The festive season is beginning to hit its stride. But let’s not beat around the bush: right now, things are not going entirely according to plan – more of which later. As you would expect, retailers and suppliers are giving it all they’ve got: another ‘3 for 2’ promotion launches at Argos today, while Smyths unveiled its Black Friday deals this week, three weeks ahead of the day itself. As an aside, I find it interesting to see retailers taking Amazon head-on by appropriating initiatives such as Black Friday, while Amazon itself is borrowing from the traditional retail playbook by launching a good old-fashioned print catalogue in the US. At least retailers aren’t copying the ‘free shipping’ deal that Amazon is currently running in the States; goodness knows how much money they will lose doing that. Mind you, if your tax and business rates bill is artificially low, I guess that helps to subsidise moves like this.
As Christmas approaches, stories of toys in short supply inevitably start to hit the papers. Scarcity of hot items is a timeless toy community challenge with no easy solution; if there was, we would have cracked it decades ago. This year’s Pimpernel Award looks to be a shoo-in for the LOL Surprise House, which has staggered the industry with its rate of sale, given its high-ticket price. Indeed, so hard is it to find in the shops across the globe that the £180 item is being offered for sale by unscrupulous scalpers on Amazon for anything up to £500, prompting Isaac Larian to personally decry the practice on his notorious LinkedIn page. Of course, he is 100% right, but how do you stop it? Answers on a postcard…
The success of the LOL house continues the brand’s stellar trajectory, as it pushes the boundaries of what anyone thought achievable by a single range. As is sadly often the way with the toy trade, some people are apparently already talking it down and questioning how long LOL can sustain its astonishing performance. All I can say is that having seen some of next year’s incredibly hush-hush developments, I wouldn’t bet on a dip any time soon. I am prevented from revealing any specific details – I certainly don’t want to become Isaac’s latest target – but suffice to say the innovation which has driven the brand so far will most definitely carry on in abundance next year.
However, returning to my opening remark, the performance of LOL isn’t currently being replicated across the market, which is being variously described as ‘strange’, ‘volatile’ and ‘highly unpredictable’. It’s getting harder to anniversary numbers, as previous trading patterns are not being replicated, and while buyers want to make decisions earlier and earlier, sales appear to be getting later and later. Most worryingly, the Toys R Us business, which many believed would be spread across the trade, has been described as having “literally evaporated” by one prominent retail buyer. This anecdotal observation is backed up by statistical evidence from NPD: including Toys R Us in the numbers, the UK toy market year-to date (up to October) is 11% down. The year-to-date like-for-like performance, i.e. stripping Toys R Us out of the number, has the market 1% up, while October like-for-like is down 1%. Essentially, there has been no significant move of the previous TRU turnover to other retailers…not yet, at any rate. Of course, the big hope is that we will see a bigger than ever spike in December, as the consumers who have been holding back finally splurge their cash.
For context, NPD tells me that the other retail channels it monitors – including Beauty and Sports – are experiencing similar pressures, suggesting that the challenge is a broader retail issue rather than a toy-specific one. Some clarity on Brexit would be welcome, as it may just loosen the public’s festive purse-strings, but unfortunately I don’t think that is something we can bank on right now. I appreciate that trade media is often inclined to talk things up as a matter of course, but as I have said many times before, I prefer an honest approach. Our readers aren’t stupid; I’m sure the majority of you are experiencing these challenges on a daily basis, and in many respects, it is reassuring to know that pretty much everyone is in the same boat.
Nevertheless, there have been a few bright spots this week: Sainsbury’s latest financial results were reported as having been boosted by the Argos acquisition, with the retailer claiming that adding Argos stores into Sainsbury’s outlets was “driving an increase in trading intensity.” While underlying profits were up by 20%, pre-tax profits were pushed down by costs related to restructuring store management teams and preparing for the Asda deal. However, overall, I suspect Sainsbury’s is very pleased with the progress it is making.
Over in the Far East, it looks like a deal to sell the Toys R Us Asian operation has moved a step closer, and the good news is that it appears as though Li & Fung is very much involved. You can read the full story here: according to reports, the deal may be completed as early as next week, which would come as welcome relief to many toy suppliers.
The FAO Schwarz pop-up in Selfridges has also opened, and I’m hearing good things about it. By all accounts it was a monumental task to get it all up and running, given the tight deadline. But, clearly, having it operational in time for the Christmas season was a must and if things go well, I am sure we’ll see the department expanded in future years. According to one person who has seen it in the flesh, pricing is said to be “surprisingly competitive” and the iconic FAO emblems – the legendary BigPiano and the moving FAO clock face – look great. With the New York flagship opening next week, it’s good to see the retailer’s comeback in full swing, in contrast to KB Toys, which announced this week that its US return is being postponed until next year. The last sentence of the LinkedIn post revealing the postponement – which asked for potential investors to get in touch – may be the key here.
Finally, having spoken about licensing jargon in recent weeks, I came across a new toy term this week which I had never heard before – ‘holiday buyer’. When I expressed bewilderment, I was told that it referred to a major buyer who attends an overseas event – LA in particular was mentioned – but doesn’t actually buy anything as a result. Any other new terminology I should be aware of?