of history, you can actually download the book for free, complete with pictures, from Gutenberg.org.  You can also attend “Little Wars” events like the one that takes place annually in St. Charles, Mo. 

I was struck by three thoughts as I read the article and the introduction to the book itself:

• Wells was certainly charming in his, for that time, obvious respect for and love of women.  Here is a quote from the preface to "Little Wars":  “Little Wars can be played by boys of every age from twelve to one hundred and fifty, by girls of the better sort, and by a few rare and gifted women.”
• Wells was ultimately a pacifist and saw his game as a warning of the realities of war.   One does have to wonder, however, how he could really think that and not see the fascination he projected in his love of not only inventing the game but playing it endlessly with his friends.
• Finally, it suddenly struck me that real war may just be the gamification of politics.  After all, Carl von Clausewitz, the 19^th century German military theorist, is famous for having said:  “War is the continuation of politics by other means.”  Maybe gamification isn’t such a new idea after all.

 

American Girl Dolls; Has Something Changed?

As a toy industry professional who also has a love of history, I have long been fascinated by American Girls and their use of historic backstories to appeal to girls.  One part toy and one part historical fiction, these dolls have created legions of followers and maybe even produced a few history professors.

The dolls have taken on heavy subjects like slavery and the depression without sugar coating them.  The characters have shown believable strength in facing down the challenges of their times.  What was surprising, at least at the time, was that a product segment known for fantasy and whimsy was just as popularly delivering pain and suffering. 

That was why I was drawn to a story in The Atlantic by Amy Schiller entitled:  “American Girls Aren’t Radical Anymore.”  Schiller faultsMattel for moving American Girl away from her gritty roots and towards a doll with a safer message.

Here is how Schiller puts it:  “With a greater focus on appearance, increasingly mild character development, and innocuous political topics, a former character-building toy has become more like a stylish accessory.”  She closes her article with these words:  “American Girl once provided a point of entry for girls who have matured into thoughtful, critical, empowered citizens. Now the company's identity feels as smooth, unthreatening and empty as the dolls on their shelves.”

The original American Girl dolls were the brainchild of Pleasant T. Rowland whose company, the Pleasant Company, rolled out her original three dolls Kirsten, Samantha and Felicity in 1986.  I don’t know if it was apocryphal but there was a story making the rounds in the late 80’s that Rowland was at a trade show and saw a company that had “knocked off” her dolls.  She went into their booth and tore them off the walls.  Whether true or not, she sounds like one of the characters in her books.

She sold the company to Mattel in 1998 and since that time, Mattel has retired the three original characters.  According to Schiller, the emphasis has now moved from these historically themed dolls to

Apps; What Are Consumers Willing to Pay?

As someone who closley follows the play industry, I find tracking apps to be a bit frustrating for three reasons:

1. They challenge the notion of perceived value.  In other words, is that bag of plastic horses still worth $5.00 if I can get a horse game app for  free?

2. It is difficult to quantify just how many dollars apps take from the other play industries when the choice of getting a free app rather than purchasing a toy does not show up as a monetary gain for apps so much as a revenue loss for video games and traditional toys.

3. We have no clear idea as to how much time apps take away from other forms of play?  We need to know.  Why, because the loss of play time to apps, which I suspect is currently far larger than the loss of dollars, could be a harbinger of a future comparable drop in revenue.

That was why an article on Retailing Today caught my interest.  Entitled, “Survey: Apps offer too much for too little,” the article maintains that app providers could get more money for their free and low priced apps than they are currently asking consumers to pay.  According to the article:  “The survey by Simon-Kucher & Partners – a global marketing and strategy consultancy specializing in pricing – investigated which apps consumers want, how much consumers will pay for apps and how app makers can turn apps into cash.”

The survey found that a large majority of consumers would pay on average $1.99 per month ($23.88 annualized) for an app they now can get for free or close to it.  Games were cited as one of the app categories that could demand this price.

This creates an interesting opportunity for app makers and their play competitors.  If app makers charge more, their revenue should go up and their unit sales should go down.  If that happens then perceived value of apps and by default competing products goes up.  It’s a win for everyone.

Still, there is that time thing.

 

Are Fitness Clubs Becoming Adult Playgrounds; Ninth Grade Revisited

Some fitness clubs are starting to sound a little like my gym class in Junior High School; ropes and a gym floor rather than cardio vascular machines.  It seems that health clubs are moving away from exercise equipment to old school forms of exercise.  Here is how Courtney Rubin describes the trend in her New York Times article: “Fitness Playgrounds Grow as Machines Go:” In the last year and a half, major health-club chains have begun making hefting sandbags and shaking 25-pound ropes the standard, ditching the fancy weight machines that have dominated gym floors for more than 30 years.”

Astroturf is the new flooring of choice while machines are replaced by things like the “Jungle Gym” found at Lifetime Fitness.  This is not, however, the Jungle Gym you remember handing upside down from in the

More of My Conversation With Isaac Larian, the Man Behind Bratz and Lalaloopsy

This is Part 2 of a two part article based upon my conversation with MGA’s CEO and founder, Isaac Larian.  Today we look at what drives him to succeed. (To read Part 1 click here.)

What drives Isaac Larian?  As much known for his protracted and ultimately successful legal battles with Mattel as his products, Isaac seems to be a man who simply won’t accept failure.   Some see him as a champion of the little guy and others as just plain stubborn.  However you perceive him, you can’t say that he lies down for anyone.

I asked Isaac where his “stubbornness” comes from.  As he told me, he is not motivated by money.  He simply wants to win.  He sounds like the toy industry’s answer to Vince Lombardi, the fabled coach of the Green Bay Packers who said:  “Winning isn’t everything; it’s the only thing.”

But why the need to win?  He responded to my question by describing how he left Iran at the age of 17 with no intention of returning.  In fact, it was a one way ticket and he had $750 to his name so there was no way he was going back. 

Isaac noted that Iran’s government was an autocratic one and that he simply did not want anyone telling him what to do.  He determined that the place for him was the United States with its democratic system and free market economy. 

Things were a struggle for Isaac as he burned through his $750 pretty quickly and ended up working as a dishwasher in a restaurant.  Refusing to fail, Isaac eventually went into business as a distributor for Nintendo.  He never looked back and today runs one of the largest independently held toy companies.  Isaac says it was his experience in Iran that causes him to fight power whether it is the industry’s institutions or his big competitors.

As much as Isaac sometimes conflicts with his competition, it seems that the retail community loves his products.  Isaac believes that their support for his products and company derives at least in part from his

A Conversation with Isaac Larian, CEO of M.G.A.; Part 1

This is Part 1 of a two part article based upon my conversation with MGA’s CEO and founder, Isaac Larian.  Part 1 will focus on his work with Bratz, Lalaloopsy and Little Tikes.  Part 2 will look at what drives him to succeed.I have known Isaac for several years and in that time have closely followed his successes and struggles.  I wanted to get a better idea, however, of what drives him and what makes him such a controversial individual.  To find out, I engaged Isaac in a conversation about his life and work.  Below, I share with you what I learned:

In this day and age when the toy industry is driven by big corporations, it is easy to forget that it was once led by people with oversized personalities, big ideas and powerful passions.  Think Ruth Handler, Louis Marx and Marvin Glass and you will know what I mean.

