Industry leaders, retailers, and manufacturers weigh in on toy trends, changes, and more in The Toy Book’s annual State of the Industry Q&A.
Basic Fun! made several acquisitions in the past year, including K’NEX, Playhut, Geoworld, and more. Do you have plans for further acquisitions in the future?
Yes, acquiring companies, brands, and toy IP is part of our DNA and growth model. We see the market continuing to strain in the below-$50-million-revenue range, and we believe we continue to offer a great opportunity for companies worrying about how to navigate the changing retail landscape. The ability to launch and drive a new program is tougher than ever without Toys “R” Us, so growing and building sales volume is tougher than ever.
In addition, the business is now shifting more and more away from FOB direct from China and toward domestic sales. This puts even greater strain on the cash flow of companies, requiring them to take greater risks on inventory product.
Do you anticipate the trend toward mergers and acquisitions will continue in the year ahead?
Yes, for sure. We are now headed into a very volatile period in our economy between the ups and downs of the stock market after 10 years of unprecedented growth, the threat of tariff impositions, and the uncertainty with regard to the investigations relating to the president. Chances are, things are going to get worse for the next few years, so now is the time for companies to make moves if they’ve been thinking about marketing their business for sale or merger. I expect a lot of action this year in the industry.
What are your predictions for the state of toy retail in 2019?
Unless a version of Toys “R” Us emerges, some of that volume is just going to go away. Think about how you shop at a grocery store. You go in for eggs and milk, and come out with chips and soda as well. It was the same with Toys “R” Us. You went in for a few gifts and came out with a basket because the selection was so enticing. Consumers shop online for what they want, and at big box you have clothes, food, and home goods to select from, as well as toys.
How would you feel about the return of Toys “R” Us?
As long as they are in a position to pay their bills, it would be great!
In your opinion, who won the battle for Toys “R” Us dollars? Which strategies worked at retail this past holiday and which did not?
In the end, all retail gained a bit, which either made up for a weak toy year or helped growth year over year. However, the toy manufacturer lost big time! Many of us thought that we could capture back 50 percent or more of the lost volume, and most got 20 percent at best. It’s going to take a bit longer than we all imagined to gain back what was lost at Toys “R” Us. Certainly adding space in areas close to closed Toys “R” Us locations helped and was smart, as was stacking out the aisles with features and pallets of special and new product. However, I don’t think anyone has really figured it out yet. It’s a work in progress for us all.
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