U.K. toy trade

Editors Note: This is the first in a series of original articles written by members of ITMA, the International Toy Magazine Association. Playthings is the U.S. representative of the organization.

This has been a challenging year for the British toy trade so far. That's a polite way of saying it's been very difficult. Of course, those of us who have spent many years in the toy trade know not to read too deeply into what transpires in the first half of the year.

Equally, many will struggle to remember a year when it wasn't challenging. The days of easy, massively profitable business—if, in truth, there ever were—have long gone. But even taking these factors into consideration, it could be argued that 2005 is shaping up to be a particularly challenging year.

Naturally, this doesn't apply purely to the toy trade in the U.K. All retail trades are finding it tough. On the surface, the U.K. economy would appear to be in a fairly robust state (low inflation, low unemployment, low interest rates), which some observers would at least partly attribute to our insistence on retaining a degree of economic independence from Europe, and the good-old British sterling currency. (So to those Europeans who always ask me when we'll be adopting the euro, the answer is clearly “not in the foreseeable future!”)

But delve a little deeper and the underlying picture is not quite as rosy as it first appears. Many British consumers are heavily in debt, due to overspending on credit cards and high mortgages. The cost of housing in the U.K.—particularly in the south—is far higher than most of Europe.

Consumer confidence is at fairly low ebb, and not helped by media scaremongering about potential tax increases and a risk of falling house prices. To make matters worse, the U.K. weather in May and June was terrible.

All of this has lead to a fairly stagnant retail environment. Half-price sales are everywhere and much earlier than they traditionally are. Profit warnings from retailers are becoming increasingly common. One of our large catalogue chains—Index—has closed down, which was a real blow to many toy suppliers.

Of course, this could all change as we approach the holiday season.

But “could” is the operative word; nobody knows for sure, and caution is everywhere. Retailers are placing small orders, refusing to commit to big numbers until they detect change in consumer spending. Toy suppliers, therefore, are reluctant to import large quantities of product that they may not be able to sell. Retailers are playing safe, reluctant to take risks on unproven suppliers and products. Without retail commitment, it's hard for toy companies to confirm TV advertising or other marketing activities to move the product off the shelf.

If all this sounds a little gloomy, there have certainly been some signs of encouragement. The Star Wars property has been a massive success. After the previous two underwhelming movies, George Lucas finally seems to have got it right, and figures, Lightsabers and other merchandise are in huge demand (and short supply). Scoubidou—a big hit in Europe last year, I'm told—has taken off in the U.K. this year. Charity wrist-bands have also sold in huge quantities. Bandai's Tamagotchi continues to perform magnificently, while Hasbro's B-Daman is starting to make waves. VTech's V.Smile—a huge hit last holiday season—continues to sell well, as does LeapFrog's LeapPad. Barbie and Bratz continue to fight a bitter war for market share in the fashion doll market. Hasbro's Here and Now Monopoly—an update of this classic board game—is already selling in large quantities, and Zapf is having a considerably better time in the U.K. than in its home territory. Last year's U.K. toy of the year, Robosapien, has a more advanced successor—V2—being tipped for big things.

So now everyone's thoughts are turning to the holiday selling season. Last year's festive period was good in some respects and not so good in others; plenty of toys were certainly sold, but with many multiple retailers offering heavy discounts or multi-buy offers (“three for the price of two” and “buy one get one free” were particularly controversial promotional mechanics), independent toy retailers found it extremely difficult to trade profitably, particularly on high-profile items. Nobody knows how heavy the discounts will be in the run-up to this holiday season. But there's little doubt among the U.K. toy fraternity that the year's biggest challenges are still ahead.