If you want to get a feeling for what those times were like you have to go no further than MGA Entertainment’s Isaac Larian, one of the most interesting, passionate and not surprisingly controversial people in today’s toy industry.  If you base genius on results, you can certainly make the case that he is one of the few geniuses in the modern toy industry.  Anyone that can bring two huge hit dolls to market (Bratz and Lalaloopsy) has some powerful insights on what today’s children, and obviously little girls, are looking for in play. 

“Isaac,” I asked, “you have brought Lalaloopsy and Bratz, two huge hits, to market.  Do you think it is surprising that it was you, a man rather than a woman, who managed to perceive what little girls wanted in dolls?”

Isaac responded immediately that his success is not his alone but due to his having a strong team in place.  In the case of Bratz and Lalaloopsy, he and they looked at many other girls’ concepts before choosing Bratz and Lalaloopsy. 

In making that decision, he said he tried to put himself inside the mind of a modern child. "Modern" is the operative word here as the trick is not thinking like yesterday’s child but today’s.  He believes that children are constantly evolving and how they want to play and what they want to play with is constantly changing as well.

In the case of Bratz, his research at the time showed him that girls 7-11 had little with which to play.  In fact, girls over six were no longer interested in Barbie.  He saw his opportunity as deriving from this hole in the marketplace.  In order to be aligned with the world in which girls lived, Bratz had to reflect the tastes of the time; and they did. Girls liked what they saw and Bratz went on to become a mega hit.

Following our line of discussion around dolls, I asked Isaac why Lalaloopsy, the first preschool fashion doll seemed to be in a category of its own.  Lalaloopsy is now in its third year and is a smash hit.  Isaac’s voice became exceedingly warm as he described how Lalaloopsy, a rag doll which came to life when the last stitch was completed.  In his words, “girls immediately got it.”  But what exactly did they get?

I thought about Lalaloopsy after the call and it occurred to me that part of this doll’s charm is not so much a turn to the future but a return to the very origins of storytelling.  The reason that so many 
fairy tales are girl centric is that story telling was what women engaged in with their daughters as they spun thread on their spinning wheels.  It was a way to pass the time and if you think about it, Lalaloopsy could easily have been a story they told.  Maybe what Isaac grasped was that in a virtual world where one expects magic on demand; there was still a special mysteryin creating life with a simple and very real world, needle and thread.

You might think that Isaac is only interested in girls' toys but his success with Little Tikes certainly belies that notion.  Founded in 1969 and purchased by MGA in 2006, Little Tikes is known as a maker of primarily plastic, oversized outdoor toys for the pre-school market.

How the Erector Set Helped Build the 20th Century

My good friend, noted inventor and toy industry thought leader, Bruce Lund, likes to talk about how our great 20^th Century engineers and architects were inspired by the toys with which they played as children.  Look at Buckminster Fuller’s Geodesic Dome or Frank Lloyd Wright’s designs and you will see the elements of their childhood construction sets. 

That’s why I was excited to read a great New York Times article by James Barron entitled “A Toy That Spanned A Century and Helped Inspire a Bridge.”  According to the article, Othmar H. Ammann, the designer of the George Washington Bridge, was not only inspired by his Erector Set but actually used one in developing his creation.

The article focuses on three men and one woman:  Othmar H. Ammann; A.C. Gilbert, the inventor of the Erector Set; Dave Frieder; a collector of Erector Sets and a champion of Mr. Ammann and his bridges and Mr. Ammann’s daughter, Margaret Ammann Durrer.  The article weaves all of these individuals together through Mr. Frieder who sees a powerful connection between the Erector Set and the many bridges that Mr. Ammann built (the Triborough Bridge, the Whitestone and the Verrzano to name a few).

Mr. Frieder actually met Ammann’s daughter Margaret who was unequivocal about the Erector set and her father.  Frieder reports her as stating:  “‘Oh, my father used an Erector Set in designing the G.W.B.’ … ‘Yes, he used some Erector Sets as an aid in designing the G.W.B.’”

Peas Work, the construction set that inspired Buckminster Fuller

Think Asia, Think Hong Kong Events in Los Angeles and New York

June 11, 2013    New York Hilton

June 14, 2013 JW Marriott Los Angeles LA LIVE

I am going to be attending the Think Asia, Think Hong Kong conference, June 11 in New York and I suggest that you check out the New York and Los Angeles events for yourself.  Hong Kong and Asia are so important to the U.S. play industries that every opportunity to meet and get to know Asian businesspeople and Americans who also do business with Asia is an opportunity not to be missed. 

The conference is being put on by the Hong Kong Trade Development Counsil and I am told that there will be over 100 business leaders flying in from Hong Kong for the events.  What is most notable for those in toy and play consumer products, however, is the presence of William Fung, Group Chairman of Li & Fung who will be one of the speakers.  Li & Fung is one of, if not the most important suppliers of production, sourcing and delivery of toys.  That is enough to get me there.  

If you are interested in signing up you can do so by clicking here for New York and here for Los Angeles.

I hope to see you there.

 

Nintendo’s New Patent Could Mean Competition on the Toy Aisle for Hasbro and Mattel

My prediction is that non-traditional toy companies are going to be following the succesful example of Skylanders and entering the toy department.  The result will be major competition for our current toy industry leaders (Mattel, Hasbro and Lego).

That’s why I was struck by joystiq article written by David Hinkle titled “Nintendo patents game controller integration in remote-controlled toys.”  Here is how Hinkle describes the event:  “Nintendo has been granted a new patent this week, a "remotely controlled mobile device control system" filed back in 2011. In layman's terms, it's a patent that calls for embedding a Wiimote within a remote-controlled toy – a toy which then would interact with a game console.”

It will be interesting to see what Nintendo has up its sleeve.  It’s going to be even more intriguing to see where the product is merchandised in stores; on the toy aisle or in the video game department.  On the same note, will the device be counted by NPD as, like Skylander figures, a video game accessory or as a remote control toy. Wherever it lands, look for a shakeup in the world of traditional toys.

 

 

Lessons from JC Penney

Ron Johnson was fired from his position as CEO of JC Penney last week after sales under his leadership continued to freefall (for my earlier comments on Johnson’s efforts see:  “JC Penney Moves Away From Fake Pricing” and “The Pricing Paradox: to Promote or Not to Promote, that Is the Question”).    Johnson’s major misstep (he made others) was ending JC Penney’s reliance on sales and coupons and turned to everyday low pricing.   The result was a 25% drop in retail sales in 2012 and a big drop in value for the company’s stock price (down 57% in the same year).

Johnson was considered a brilliant strategist for his success in running Apple’s retail division.  The J.C. Penney board was so enamored of his brilliance that they gave him free reign to test his strategy in ALL STORES.  In other words, he never test drove his revolutionary concept in a small market to see if it worked.

Is Johnson’s failure a lesson in hubris; well, probably yes; but there are other more important lessons than those of having an oversized ego and a worshipful board.  Here they are:

Toy Manufacturing; Is the Next Stop Cambodia?

Those who engage in the business of play are always looking for the next low cost labor country.  The baton has, over the last 100 years been passed from Germany to Japan to Taiwan to Hong Kong to its latest and seemingly final resting place in China.

