The global toy business:

Post COVID-19 lockdown

Soon after we finished Spielwarenmesse® 2020, those hopes which burned so brightly for a good year of trading in the toy business came crashing down around us. Business which had seemingly been secured for the year faded away, and companies big and small had to fight to protect as much of the promised order book as possible.

Several months later we can observe winners and losers across the toy and games business. Those companies with a heavy focus on products which represent a parent approved purchase (e.g. board games, science kits, arts & crafts) have generally speaking seen significant sales uplift with sell through way in excess of norms and averages for this time of year. Collectables and movie related toys have been hard hit in several markets.

Overall toy industry outlook post lockdown

The critical question now is what is the outlook as more countries seek to move out of lockdown?

The first part of answering this question alas has to be confirming that COVID-19 has not gone. While many countries have seen a massive drop off in cases others have been facing a rising wave of coronavirus infections. Even those countries who thought they had eradicated it have seen pockets of resurgence. The reality is that it does not seem like we will see a post-COVID-19 scenario for some time, and resurgence of the virus will likely lead back to at least localised lockdowns.

In the medium term, we can reasonably expect both treatments of the illness to hugely improve, making COVID-19 less serious and less fatal than it has been to this point, and also to see comparatively rapid moves towards an effective vaccination. The hard reality is that this is not over yet, but there is light at the end of the tunnel!

Toy manufacturers outlook

From the perspective of toy manufacturers, we can make several observations:

Firstly, all toy and game companies should be working hard to increase their offering of parentally approved products in case of further outbreaks. This is a basic risk reduction strategy at this point.

Secondly though we should consider the outlook for collectable toys. This pocket money category had performed so well for quite a few years based on a seemingly never-ending stream of product development. For the short term though this category of toys looks to be facing headwinds. The ‘playground effect’ with children talking about their favourite collectable toys is very limited right now due to social distancing and disruption to children attending school. In normal times the one thing the toy business could count on was millions of children meeting most days of the week and driving a (non-medical!) viral effect. The immediate outlook for this powerful toy sales booster is uncertain, although in the medium term it will of course come back.

The third major consideration for toy companies is the impact of the pandemic on movie related toy sales. Ever since Star Wars became the first mighty ‘toyetic’ movie and sold record levels of merchandise, especially toys, the toy business and Hollywood have been intertwined. Until humanity finds a way to attend cinemas en masse, it is hard to see the usual huge sales spike coming from movie related toys. While video on demand has helped to fill some gap in driving sales demand during the pandemic and is clearly going to be a growing force, there is nothing quite like a global blockbuster movie with marketing spend of €millions to drive toy sales.

Finally, from the perspective of toy manufacturers is the ongoing uncertainty of supply chains. While at the time of writing it looks like China has a strong grip on the problem, the virus has not completely gone away. It seems prudent and logical that toy manufacturers will seek to balance out manufacturing from China with sourcing from other countries and regions, which like many of the short-term impacts of the pandemic is likely to act to only accelerate the ongoing trend.

Toy retailers’ perspective

From the perspective of toy retailers, the ongoing reopening of physical stores must come as a massive relief. For many retailers, their online sales have soared during lockdowns around the world, but the vast majority of toys sold are still sold by physical ‘bricks and mortar’ stores.

The challenges for stores are ongoing – consumer footfall is down in many countries and likely to stay down for the short term. Big movie launches which offer a sales boost at time when the toy business would otherwise be quiet have not materialised, and toy retailers face the tricky ongoing challenge of creating and maintaining COVID safe shopping experiences.

Looking on the bright side, as long as the virus can be kept at bay heading into the last few months of the year, the biggest selling period for toys is still ahead, and so hopefully toy retail can enjoy a better and ideally relatively normal back end of the year.

Demand for toys stays despite the crisis

While the challenges are not going away for humanity, and for the toy business, the good news at least is that our industry does not see the same catastrophic and destructive drop offs in demand during these terribly tough times as some industries, and for that we should be grateful.

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