Why Channel Management is Busted; A Little History


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.

One thought

  1. finally!!!!! Someone gets it. There is NO channel to manage. If I understood Mr Storch correctly he was insinuating that some “hot” products should be introduced on a “exclusive” level to the big boys. Thats fine but would he then commit to fronting the tooling? or purchase enough, up front, to justify the exclusivity?
    Sure happy to be retired……
    Ron Grattini

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