The fly in the ointment, however, is that though China now produces 86% of the worlds’ toys it is no longer the low cost provider it once was.  Is Cambodia the next stop for those in search of a lower cost of goods? 

New York Times writer Keith Bradsher thinks so in his article, “Hello Cambodia.”  He tells us that companies are looking to move out of China in order “…to limit their overwhelming reliance on factories in

LEGO and Hyper-Realism

Can you pick out the LEGO elements in this photograph?  The brilliant LEGO artist, Nathan Sawaya, and the photographer, Dean West, have joined forces to provide us all with some fascinating and puzzling images.  By combining real environments and people with LEGO creations, both artists have defied us to figure out which is real and which is LEGO.  Here are two images that I found on designboom in a piece entitled “nathan sawaya’s hyper-realistic LEGO sculptures photographed by dean west.”

For answers move to the next page.

Toys R Us; Does it Need a New Business Model?

Everyone in the toy industry, and I mean everyone, is a stakeholder in Toys R Us.  They are the biggest pure toy and play retailer in the world and all of our fortunes are inextricably locked together with theirs. 

That is why the decision by Toys R Us to withdraw its IPO coupled with its continuing leadership uncertainty creates queasiness in many play industry members.  The company, it seems, is still looking for how best to operate in a 21^st century economy that just won’t stand still.  But, how do you know what to do next when all the parts of our once familiar economic models seemed to be floating? 

One writer, Carol Roth, has some ideas on what the company needs to change in order to resume a strong growth trend.  In a CNBC article, “Toys R Us Needs a Business Model Makeover,” Roth points out how entertaining it used to be to walk the aisles of a Toys R Us.  There were so many toys that it was a real trip (in both senses of the word) to just visit the store.

That’s all changed because, as she puts it:  “Toys R Us has lost its relevance. While it used to be entertainment to shop the store, now with so many other sources of entertainment, there is no critical pull into the Toys R Us store.”

She suggests that if toys statically placed on shelves don’t entertain any more than why not actually entertain.  Here are her suggestions:

Create an area for “interactive experiences.  She sites American Girl stores as a model for this approach. 

Create a place for in-store birthday party events.  This is a great idea and one that Toys R Us actually executed about ten years ago in its experimental Geoffrey stores.  I remember

Capitalism, Toys and Play

Those who create and market play have long been considered architects of the softer side of life.   They are also, however, the leading edge of the capitalist system.  At least that’s what occurred to me as I read an interesting piece in the New York Times, entitled “In History Departments, It’s up With Capitalism.”  Written by Jennifer Schuessler, the article notes that those who run economies (“the bosses, bankers and brokers”) are once again the subject of intense study.

As I read the article, I began to think about those characters and those with character who built the American toy and later play industry into the multi-billion dollar industry it is.  Their use of democracy’s powerful private and intellectual property protections with capitalism’s open door to entrepreneurs created multi-millionaires and paupers.

It takes, however, more than just an idea and good fortune to be more than a one hit wonder.  It takes enormous business acumen, an ability to manage assets as well as people and the rare ability to keep up with society’s rapid changes in taste.

Just look at the legends, Louis B. Marx, Louis Marx and Company; Ruth and Elliott Handler, Mattel; Charles Lazarus, Toys R Us; Betty James, Slinky  and the Hassenfelds (Henry, Merrill, Stephen and Alan), Hasbro and you get a sense of  what happens when individuals have both the requisite genius of  great merchant and great businessperson. 

As I finished the article, the question that occurred to me was:  “Why do the toy and play industries exist?  Is it to bring joy to children and adults or is it to build a business and maintain it?”  Is one the product and the other a by-product?  In fact, does it even matter?  What do you think?

The Hub Network, Kiss and Hello Kitty

One of the odder combinations to come along in a while is the KISS x Hello Kitty line of products.  An even odder combination may just be the recently announced plan for The Hub Network to air a Gene Simmons produced Kiss Hello Kitty cartoon show. 

The KISS x Hello Kitty line has been around since 2010 and has done  well with a largely adult market.  That raises the question:  Will children who watch My Little Pony and the parents who watch them watch be drawn to a formerly sweet Hello Kitty now wearing leather and studs and sticking out her tongue? 

I visited the Hello Kitty website store to see what types KISS x Hello Kitty products were being sold.  What I found was that everything on the page came in adult sizes with some pretty nice

Wooden Bricks Inspired by Lego

I love these wooden versions of Lego bricks from Mokurokku.  It really says something about the warmth and feel that wood lends to toys and games.  It simply adds a tactile experience that other materials simply cannot provide.

If you can remember when Hasbro made their wooden Scrabble tiles out of Vermont maple you will know what I mean.  The Vermont maple tile had a weight and density plus a feel that felt substantial and smooth when held by the tips of the fingers.  It gave the game a whole other dimension as the highly stimulated workings of the mind were combined with a solid “plunk” sound as words were spelled out tile by tile.

Similarly, the old wooden Monopoly pieces had an abstract look and feel that made choosing your piece totally an idiosyncratic experience.  Why exactly did you want that tall, weird unpainted piece instead of that little yellow piece that looks like the inspiration for R2D2?

Are wooden bricks for children?  Why do they have to be?  I think there are adults who would pay a premium to have something in their family room that functions both as play piece, décor object and a type of worry bead.

Thank you Marjorie Israel Chayette of CitiBlocs for bringing this to my attention.

Traditional Toy Production and the Time Dilemma

I have, since my conversation with Elie Dekel, (Part 1: A Conversation with Elie Dekel, President of Saban Brands) been giving a lot of thought to time.  If you will recall, Elie noted that Saban Brands takes a multi-platform approach to promoting its shows.  They utilize media, websites, social networking, digital play and…of course, traditional toys. 

The challenge for Saban and a growing number of entertainment companies is that that digital entertainment and gaming have a more condensed creative cycle (6 to 12 months) compared to traditional toys (12 to 24 months).   This gap in time, from six to twelve months, can be a challenge in “times” like these when the public’s enthusiasm for a product or story can take off, peak and decline in a matter of months.

Now that those who launch new properties promote and sell them across digital platforms the pace of developing toys therefor needs to shrink.  Where, however, do we cut time?

As I considered the challenge, my mind turned to Wal-Mart and how it has handled the pricing question.  If Wal-Mart thinks a price is too high it tells the vendor that, if they want the business, they need to join with their suppliers, designers along with their engineers and figure out how to reduce costs.  The vendor may choose to reduce the size of the product, cut down on the number of elements or reduce the number of variations.  They may also simply engage in some tough negotiating and push everyone to cut out some profitability.

Cutting down on time may entail something of the same process.  Is the manufacturer able to cut out some steps through a redesign; can the licensor speed up approval processes; is it possible to move manufacturing closer to the destination?

In an age in which the population expects results to happen more and more quickly, the need to shave time may be becoming as important as the need to cut cost was in the late 20^th century.  After all, as Benjamin Franklin so famously put it:  "Time is money."

 

What’s Next for Specialty Retailers?

