I want to thank everyone who has commented on my posting, “Jerry Storch of Toys R Us Speaks His Mind at PlayCon.” Jerry’s position that the toy industry is terrible at channel management created a stir on our comments section, Linked In, the ASTRA bulletin board and other venues. Channel management is, if you will recall, the process of when and to whom product is shipped. Mr. Storch points out that the toy industry seeks to secure all channels of trade (specialty, mass, supermarket, drug, etc.) in year one resulting in hypercompetitive pricing, a shorted product life cycle and less profit for everyone.
Brian Torney, in his Global Toy News posting “Opinion-Storch Out on a Limb” made an excellent case for the need for channel management. As he puts it, the lack of channel management by toy companies has “…reduced product to month-long shelf life and weakened brands by a half-life. If products cost more to produce and market each year, how can we justify fruit fly product lifetimes and diminishing returns?”
So why do we have fruit fly product lifetimes and diminishing returns? How did we come to this? To find out, we can look at the history of the toy industry. If you were to take a time machine back 20 years or so you would have found that the retail landscape was far more abundant in the number of retail chains. Here is a list of just some of the larger retailers who are no longer with us:
Ames Mass Merchandiser
Best Products Catalog Showroom
Bradlees Mass Merchandiser
Caldor Mass Merchandiser
Children’s Palace Toy Chain
Eckerd Drug Drug Chain
Hills Mass Merchandiser
Jamesway Mass Merchandiser
KB Toys Toy Chain
Kiddie City Toy Chain
Osco Drug Chain
Peoples Drug Chain
Pharmor Drug Chain
Service Merchandise Catalog Showroom
Venture Mass Merchandiser
Woolworth Variety Chain
Zayre Mass Merchandiser
This is history but not ancient history. Speak with some of the industry’s veterans and you will hear some great stories (funny, less funny and not funny at all) about doing business with these chains.
My point is that there used to be an abundance of potential customers so when a company brought a product to market, it did not have to make sure that it acquired at least two of the big three (Toys R Us, Wal-Mart and Target) in order to run a television ad. In fact, due to the regional nature o
f these chains you could run spot ads in specific cities to test the product out. Better yet, you could find sufficient product placement with no television support at all. This was beneficial in that a company and its retail customers could actually find out if the product was popular with consumers prior to investing in a major marketing program.
Bottom line our current status of a few major chains dominating over 50% of retail toy sales is unprecedented and calls for a new model for bringing products to market. Simply put, too few chains taking too much product in too short a time is too risky…for everyone. No one can bring back the old days. We can, however, recognize that the current model is busted. Once that is done we can begin the process of creating a new one.