A Play Date in Europe

Toys are important to children and families, important to intellectual property owners and important to retailers. But the European toy market is usually defined in terms of its struggle—too little stock when it's needed, too much competition, too low margins and too tough at retail. And yet it prevails year after year.

Although NPD results indicate that the toy market is in decline month on month, there are some success stories in very particular areas and next year's most significant product launches include products to re-connect the toy business with girls.

You can't start a conversation about toys without noting "the Woolworths effect" in the U.K. The closure of the U.K. high street's biggest licensed toy retailer a year ago is still echoing around the industry. NPD's License Tracker shows that the sales of licensed products lost by Woolworths have not been picked up completely by other retailers and that money is probably being spent on fashion or magazines that might have otherwise been spent on small-ticket toy items.

However, one part of the U.K. market has benefited directly from the Woolworths closure—the independent retailer sector. John Dyson, chairman of the British Toy and Hobby Association and managing director of Toymaster, the members' chain of independent shops, says that after a tough 2008, most Toymaster members are trading up this year. On average, sales are 20 percent up since the demise of Woolworths, where the Toymaster store is in the same town center as a former Woolworths. "This sector needed a break," says Dyson. Will the Woolworths effect wear off? Dyson doesn't think so. "There are 800 fewer shops on the high street selling toys, and they won't be replaced by toy shops, even though other retailers may increase their toy offering. It's a beacon in a year in which the toy industry otherwise tracked down."

Meanwhile, the grocers, particularly Tesco, have stormed ahead thanks to their footfall advantage and would have done well with or without the Woolworths effect. Grocers are now moving on to selling higher-priced items for occasions, not just impulse purchases. They remain aggressive in pricing leading up to Christmas this year. Tesco started with a 50-percent-off sale; Asda's Christmas Toy Event offers nearly $10 million (£6 million) in discounts (it sold nearly 7,000 half-price doll houses in a day); and Sainsbury's is likely to repeat its 50-percent-off-toys offer before Christmas again this year. Bandai's Rosie Bayles says consumers expect this fierce discounting now, and although it's most acute in the U.K., this trend is bound to shift to the rest of Europe. It seems that the message from retail has become not so much "What's your product?" but rather "What's the offer on your product."

"The grocers will remain aggressive. Department stores, independent retailers and everyone else has to examine their unique selling proposition and offering and compete where they can. Price is not the only important factor," says Dyson.

Licensed toys drive the toy market in the U.K., comprising a third of the $1.2 billion (£750 million) toy business. "You're as good as your licenses," says Bayles.

NPD data backs this up. "Where there's a great film there's increased toy sales," says NPD Group's Ania Kozielec. Star Wars remains the benchmark, reaching and maintaining its peak performance. Indiana Jones did well last year. "But look at the film slate for the first half of 2009 and you can see why nothing 'connected' with the toy industry in the same way," she says.

Look for these key toy trends for 2010:

•The most significant trend for 2010 is the launch of new girls' doll properties into the gap left by Bratz, which remains largely unfilled. Dyson admits that the toy business has lacked connectivity with girls recently and hopes the new launches will help the business reconnect. There has been yet more work on the Barbie brand and there are new entries to market. A quick look indicates a trend for a more wholesome doll, and thank goodness, most commentators seem to say. While the girls' market is considered to be more fragmented in Europe with direct competition from fashion and other areas, girls can be very loyal so there is a real opportunity here.

Among the new entries into the doll category are Liv from Spin Master, which is launching for Christmas 2009 for girls ages 6 and up. It's the first significant fashion doll launch from Spin Master and each doll has a link to the Web site for Liv content and activities. It's a bold offering with a "Real Girls, Real Life" positioning and the girls are described as neither perfect nor bratty, but representing the average teenager's interests and challenges.

Second is Harumika, one of three girls' properties from Bandai. It's a mannequin that comes with accessories, fabric and decorations. A companion European Web site allows fans to upload photos of their creations, enter design contests and access other fans. The other Bandai dolls are Star Friends, a baby doll line with a tamagotchi (digital pet) device in its hand, and KeyTweens, a mini doll line.

Third is Moxie Girlz from MGA. It's a fashion doll line with a book feature and a "friends forever tagline" and plans for a full licensing program through agency TLC.

Others fashion doll brands will continue to perform across Europe including Rainbow's Winx Club and its new spin off, PopPixie.

•Preschool is fast approaching a fifth of the total toy market. It will remain a very crowded market, but one that still attracts new entrants. Bandai, for example, will launch its first significant preschool line next year with Tinga Tinga Tales.

•Boys' action toys are almost 90 percent licensed and are hard to ignore with no change expected in 2010. This year has seen the re-launch of Action Man by Tesco and huge volumes of Ben 10 items sold. "The Ben 10 figurines are great toys. It's what boys like," says Bayles. "We've had a brilliant year, huge across Europe with Spain and the U.K., the strongest to date, and others catching up." Bakugan toys from Spin Master, featuring magnetic balls that flick or roll across the table to ping open in response to magnetic cards, in addition to Gormiti and Huntik, which are driven by the Italian market, are expected to be hot for 2010.

• Expect even stronger links between content producers and toy makers, following the emergence of collaborations between Hasbro and Discovery, as well as Upper Deck and Rainbow.

•MMOGs launching with real toys, virtual worlds for preschoolers and Web-connected toys will all feature prominently next year. A September NPD study showed that children are as comfortable using multimedia tools and digital technology as they are throwing a ball or jumping a rope and that U.S. households with children ages 4 to 14 have on average 11 consumer electronic devices. Driving the trend are Web-connected toys and new online worlds, which reinforce what most toy companies already know—brands should always consider an online dimension to engage children.

Industry executives, however, caution about technology for technology's sake. "You can focus too much on this," says Bayles. "We're still about toys. The real challenge is that the video game market is taking the younger and female market now, where competition is already strong from fashion."

•The film cycle is coming round and in addition to Harry Potter and the superhero offerings in 2010 there is Toy Story, much loved and hotly anticipated across Europe by a toy industry that experienced strong uplift after the last two movies.

"The toy industry is resilient. People have been writing it off for years in the face of computers, mobile phones and kids getting older younger," says Dyson. "But the bottom line is that there is value and importance in play. You only need a piece of wood and a ball and you've got a game of cricket. And the ultimate up-note is that where consolidation occurs it leaves space for new companies and fresh products in the industry."


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