In my last posting, “The Coming Retail Sea Change” I wrote about the troubling outlook for big box retailers.  How long can they sustain their current infrastructure (store counts, store size and distribution center) when confronted by the head winds of technology and demographics?  Simply put, changes in technology have driven consumers (particularly younger, tech savvy ones who no longer love their cars as much as their smart phones) to use big box retailers as showrooms.  The ability of ecommerce providers to utilize this unintended service at no cost to them has resulted in an unsustainable retail model for those who depend upon large numbers of consumers willing to drive to and ultimately purchase from a big box retailer. 

What, however, is going to happen to specialty retailers?  These small, mom and pop operators, have long suffered from the dominance of the big box retailers and have been further battered by the internet.  Will they become extinct like big box dinosaurs or will they survive and come out of the shadows when the behemoths of retail are gone?

My prediction is that those who use their small size and specialization as a strength will ultimately benefit.  By providing a hands on education in their product specialties (think Marbles the Brain Store) and at some point in the future charging for that expertise as a service while selling the product itself at internet competitive prices will be a potential model. 

I would be interesting in knowing how those of you in the specialty retail community see the ongoing battle for retail supremacy.  Are you hopeful or concerned?  Do you have a solution?  Let us know.

The Coming Retail Sea Change

I have, for some time now, been asking the question:  “When will the tipping point for big box retailing occur?”  That moment when the internet has syphoned off just enough consumers so that it is no longer possible to maintain 200,000 square foot stores and the multiplicity of distribution centers that support them.  One writer thinks its going to take place in 2016; more on that in a minute.

First, let's consider the two big existential questions confronting big box retailers like Wal-Mart and Target:

• What size physical infrastructure in terms of store size and store counts is going to make sense to serve a rising generation of shoppers who would rather shop at home?
• How long can bricks and mortar retailers afford to provide ecommerce providers with free showroom space?

These two questions, both generated by the digital age, are going to define retailing in the coming decades.  Michael Hiatt, writing for Retailing Today (“The Ultimate Age of Retail”) sees retailing as on the cusp of one of its 20 year sea changes.  Here is how he puts it in the opening to his article:  “Retail innovation cycles last approximately 20 years. As we take a look at retail history, this cycle becomes self-evident. From the general store to department stores to discount stores and so forth, each variety has their day in the sun as the leading channel for most purchases.”

He goes on to note that retailing is going through an inherently unstable period in which two forms of retailing are co-existing:  Bricks and mortar retailers and ecommerce providers.  The problem is bricks and mortar stores function as unintended but “well-apportioned, visibly-appealing showrooms” for consumers who want to assess a product which they then purchase from an ecommerce provider at a lower price via their cell phone.

Hiatt does an excellent job of noting possible outcomes.  One I found to be prescient was the idea that bricks and mortar retailers will progressively offer fewer registers by allowing consumers to check out via their cell phones. 

My prediction is that we will see fewer and smaller big box retailers while at the same time some more adventurous etailers opening their own showrooms.  I also see local home delivery, now being

Well Dressed Animals; The Amazing Work of Yago Partal

I stumbled across a fantastic series of cleverly manipulated photographs by a Spanish artist (he's from Barcelona) on the Fubiz website.  His name is Yago Partal and he has created whimsical but disarminly real images of animals dressed like humans.  I would love to see these licensed and used on puzzles.  Here are two images.  Go to "Fashion Zoo Animals" to see the entire set. 

Part 2: A conversation with the President of Saban Brands; we talk about Power Rangers and Vortexx

In Part 1 of my conversation with Elie Dekel, President of Saban Brands, we talked about how to communicate effectively with today's children and the need for the toy industry to shorten its time to market.  Today we learn about what it took to succesfully revive a 20 year old Power Rangers brand and why Vortexx may just be the next big thing in television for kids.

Power Rangers a generation later

I asked Elie to explain the differences in approach to audiences for Power Rangers now that 20 years had passed since its inception?  He said the major difference they found was that children now have far more control over what and how they engage their favorite shows and characters. 

Elie pointed out that not that long ago if you wanted to watch a television show, you had to either video tape it or find it on TV Guide.  Now you don’t even need a television to watch a television show.  Because that child consumer has so many choice options via computer screens, television screens or the screen in his or her pocket they have the power of control.

Vortexx

Children may have control over how, when and where they watch but Saban Brands wants to make sure that they have some control over how their properties are presented on television.  That is why they have come forward with what amounts to their own mini-television network.

One of their properties is Vortexx, and it airs Saturday mornings as a leased block (7:00 AM – Noon) on the CW Network.  By bringing back the old Saturday morning cartoon experience and doing so on free TV; they have managed to capture an audience of 115 million children, an audience not even cable can reach.

I came away from my conversation with Elie with a renewed sense that the toy industry must not only engage the digital play and entertainment industries but match up operationally and logistically as well.  Engaging means more than creating an app to go with a toy; it means rethinking the very essentials of how business is done in a world in which kids rule and time accelerates. 

.

 

Part 1: A Conversation with Elie Dekel, President of Saban Brands

I recently had the opportunity to interview Elie Dekel, the President of Saban Brands.  I wanted to talk with Elie for two major reasons: 

Saban’s importance to the toy industry in creating and nurturing great, character driven, and child oriented intellectual property.  Their stable currently consists of Power Rangers, Paul Frank, Vortexx, Julius Jr., Popples, Digimon Fusion, Zui.com and The Playforge.

Saban’s cutting edge use of transmedia storytelling, in other words, using a multitude of platforms from gaming to television to toys, to market its products and tell their stories. 

My hope was that Elie’s perspective would provide some unique insights on the traditional toy industry.  He did not disappoint.

How do we reduce time to market?

I asked Elie to tell me how traditional toys fit into Saban’s planning; not from a product standpoint but from one of logistics.  Elie confirmed that toys are a big part of their multi-platform approach to entertainment and play.  He did note, however, that digital entertainment and gaming have a far shorter creative cycle (6 to 12 months) than do traditional toys (12 to 24 months).  

This gap creates a challenge as by the time a toy comes to market, the digital elements and the children they reach may well have moved on either to another story development or to a new property.  I asked Elie what needs to happen and he said that Saban would like to see the toy industry shorten its product cycle.  When I asked him the desired time line, he responded that the aforesaid 6 to 12 months was optimal.   I came away from our conversation believing that this was a critical question and one I intend to explore:   Where and how can 6 to 12 months be cut out of time to market?

How do we speak to today’s children?

Elie surprised me with a question of his own:  “How do we as providers play with children who walk around with a screen in their pocket?”   How do we connect with children who can access play and entertainment on demand?  How does the storytelling industry deal with these children as they morph into 18-34 year olds who expect ever richer, deeper and broader brand extensions?

Elie responded to his own question by stating that his company, Saban Brands is up to the challenge.  He cited the revival of Power Rangers as an example.  He told me that their reboot strategy involved making sure that it became an evergreen brand.  That meant to Saban that it had to be more than “just” a great

3D Printing, Toy Mashups and Copyrights

There is a fascinating article in TechCrunch on the continuing revolution that 3D printing is bringing to… well… it seems like everything.  In the case of this article by Michael Weinberg, “As Patent Drama Continues, 3D Printing Provides A Way Out For Mashup Creators,” it appears that 3D prinitng is going to be disruptive to some of the rules of intellectual property ownership as well.

