Making mischief…it’s the Friday Blog!

Published on: 14th June 2019

Let’s start this week’s Blog with one of the few people in the global toy market who – like Kylie, Britney and Madonna – we can refer to by his forename and everyone will know who I am talking about (although, to be fair, I do know someone in the US toy market who is referred to by his Walmart buyer as Isaac 2). Isaac 1 has made another attempt to persuade Mattel to sell the company to him…with fairly predictable results. The fact that the offer was conditional on Isaac becoming Mattel’s chairman and CEO, and on all of Mattel’s current directors resigning without any further compensation, made it fairly unlikely that it would be accepted (“Sure, take it, it’s yours – I’ll just get my coat.”). Indeed, you have to question whether this was a case of Isaac making mischief, just because he can. Interestingly, Mattel’s share price climbed fairly steeply after the bid was made public (by Isaac on his LinkedIn page, natch). As a shareholder himself, Isaac is probably not too disappointed with that outcome, while I guess Mattel won’t exactly be complaining either.

In blaming its latest set of subdued results on Brexit, Tesco echoed what independent retailers have been telling us for months – that, right now, footfall and consumer spend are both being impacted by the ongoing political uncertainty. The UK economy shrank by 0.4% in April, following a 0.1% reduction in March. Doesn’t sound too awful, right? Except a 0.5% reduction is the equivalent of £10bn; in two months, the UK lost more than its net contribution to the EU – and we haven’t even left yet! I recently took part in a podcast with my great American friends and counterparts Chris Byrne and Richard Gottlieb, where I put forward the theory that a No Deal Brexit could potentially be as disruptive for the UK as the tariff situation will be for the US – although I genuinely hope I’m proved wrong about that. However, it’s important to keep it all in perspective; both situations will throw up some major challenges along the way, but there will always be kids, they’ll always receive pocket money and need to be kept occupied on rainy days, Christmas and birthdays will come round – and kids will always want toys. None of that will change, thank goodness: we may just have to jump through a few more hoops along the way.

The US tariff threat has certainly thrown Chinese factories into a spin; US companies are desperately trying to pull forward orders by up to two months, in an attempt to stockpile goods before the tariffs are due to kick in. Of course, it’s not quite as straightforward as that; additional workforce needs to be put in place, raw materials procured, packaging material obtained…and that’s before the issue of production line capacity is taken into account. Never has the need for flexibility and the ability to react been more integral to a company’s success than in today’s toy market, and this situation must certainly be testing factories to their limits.

But let’s look on the bright side – Christmas is coming! We know that a) because people have started sharing Elf memes on twitter counting down to the big day and b) because Argos has once again been first out of the traps with the announcement of its predicted top toys for Christmas. You can see what made the top 12 here. There are undoubtedly some great products on the list, although with over six months still to go, I suspect we’ll see a few other winners emerge before the big day. Predicting what is going to be a hit in six weeks’ time – yet alone six months’ time – is no easy task these days. I’m not sure I fully buy into some of the statistics quoted by Argos in the accompanying press release; if a quarter of shoppers really have already started their Christmas shopping, I would be mildly surprised. If – as claimed – 10% have already finished it, I would be truly staggered. I would imagine Argos themselves would be gutted if 10% of consumers had completed all their festive purchases six weeks before the autumn winter catalogue is even launched.

Over in China, they don’t have to wait for Christmas for a big surge in toy sales – Children’s Day is a huge sales driver in the region, and Toys R Us took full advantage of the festivities, increasing sales by 25% over the first weekend in June. While I’m generally wary of cultural appropriation, we could have certainly done with that sort of mid-year boost here in the UK. Toys R Us Asia is planning to open over 65 stores across Greater China, Japan and South East Asia this year, and has suggested that it is looking to double its Chinese store estate (to 400 stores) by 2021. It’s great to see TRU thriving in Asia, although it has all gone a little quiet in the US, save for the news that the lawyers who represented TRU during its Chapter 11 proceedings has been awarded the grand total of $56m in fees for fifteen months’ work. US suppliers must have been thrilled to hear that…

Back at home, The Entertainer’s online sales have increased healthily since it launched its new website last November. Apparently, conversion rates are up by 13%, which represents a significant improvement on what was already a highly credible performance. For me, therein lies the key between the companies which will ride out the current turbulence and those that will find the going tougher; no matter how well you’re doing, keep striving to improve and never become complacent. You can see that spirit reflected in any number of the stories we’ve run online this week; new ranges being launched, new marketing initiatives and strategies, new licences signed, new live events, new partnerships, new distribution deals. We’re in the midst of some pretty challenging conditions, but standing still is really not an option. Let us hope that fortune will continue to favour the brave over the coming months.