ModelZone, the UK's largest model retailer with 47 stores across the country, went into administration on 27 June, leaving yet another gap on the high street. Big name brands such as HMV (media products), Comet and Jessops (both electronics and appliance specialists) in the UK have all collapsed this year as hard-up consumers remained reluctant to spend freely at a time of high unemployment, low wage rises and increasing prices.
Hobby stores (and ModelZone) was one of the very channels investigated in our "Toys and Games Retailing: Specialist Toy Retailers: Defence against the Grocery Arts" global briefing back in 2011. As highlighted in the report, competition from grocery retailers has put specialist toy retailers in a difficult position, fighting for their status as the preferred destination for toy shopping in recent years. In true grocery fashion, these players are offering low prices coupled with convenience. They are also well placed to harness the seasonal nature of toy demand. Back then, in response, Euromonitor International had advised specialist toy stores to rebrand themselves and search for alternative growth avenues, including the internet, emerging markets and new store concepts. ModelZone’s failure to address and fully embrace the ever changing dynamics of retailing caused its collapse in this latest blow to the British high street.
Traditional toys and games stores being squeezed
Hobby stores such as Hobbycraft and ModelZone are prominent in a number of categories within traditional toys and games, such as model vehicles and games and puzzles. These stores have a highly dedicated audience and are best placed to offer niche products, such as model sets. In Western countries, die cast model vehicles and radio/remote control vehicles are popular items in such outlets. In Japan/Asia Pacific, collectible figurines and robots are very popular.
Like any other traditional toys and games stores, hobby stores have been under immense pressure from the rising popularity of grocery and internet retailing. The power and influence of grocery retailers, particularly hypermarkets and supermarkets, in traditional toys is increasing globally, in line with a broader trend that is affecting the retail industry as a whole. Large retailers such as Tesco and Carrefour have been stocking more toys, which is putting a strain on specialist toy retailers.
The internet outperformed all other distribution channels over 2007-2012 in terms of growth. Global internet retailing of traditional toys and games amounted to more than US$7 billion in 2012, with sales through this channel projected to exceed US$10.2 billion by 2017.
Hobby stores target a rather niche market, offering items which often cannot be found elsewhere. As many of the typical die cast model and model kit collectors are looking online, such bricks-and-mortar stores are finding it more difficult to attract customers.
% of Traditional Toys Sold Through the Internet, Selected Markets, Rsp
Source: Euromonitor International
Destiny or missed opportunity?
In an attempt to diversify its product ranges, some of ModelZone's branches had started to stock Lego in recent months alongside the usual lines of model planes and tanks. However, the lack of a clear direction seems to have cost the company dearly in the wake of intense competition in toy retailing.
Given the pressure from the grocery and internet channels, traditional toy stores are starting to emphasise the “play” element through elaborate shelf displays and interactive store designs. The key message is that
toy stores are still the best place to shop for toys. Rather than trying to diversify, ModelZone perhaps could have focused more on what it does best – giving the best advice and guidance to its niche consumer base through its in-store experts. Playing to its unique competitive advantage could have helped the company to differentiate itself from grocery and internet retailers.
Hampered by economic uncertainty and low consumer confidence, these are difficult times for many high street retailers in the UK. Therefore, geographical expansion could have been another growth area for ModelZone. Japan, Singapore and Germany could have been considered in this respect as these are the three most developed toy markets, with a 17% value share of traditional toys and games targeted at adults (population aged over 20). With its high-end products, ModelZone could have tried to tap into other suitable and more attractive markets which in return could have potentially limited or even offset the decline and losses at home.