Weinberg notes that not surprisingly most intellectual property (music, art, design, etc.) is protected by intellectual property laws.  You can’t, for example, take Mickey Mouse and do a mashup with Skeletor and get away with it.

But what about things that exist in the physical world? Here is how he puts it:

There are plenty of reasons to be excited about 3D printing, but one of them is that it moves beyond the world of things protected by copyright…the physical world – the real world – is full of … things that are not protected by copyright. In fact, the world is full of things that are not protected by any sort of intellectual property right at all. That means that you can take them and do whatever you want with them.

To illustrate his point, Weinberg points to the “Free Universal Construction Kit” as the ultimate toy mashup.  Print it out on a 3D printer and you can link 10 different kinds of construction pieces together (Lego, Duplo, Fischertechnik, Gears! Gears! Gears!, K’Nex, Krinkles (Bristle Blocks), Lincoln Logs, Tinkertoys, Zome, and Zoob). 

Think of what you can build.  According to Weinberg you can do this because these are objects that are no longer covered by their original patents.  As he puts it:  “These toys are functional objects so they are outside of the scope of copyright. While some of them were patented when they

Toys and the 101 Objects that Changed the World

Chess #42

The History Channel has created a list of the “101 Objects That Changed the World.”  I was pleased to see that the list included 10 toys, or roughly 10% of the objects cited.  Here is a list of the toys ranked in reverse order with their ranking:

99         Frisbee

93         Slinky

92         GI Joe

89         Hula Hoop

87         Teddy Bear

82         Rubik’s Cube

Wedding Ring #74

54         Barbie

51         Rubber Ball

48         Dice

41         Chess Set

Chopsticks #42

To provide some perspective, The Mask of Kings Tut was number 81, the Wedding Ring number 74, the Guitar number 63 and Chopsticks number 42.  What was number 1; the Bible?  The Route 66 sign was number 101.

 

 

Lego the Interview; we speak with Soren Torp Laursen

Lego recently became the second largest toy company in the world in terms of revenue (see “Lego Challenges for the World's Biggest Toy Company”) and number one based upon net income.  They accomplished this feat by posting an astounding eight consecutive years of double digit increases in sales. 

Soren Torp Laursen, President of Lego Brands, has overseen Lego’s growth over these explosive eight years.  We asked Soren to help us better understand how they accomplished this feat and, more importantly, what happens next.   He kindly complied and here is the result:

Richard

Eight years in a row of double digit increases is an incredible feat and the people at Lego, from management on down, should be extremely proud.    Can you tell us some of the key factors in how you got the ball rolling (which is one thing) and kept it rolling (which is entirely another thing)?

Soren

If you go back to 2003, we had our worst year ever as a company. Recovering from that moment, we squarely focused on being the best at delivering great construction toy play experiences, and we set aside all of the distractions that prevented us from being able to do so (running our own software publishing division, publishing our own books, developing our own branded non-toy merchandise, managing theme parks). We learned the hard way that we are best suited to stay focused on being a great construction brand, and all of the rest of what it takes to engage children is best left to the experts in those areas. We did not plan for growth while we undertook a right-setting of the business, in fact we hoped for break-even results, but ironically, getting back to a construction focus drove immediate growth. By focusing on being the best construction experience we can be, we were able to reignite our fans, recruit new users to building, generate real value for our retail partners and drive growth in the category and overall industry that makes building sets a true beacon.  What it takes to sustain growth is a tremendous amount of organizational and personal discipline. Every year children have increasing options, their expectations grow and the temptations multiply to try things to grab their attention. The toughest thing to do is to stick to your knitting, but we have been relentless in our commitment to our core idea, and to driving innovation that reinforces building and doesn’t distract us from our wheelhouse.  

Richard

What impact did reaching out to girls with Lego Friends have on last year’s numbers?

Soren

We set out to dramatically increase the number of girls who build with LEGO bricks, and the launch of LEGO Friends helped us to triple the number of girls in the U.S. alone who build the LEGO way. We sold twice as much Friends product as we had anticipated at launch, and the line ranked in our top 5 themes globally in its launch year, contributing to roughly 50% of the growth we experienced in 2012. In fact, the #1 overall best-selling LEGO set of 2012 was LEGO Friends Olivia’s House. Not only have we provided a means for more children to engage in the positive development benefits of construction play, we have also significantly increased our active consumer base. It is our hope and strong belief that many of those girls will also explore other themes in the LEGO system, and we are therefore very excited about the growth opportunity that this has opened up for us.

Richard

Congratulations for successfully reopening the construction door to girls.  Ironically, your reward for doing so is competition like Mega Bloks Barbie Build & Style?  What do you see as the future for girls and construction and how will Lego move forward?  Are there some licenses on the horizon?

Soren

We are thrilled to have a formula in LEGO Friends that has invited a new audience to build and to truly engage in collecting and playing deeply with the LEGO system. Given that we focus only on building, we don’t see girls and construction as a trend or something that we will try for a few months to see what short-term gain we can grab. Construction is perhaps one of the most complex and complicated businesses to establish and maintain, yet it is our only focus, so we know what it takes to create and supply for sustainable engagement. We very much see girls as part of our core business moving forward. We are adding to the Friends collection this year and we have plans to further expand the opportunities through a variety of new themes and properties in the years to come.

Richard

Construction, whether it is virtual or three dimensional, has become a major growth industry.  Is that because of Lego’s leadership or do people just crave to build?

Soren

It’s a great question and one we ask ourselves all the time. Our research indicates that no matter how tech savvy, virtually geared or plugged in children are, they will always have an inherent need to tinker, to create, and to build. Because we focus only on the construction play pattern and have successfully expanded our business, much of the growth in Building Sets is attributable to the LEGO brand. The more children are exposed to the possibilities, the fun and the personal reward of building, be it physically or virtually, the

Step2 Takes the Digital Search Directly to Shoppers

John Haake is a recognized industry thought leader with over 20 years of advertising and technology experience. He has a strong track record of successfully defining opportunities within emerging technologies and evangelizing them. Prior to joining HookLogic, John held leadership positions at Synaptic Digital, a global video content creation, distribution and exchange platform, and Turn, where he spearheaded a repositioning from an ad network to a leading demand side platform for dynamic data and media buying.

There's big competition playing out on the search results and category sorts of major online retailers. Little Tikes, along with category killer, Fisher-Price, dominate the webpages of retailers like Toys “R” Us in the outdoor play set category, but Step2 is innovating with their search budget to unseat their rivals by winning top-of-sort placements in relevant search results.

Step2 competes head-to-head with Little Tikes, a Buckeye State rival, and Fisher Price in all their retail channels. As consumer behavior has evolved, the battlefield has moved from the physical shopping aisle to the webpages of large retailers. This suits Step2 just fine.

“The Retail Search Exchange moves our search marketing dollars closer to the shopper,” said Tena Crock, Online Marketing Director for Step2. “It fits perfectly into our marketing mix without the need of additional time or resources – there's no keyword research or creative asset production needed on our end.”

