Last week’s Blog about the thorny question of margins certainly prompted lots of comments and feedback, so I wanted to briefly return to the subject to share some of the more interesting nuggets I learned.
First up, it seems I may have been given a slightly optimistic estimation of Mytoys’ market share in Germany – but even allowing for that, there’s no doubt that its demise still came as a shock to many. Nevertheless, there was a feeling that its situation was at least partially self-inflicted: people suggested that its range was heavily predicated around certain suppliers known for offering margins at the lower end of the scale. There seemed to be no sense of them attempting to create a margin mix with FOB items, own brand, brands that offered higher margins, clearance lines or any of the other ways a retailer can help to balance the margin equation.
There was also a lively debate about who should be earning the lion’s share of the margin – the (online) retailer, or the developer of the toy, responsible for R & D, product design, packaging, testing, marketing and everything else that goes into driving sales. And as I had brought Amazon into the conversation as another eCommerce retailer allegedly unhappy with toy margins, some quite rightly pointed out that Amazon remains a core part of the problem, with its infamous strategy to match the lowest price in the market (either automatically or manually). Just as John Lewis’ ‘never knowingly undersold” proposition became anachronistic in today’s retail climate, so Amazon’s race to the bottom algorithm has prompted some to point out that it can hardly complain about low margins given its role in market pricing and pricing perception amongst consumers – and I have some sympathy with that viewpoint. Physician, heal thyself…
I also received a call from Gary Grant – a man who is no stranger to joining in with lively conversations about retail margins – who took time out from his busy schedule to give me a very thorough grounding on the nuances of the margin debate. I found it particularly interesting that Gary is no fan of suppliers offering the same margin across the board to different types of retailers, as those retailers all have completely different cost structures. Those differences don’t just extend to brick and mortar versus online retail, as you would expect, but even within the brick-and-mortar channel, the disparity between – say – an out-of-town retailer versus an in-town retailer can be huge. As far as Gary is concerned, a ‘one size fits all’ margin approach does nothing to level the playing field – and hearing the numbers in great detail, I can see why he would think that. Long story short, expect this debate to run and run while trading remains challenging.
Elsewhere, John Lewis unveiled its financial results this week – and they weren’t a pretty sight. Pre-tax losses exceeded expectations and the legendary staff bonuses have been put on hold. On the plus side, I spoke to several independent department stores at this week’s INDX show who are doing perfectly well, so I certainly don’t think it is a case that all department stores are struggling.
On the subject of the INDX show, it remains the perfect illustration of ‘quality over quantity’ in the event field: numerous exhibitors told me that if one ore two meetings went according to plan, it would cover the cost of being there. In addition to members, there was a decent turnout of non-AIS members, as has increasingly been the case in recent years. In terms of the new March timing, it will be interesting to see how people felt it worked in practice – I spoke to quite a lot of exhibitors and visitors, and it was evident that there is no clear consensus on the right time to hold the show. Every month between March and September was cited as the ‘right’ time for it to take place by someone or other, so how on earth they decide on the timing for next year, goodness only knows.
The next stop on the specialist toy circuit will be Harrogate in May, for the Toymaster Show. We’ve just started working on our preview of the event, which we believe is going to be our biggest and best ever Toymaster preview issue – so if you haven’t yet reserved your slot, get in touch with Mark or myself now to be part of this very special edition.
Also taking place in May is the Toy Trust’s May Mayhem event – the BTHA is aiming to break the record for the most companies participating in the event (which would be 40 companies). So, if you haven’t signed up yet, now is the time to throw your hat into the ring – the wonderful mobility charity Whizz-Kidz has been named as the Toy Trust’s main beneficiary for 2023, and you can get involved in May Mayhem in any way you wish. You don’t have to live off the land in the wilderness for a week or build a raft and sail across an ocean (or even a large lake in Surrey) – you can choose your own method of fundraising to suit your organisation. A great way of team building while raising money for a great cause – you can sign up at https://www.toytrust.co.uk/may-mayhem/ or email firstname.lastname@example.org for more details.
In other BTHA news, exhibitor applications for Toy Fair are now open – Toy World has already signed on the dotted line for next year, as I am sure many of this year’s exhibitors have. I am sure there will be many twists and turns between now and then, but London Toy Fair will always be the a key date in our diary.
Finally, our best wishes to Kay Thomson, who steps down from her role as sales manager at Winning Moves today. Kay had some devastating health issues a few years ago, and it was wonderful to see her return to the toy community she has spent over 30 years in. Whatever comes next for her, we wish her all the best.