Three Atypical Retail Channels in the Overseas Toy Market

1. Low-price discount stores

As we all know, the two mature toy markets in Europe and the United States are suffering from decades of high inflation, which has suppressed consumption of non-essential items such as toys. Cash-strapped people turned their attention to low-priced discount stores, including outlets. According to a survey conducted by the German market research company GfK in 15 European countries, more than 90% of consumers will adjust their consumption habits. Among various consumption channels, only the low-price discount store channel has increased willingness to spend. The increase reached 15%.

 

In the past, consumers did not think that they could buy big brands in such stores, but with the changes in the market environment, Lego, Mattel, Disney and other famous brand products have also begun to lower their profile and enter this atypical toy sales channel. For example, the United States has won the mini version of the plush top Squishmallows, and Five Below has Disney's exclusive goods. The latter even achieved an 11.2% growth during the Christmas sales period last year, which is very rare in an environment where many toy giants are experiencing declines in revenue.

 

Low price means small profit. What do toy manufacturers think? Claire Carroll, head of global brand development at Toy Monster, headquartered in Australia and with operations around the world, said: "What consumers want now is: low price + brand, which will drive the toy manufacturing industry to use creativity to reduce unnecessary costs. Rick Mershon, senior vice president of marketing for Sunny Days Entertainment, an American toy manufacturer and distributor, pointed out that low-price discount stores are also a good test point for new products for toy manufacturers. In Wal-Mart, Target, Fred Meye and other traditional strong chain retail stores, manufacturers prefer to provide a complete series of products, which increases the initial investment of manufacturers and makes it difficult to keep costs down; while discount stores are cooperative and flexible. With better popularity, manufacturers can tentatively launch low-priced new products first. If the product sells well and has high market acceptance, the manufacturer can launch a follow-up series of products, raise the price, and then spread it to other retail channels.

 

2. DTC (brand direct marketing)

After the toy manufacturers were forced to deploy DTC (direct brand channel) due to the closure of stores during the epidemic, many toy manufacturers stabilized DTC as a company strategy because they tasted the sweetness. Since brand direct marketing focuses on brand influence, it is suitable for products with strong fan attributes, establishes private domain traffic, provides new product information, advance notice, reservation priority, fan activities and other exclusive services to form an exclusive relationship.

 

A more prominent example is Funko. At the 2022 performance briefing, company executives revealed that its DTC business accounted for 11% of the company as a whole, which was larger than Wal-Mart, the number one cooperative customer, at 8%. Andrew Perlmutter, the relevant person in charge, said that some retailers are indeed not happy about this, thinking that this will cause conflicts, but most customers still welcome our direct sales service, because when their goods are sold out and the inventory is out of stock again When not online, we will add a link to our directly-operated store as a supplementary means. Of course, Funko will also provide some exclusive items to cooperative customers in return. On the other hand, Hasbro and Mattel focus their DTC business on high-end toys for older children, which are differentiated from traditional channel products for children of the right age.

 

Not only the manufacturers, but even the copyright owner has started the DTC business, which is a means of "retaining the new and retaining the old" in addition to helping the authorized party's product sales. In the past, there were Japan’s Sanrio and the streaming media Netflix (Netflix), and later there was Paramount Global’s self-built independent station. At present, Paramount International has 125 brands and 50,000 items online, which can be shipped globally. Among them, it has local warehouses in the United States, Canada, the United Kingdom, and Germany, and plans to expand within this year.

According to the data of Shopify, a self-built independent station service provider, among the shops currently engaged in DTC business, they are concentrated in the United States (57.2%), the United Kingdom (10.6%), Canada (8%), and other countries and regions with a relatively high proportion There are: Australia, India, New Zealand, Germany, Singapore, France and Hong Kong, China. Shopify is currently increasing its services for big brands, and recently announced the opening of its service modules for big brands to integrate into external platforms. Mattel is one of the first beneficiary customers. Previously, Mattel and Shopify established its DTC independent stations Mattel Creation and American Girl, which will later be expanded to all its brands.

 

3. Live streaming/content e-commerce

When the domestic live broadcast e-commerce is in full swing, the live broadcast e-commerce represented by TikTok Shop has a different situation overseas. To sum it up in one sentence: Southeast Asia is hot, Europe and the United States are cold. This can be seen from the expansion of TikTop Shop: in 2021, it will only test the water in Indonesia and the United Kingdom, and in 2022, 4 of the 5 new sites will be in Southeast Asia (Thailand, Vietnam, Malaysia, and the Philippines). This is mainly because the population in Southeast Asia is generally relatively young, and they are highly receptive to live streaming. In June 2022, according to data from the Thai payment giant Omise, the annual growth rate of the total merchandise turnover of the live broadcast e-commerce industry in Southeast Asia reached 306%, and the annual order volume surged by 115%, which shows its rapid development.

 

Compared with the hotness in Southeast Asia, the development speed in Europe and the United States is much slower. Although the UK site was first opened, due to the complex geopolitics, huge cultural differences, and different regulatory systems in Europe and the United States, TikTok Shop gave up the relevant functions of live streaming in Germany, France, Italy, and the West. In the United States, people watch live broadcasts more for entertainment than shopping. A variety of entertainment methods and shopping channels have also distracted Americans' interest in live shopping. According to a 2022 survey by market consulting firm Coresight Research, 78% of respondents have never watched live broadcasts, and American consumers who have watched live broadcasts hope to buy practical products that cannot be bought elsewhere. It is completely different from the Chinese audience.

 

Specifically, toy manufacturers tend to do customized themed live broadcasts on social platforms instead of integrating them into the live broadcast content of e-commerce anchors. For example, after the epidemic, Funko will have an annual fan live broadcast event to promote new products; Hasbro will hold Hasbro Holiday Shopping Live before Christmas, allowing viewers to watch on the photo wall, Facebook and official website , and then jump to the official website to place an order. There is also IMC Toys, a company specializing in doll toys, which has built its own Kitoons content platform to provide product content services through smart TVs, mobile phones, tablets, and websites. When viewers (children) are interested in related peripheral toys while watching animation programs, they can add shopping Car, parents log in to the background through the parent mode, filter shopping products and then place an order with one click.

 

These channels are not new, but they are atypical toy sales channels that have become popular recently, bringing different new opportunities to the toy industry.