As an early adopter of the Retail Search Exchange powered by HookLogic, Step2’s goal is to win market share via the cost-per-click auction marketplace which exclusively targets consumers actively shopping on a network of ecommerce websites like BabyAge, Rakuten.com Shopping, and the largest baby and toy retailer online. With the Retail Search Exchange, brand marketers have an opportunity to seamlessly influence shopper decisions with “featured” product listings that are served against relevant site searches and category sorts.

“The Retail Search Exchange takes a proven paid search model and aims it directly at shoppers as they do their product research and make their purchase decisions on retail ecommerce sites,” said Jonathan

The 3D Scanner Has Arrived

As I have written in the past, the 3D Printer is a potential game changer for the consumer products industry.  At the right price, under $500, this piece of equipment can turn anyone’s family room or bedroom into a mini-factory.  The end user receives the product without benefit of container ships, trucks or warehouses.  Rather, a consumer just downloads a program that allows them to print out a product made out of resin (titanium too if you are willing to pay the price).

Now, a new product has arrived:  The 3D Scanner.  It seems that Brooklyn based Makerbot Industries, creator of the Replicator 2, has introduced the MakerBot Digitizer Desktop 3D Scanner.  Brian Heater, in his engadget article quotes Bret Pettis, the company’s CEO as describing the new piece of office equipment this way: "With the MakerBot Digitizer, now everyone will be able to scan a physical item, digitize it and print it in 3D -- with little or no design experience."

He goes on to describe its benefits, describing it as a “… great tool for archiving, prototyping, replicating, and digitizing prototypes, models, parts, artifacts, artwork, sculptures, clay figures, jewelry, etc."

Pettis and his company are participating in what some call “The New Industrial Revolution” in which, among other things, production will be in the hands of the consumer.  If you want to be a member of this new wave, you can do so by checking out the MakerBot Digitizer Desktop 3D Scanner.  You can’t buy it yet but you can sign up to get one by going to: http://store.makerbot.com/digitizer.html

Here is a nice video from the Verge's Thomas Houston explaining this important new development:

 

 

 

Girls Outpace Boys in Science; but not in the U.S.

Two years ago I ran a seminar at the Nuremberg Toy Fair on the question:  Do the toys that girls play with as children have an impact on the professional and academic choices they make as women?  I had begun my research on this question because of concerns by some that gender stereotypical toys like toy brooms and baby dolls had a handicapping effect on women entering the sciences. 

As I was leaving the conference, a gentleman approached me to make the point that the notion of the sciences as a preserve for males was not a global one.  In fact, he pointed out that females actually dominated the sciences in parts of Asia and the Middle East.

That comment came back to me when I recently came upon an article in the New York Times by Hannah Fairfield entitled “Girls Lead in Science Exam, but Not in the United States.”

According to the story, “a test [was] given in 65 developed countries by the Organization for Economic Cooperation and Development. It finds that among a representative sample of 15-year-olds around the world, girls generally outperform boys in science….” It seems that girls outscored boys in Northern Europe and Asia to a significant degree.  They also outscored boys in the Middle East, Southern Europe and Eastern Europe. 

The important question that I have is what is happening in these other countries that forms such a different outlook in females?  What if any role do toys play?   If you are aware of research in this area or have some insights please write in and let us know.

 

Bar Games; Where Booze Meets the Tabletop

I have been putting a lot of study recently into the many kinds of play environments.  One of these environments is your neighborhood bar.  Everyone is familiar with playing darts (an old Pub game) in bars but what about shuffleboard?

No, no, no, not that shuffle board, the kind that involves poles and senior citizens in socks and sandals.  No, this game involves sliding metal discs from one end to the other of a narrow, 12 foot long table.   The point of the game is to get them closest to the far end of the table without falling over the edge.

I was recently challenged by a smug young man in his mid-20’s (my nephew) who was going to “teach me” how to play the game.  I am happy to report that I beat him and beat him soundly.  Hurray for the smug older guy.

If you are in New York and want to play bar shuffleboard  there are a number of places to do so.  The New York Times in a very nice article, “Bar Shuffleboard: Beer, Yes; Sticks, No” by Adam W. Kepler provides locations.

What's your favorite bar for playing games (and don't forget to mention the city)?

FAT CAT, 75 Christopher Street, West Village; (212) 675-6056, fatcatmusic.org.

NANCY WHISKEY PUB, 1 Lispenard Street, TriBeCa; (212) 226-9943, nancywhiskeypub.com.

PLUG UGLIES, 257 Third Avenue, at 21st Street, Manhattan; (212) 780-1944, plugugliesnyc.com.

THE DIAMOND, 43 Franklin Street, Greenpoint, Brooklyn; (718) 383-5030, thediamondbrooklyn.com.

THE WHISKEY BROOKLYN, 44 Berry Street, Williamsburg; (718) 387-8444, whiskeybrooklyn.com.

BURNSIDE, 506 Grand Street, Williamsburg, Brooklyn; (347) 889-7793, burnsidebrooklyn.com.

THE DRAM SHOP, 339 Ninth Street, Park Slope, Brooklyn; (718) 788-1444, dramshopbrooklyn.com.

 

Why Does Skylanders Succeed while 90% of App Toys Fail?

One of the disappointments of 2012 was the failure of what was deemed to be a powerful new category of play:  App Toys.   Why did this happen, particularly in light of the spectacular success of Skylanders?

Many of us in the toy sector have our opinions but why not turn to someone who is a member of the digital play segment?  That’s what I decided to do and by making that effort found an excellent article on GAMEZEBO by Lloyd Melnick aptly entitled:  “Why app toys fail and Skylanders soar.”

Lloyd Melnick has a long history in gaming (He is currently Managing Director at the Verus Entertainment Group) so his perspective is from the digital side.  I have attempted here to summarize his points and to have provided some points of my own.  I do, however, strongly suggest that you read his entire article.

He begins by pointing out that a number of big players made the effort this year but size did not seem to matter.  Here is how he puts it:  “Among the failed app toys were Barbie Dolls and Hot Wheels cars with special conductors to control games on a tablet from Hasbro, Disney’s Cars AppMates, and a version of the Game of Life from Hasbro.”

He sees the essence of their failure as deriving from the undisputable fact that these are traditional toy companies attempting to play in the digital space.  This is the opposite of Activision’s Skylanders which is a digital company entering the traditional toy arena. 

Why though, does this give the digital player the advantage?  Melnick has an answer and puts it this way:

The biggest problem with app toys is that the toy makers are simply trying to move the same product to a new platform. The toy companies do not understand what creates compelling experiences on tablets (or consoles or phones, for that matter). Instead, they are replicating the same experience people have with the physical goods in the virtual world, which is not what consumers are looking for.

In addition, Melnick says that in some cases the app merely functions as a gimmick rather than an enhancement.  He points to the app spinner for the Game of Life.  He notes that ultimately it doesn’t do anything differently than a plastic spinner.  If there is no advantage, why does it exist?

Particularly interesting to me was his notion that a big part of the problem for toy companies is that they “…are used to developing—and are still developing—for retail, where there is a single discrete purchase, driven by distribution, advertising, and point of purchase promotion.”  In other words, their essential business model gets in the way.  He speaks about “lifetime value” which is the notion

Our 1000th Blog Post

Today is a special day for Global Toy News as this is our 1000th blog post.  That's about a half a  million words or almost the same length as War and Peace. 

Next month will mark three full years of providing commentary on the toy industry.  In that time we have tried to shed light equally on our industry's successes and foibles; our major and minor players; our global associates and everyone else who makes up this fascinating and sometimes bewildering industry.  And by the way, if you are doing research, use our search function.  Between all of  our postings, if you need information on it; we probably wrote about it.

I want to thank all of our wonderful writers who share their opinions and insights so adeptly.  I want to thank Miguel Ortuno of Blue Bot Advertising who does such a great job of designing and reinventing our website. A very big thanks is due our advertisers who making it possible for us to provide our magazine to the industry at no charge.  So, please pay attention to those ads.

Of course, we don't just write for ourselves.  We write for all of you who read and subscribe.  There would be no Global Toy News without you.

So, thank you one and all.  And now, on to number 2,000.

 

 

The Play Industry; Who’s In and Who's Out?

I recently wrote a piece, “The Toy Industry Is Dead,” that announced:  "The Toy Industry is dead; Long live the Play Industry."   What is the Play Industry?  Simply put, anyone who sells play as an end product, whether the tool is digital or physical, is competing for the consumer’s dollar and time.

I concluded that a failure to recognize that fact would take the toy industry down the same track followed by the railroad industry in the 20th century.  They thought they were in the railroad business until they found out  that they were in the transportation business.  A fact that that their real competition, truck, plane and automobile companies,  fully understood. 

But what kinds of play products and platforms should be included in the “Play Industry?”  I would like this to be a Wiki experience in which all of us collaborate in defining what constitutes membership and who the members are.

So, to start the discussion, here are my criteria for membership:  “Is the product interactive (not simply entertainment like a movie or book); and does it compete for play time and / or revenue?  If it does, it’s in. 

Based upon that concept, below is a list I came up with of potential play categories that I believe fit (list includes both child and adult play).  I have divided them into revenue competitors and time competitors.

Revenue Competitors

Traditional, 3 dimensional toys

Video Games (software and hardware)

Digital Games

Tablets, Cell Phones and all other Mobile Devices

Furniture Games (Billiards, Foosball, Ping Pong etc.)

Play Environments (Bowling Allies, Bars, etc.)

Hobbies and Crafts

Theme Parks and Water Parks

Time Competitors

Playground

Beach

Homework

Free Play

Television

Organized sports

How would you define membership in the “Play Industry”?  Which of these do you think are categories belong in the toy industry?  Let us know. 

The Slow Toy Awards

 
Wonderworld Eco House

I recently came upon a website for “The Slow Toy Movement.”  This organization has as its “… aim to recognise the ‘real toys’ on the market that are well made, inspire the mind and provide children far more than the noise and flashing lights commonly associated with the toys of today.”

In order to do so, they announced in October their list of awards for toys that they deem as  “… encouraging traditional play, boosting creative thinking, inspiring the developments of one’s own imagination. They are not made of plastic, are without batteries and are sold in independent toy shops. They are durable, stand the test of time, without thousands of different functions and, are officially Slow Toys!”

It seems oddly anachronistic to call battery operated toys, a mid-20^th century category the “toys of today.”  It seems that they would be more on truly non-traditional play like apps.  Never-the-less there is ample room to celebrate toys that are durable and simple. 

Here, announced in October, are the 2012 Slow Toy Awards:

 

The Wonderworld Eco House, by Wonderworld

Rory Story Cubes, by Coiledspring Games

Triangular Activity Centre, by Bigjigs Toys

Oobicoo, by Totseat

Multi-solution Puzzle, by P’kolino

My Wondercube, by My Wonder Cube

Stacking Hoops, by Play to Z

 

By the way, the Slow Toy Movement may be slow when it comes to play but not when it comes to

Low Cost Imported Toys; Some Things Never Change

It is easy to believe that the concerns regarding Chinese dominance of toy industry manufacturing is a new phenomenon.  That most toys were formerly made in the US and that things changed about 25 years ago.

That was why I had an “aha!” moment this week as I was researching some early 20^th century toy companies that no longer exist.  While doing my research I came upon a hearing that took place in 1921 whose purpose was to consider whether tariffs on imported toys should be increased (Here is a link).  The toy industry went before the congressional committee led by none other than A.C. Gilbert, who pioneered toy chemistry sets and was known for the Erector Set. 

 It seems that with World War I behind them, the self-described “New American Toy Industry” was concerned about the import of “cheap” German toys.  The Germans were said by the Americans to be using inexpensive adult and child labor.  It’s startling how the reactions to Chinese imports in the late 20^th Century and German imports in the early part of the century closely mirror each other. 

The parallels are not just in the reaction to cheap foreign labor but also to the sheer dominance that Germany exercised over global toy production.  Below are figures I found in the Congressional record.   They are the comparative figures for American toy imports (excluding dolls) from Germany, Japan, France, England and “All Other Countries” according to the Congressional record.

                Germany           Japan               France             England                               Total

1914     $5,926,941        $434,006           $206,134           $420,859                  $7,267,523       

1920     $3,186,650        $3,958,051        $164,688           $195,131                  $7,898,162

What I find fascinating in these figures is that the demand for lower priced goods was so strong that as Germany lost market share due to the World War I years (America embargoed all German toys) that another low price provider, Japan, picked up the slack.

Lego Challenges for the World's Biggest Toy Company

I received a note from Gerrick Johnson, Toy Industry Specialist for BMO Capital, with some interesting analysis.  He ran 2012 numbers on Lego, Hasbro and Mattel and according to his calculations, Lego is now the number two toy company in the world based upon revenue edging out Hasbro.  It is the number one toy company in the world based upon net income.

Here is how he explains it.  "LEGO did $4.137 billion in sales vs Hasbro's $4.084 billion. Mattel did $6.421 billion. So based on sales LEGO is #2."  Then he goes on to write:  "But, if you look at net income, LEGO is #1 with $992 million. Mattel had $777 mil and Hasbro had $336 million."

I knew that Lego has had double digit increases for eight years in a row but these numbers certainly put it into perspective.

Congratulations Lego!

 

 

Tijuana Wakes Up!

In my last posting I wrote about the emergence, at least according to New York Times writer, Chris Anderson (“Mexico: The New China”), of a San Diego / Tijuana industrial hub that he believes will rival the Hong Kong / Shenzhen nexus.

What might make San Diego / Tijuana as an alternative for US manufacturers?  Anderson sites several reasons:

• A shorter supply chain allows for small batch production and shorter lead times. 
• Just in time manufacturing allows for running changes rather than having to wait until current inventory has sold through.
• Reduced risk from a constant on-site presence reduces downstream costs.  If there is something wrong in production, the company learns about it as it happens rather than waiting to discover it once the order is received.
• Wages in Mexico, due to Chinese inflation over the last decade, are now more in line with China’s pay rates. 

I would add that:

Producing near the US border can result in one or two additional product turns for companies and retailers.

Company principals can, if they wish, shuttle to the factory on a daily basis.  This constant presence on the manufacturing floor can reinforce that company’s business culture.

Hong Kong + Shenzhen = San Diego + Tijuana?

Mexico has long been considered as a manufacturing alternative to China and, in fact, some major companies do produce there (think Mattel and Little Tikes).  Still, the amount of toy and play product produced in Mexico pales in comparison to China’s 86% share of the world toy market.  Things there may, however, finally be heating up.

That’s what I thought after reading “Mexico: The New China” by New York Times reporter, Chris Anderson.  Here is how the writer describes modern Tijuana: “[Tijuana] is a city of more than two million people (larger than neighboring San Diego), and it has become North America’s electronics assembly hot spot” 

Anderson is no longer a full-time reporter.  He now owns a company, 3D Robotics, that has an office in San Diego and manufacturing in Tijuana or TJ as he calls it.  In describing the experience of commuting between the two locations he makes this intriguing statement:

Shuttling between the two factories …I’m reminded of a similar experience I had a decade earlier. In the late 1990s and early 2000s, I lived in Hong Kong…and saw how that city was paired with the “special economic zone” of Shenzhen... Together, the two created a world-beating manufacturing hub: business, design and finance in Hong Kong, manufacturing in Shenzhen…Today, what Shenzhen is to Hong Kong, Tijuana is becoming to San Diego.

This is a fascinating notion but what makes the San Diego / Tijuana hub attractive to manufacturers?  That in my next posting.       

 

The 3D Pen; Another Paradigm Shift?

I have been tracking the rise of 3D printing for some time and have noted in the past that it is offers a potential game changer to the consumer products industry.  Just as Apple disrupted the traditional business model for selling music, 3D printing has the potential to disrupt the traditional manufacturing business model.  After all, if you have a 3D printer you can turn any family room into a tiny manufacturing site.  If that happens, there is no need for off shore manufacturing, containerized shipping, domestic warehouses or even traditional selling; the designer is king.

That’s why my antenna went up when I got word of the 3Doodler from WobbleWorks.  It’s a pen that allows the user to draw in three dimensions.  How cool is that?  Here is how it works:

 

The company has currently raised $1.7 million on Kickstarter (check it out).  I can see why.  It will create a whole new platform for creating art as well as crafts; think pipe cleaners from Mars.  Actually think pipe cleaners from WobbleWorks. 

The inventors are “play industry” veterans.  Peter Dilworth and Maxwell Bogue both invented at WowWee.   If you want to see the future of play, keep your eyes on people like Peter and Maxwell.  That’s where they are going.

 

The Toy Industry Is Dead

The Toy Industry is dead. 

It existed back in the 20th Century when it was the only game in town for those who wanted to play.  In the 21st Century, however, toy companies are just one part of the greater Play Industry which consists of those who create video games; develop apps; manufacture tablets; and create immersive digital worlds.  And just wait; we are going to soon have to include 3D Printing companies as well.  In other words, the Play Industry includes any entity that seeks to provide play or a platform for it to take place.

If you think that what we call our industry is just a matter of semantics, think again.  Let me assure you that if you believe you are in the Toy Industry you are going to get steamrolled by any company that recognizes that the battles are no longer for shelf space in a toy department but for time and mindshare in an 8 year old’s brain. 

The challenge that we all face is that our institutions have not yet caught up with that reality.  Retail stores continue to separate play products into different departments rather than merchandising them in one big family play center.  The Toy Industry Association continues to put on a Toy Fair which is still almost entirely a showcase for traditional toys.  NPD provides industry analysis that puts traditional toys in a separate $16.5 Billion category from the $13.3 Billion Video Game hardware and software sector.  Euromonitor, on the other hand, counts Video Game hardware and software and Traditional Toys and Games together ($42 Billion estimated for 2012).

As a result, the toy industry is currently like one of those 15th Century explorers whose maps included whole parts of the globe that were marked "Unknown."  In short, we don't just need a "bigger boat;" we need a better map.

What can be done?

The industry first must recognize who its true competitors are.  Once done, it must demand the data and analysis it needs to effectively compete in a 21^stCentury world of consumer play that is far vaster and

Mattel and Hasbro; do they have a responsibility to the rest of the toy industry?

Do Mattel and Hasbro, by far the toy industry’s biggest companies; have a responsibility to the rest of the industry?  This was the question I asked myself as I listened, during Toy Fair,  to a similar refrain from leaders of mid-tier companies:  “Hasbro and Mattel, through a failure to innovate, are hurting the toy industry.”

The leaders I spoke with are concerned that, by putting their emphasis on endlessly synergizing and promoting existing brands, the industry’s leaders are making the toy department boring.  For example, some  argue that all of the game companies are impacted by Hasbro’s emphasis on filling shelves with multiple variations of Monopoly, Trivial Pursuit and even Jenga.  The more brand duplications there are, they argue, the less variety for consumers. 

To me it’s like having a book store that is filled with variations of Gone with the Wind:  Horse Gone with the Wind; Chattanooga Gone with the Wind and Star Wars Gone with the Wind (which is actually, when you think about it, a very compelling and doable concept).  If this were the case all of these versions would be, in any bricks and mortar store, forcing the retailer to reduce the number of other kinds of books.  For a while, the book store would do a great business with those who are Gone with the Wind

Hasbro and Mattel Shut Out of the 2013 the TOTY Awards; what a difference a year makes

Last year I wrote a series of articles analyzing and ultimately criticizing the TOTY (Toy of the Year) Awards for having a system that allocated too many awards to too few companies.  Here is how I put the question:  “…how is it possible that out of 100,000+ products and almost 1100 exhibitors Mattel managed to win 40% of the TOTY (Toy of the Year) awards?  How is it that 70% of the awards given out went to three publicly traded toy companies (Mattel, Hasbro and Leapfrog)?”

This was not a one-time situation as in the prior year, 80% of the awards went to four companies.  There was, at least to me, a problem with any awards program that awards such a big percentage of prizes to so little a number of companies.

Fortunately the results of the 2013 TOTY’s were far different.  25% of this year’s awards (three) were won by Lego.  The rest were awarded, one a piece, to:  Playmates, Activision, LeapFrog, PlaSmart, Cloudb, Crayola, Nickelodeon, JAKKS and Just Play. 

In addition to to the Education Award, LeapFrog also was voted the People's Choice Award.  As the name implies, it is the only award presented that is soley at the discretion of consumers.

Notably absent were the toy industry’s two largest toy companies, Mattel and Hasbro.  That absence may say a lot more about the state of the industry than it does about who wins awards; that in my next posting.

 

 

Toy Fair 2013 and the new normal

It seems like, for several years now, there has been a great deal of concern in whether show attendance was up or down from the previous year. I don’t remember these discussions back in the 90’s but now it seems like many see this as a type of temperature reading for how the industry is doing.

Yes, it looked to me like attendance was off sharply the first day (at least in part, weather related) and then came back as the week moved on.  I base this on available tables in food areas and the activity at the various coat check areas. 

No matter how good or bad attendance was, however, I think it’s time we accept that falling or steady attendance is the new normal and it’s not going to change any time soon.  We have simply lost too many smaller retailers and our larger merchants have steadily cut back on the number of buyers and staff they send. 

But what does the new normal tell us about the health of our industry?

For starters, I don’t think show attendance tells us much about how the industry is doing macro economically.  With over 50% of retail sales divvied up between Wal-Mart, Target and Toys R Us, and