Building appeal is all a matter of child’s play

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Having less spare cash is prompting today’s parents to rethink the toys they buy for their children, with trusted brands that offer longevity and encourage imaginative play topping their list.

While the economy may have slumped, the UK toy industry is as lively as ever. But with less money to spend, parents are gravitating towards trusted brands that can be used on multiple occasions for imaginative play, such as Lego, according to research seen exclusively by Marketing Week.

Toy unit sales are down by 11% so far in 2011, but a move towards more expensive yet longer-lasting products means total toy sales have so far reached £658.2m in 2011, up from £633m in 2010. Last year there was a sales spike in low-value, high-quantity toys, such as Match Attax cards and World Cup Panini stickers; this year people seem prepared to spend more for a greater perceived value.

This value-for-money mindset affects the categories in which parents and children are spending their money. Building sets, such as Lego, have seen phenomenal growth, up 24% to a value of £54.1m. Meanwhile, the doll category has grown by 14%, with the sales value of fashion-themed dolls increasing by 32%.

Lego has also further expanded its reach beyond building sets into the action figure market. Industry analyst for NPD EuroToys, Frédérique Tutt, explains that the company has launched a series of strong figure-based product lines in the first half of the year, including Lego Ninjago and Lego Pharaohs Quest. Tutt attributes a 13% drop in the value of action figure and accessory sales overall to Lego grabbing so much of this market from other players.

Lego Ninjago’s good sales record relates to its multichannel campaign, which features a strong brand storyline, several shows on Cartoon Network, a website, and a roadshow that travelled the UK this summer, claims Tutt.

“Marketing for toys is getting more sophisticated. To appeal to the kids, you can’t just create the best toy in the world and then launch it on a shelf at Toys R Us. That’s not going to be enough,” she warns. “You can do TV, you can do press but you have to do viral marketing now to reach them and you must have a website. And ideally you have a little USP so inside the packaging, for example, you might have a secret code that will unleash a new world of toys on your website.”

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Lego has also found success with building sets for licensed entertainment products, such as Harry Potter, Star Wars and Toy Story, which also compete with the action figure equivalent.

Lego UK director of marketing David Buxbaum says: “Challenging economic times have changed people’s perceptions of value. Part of the reason there are shifts from one category to another might be a function of people trying to get more value for their money.

“One of the great things about Lego, for example, is that for £9.99 you get both a building experience that can continue on and role-play on top of that, whereas in some other categories, you don’t get as much dynamism in the product proposition.”

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Other entertainment properties seeing growth include Toy Story and Disney’s Cars. Toy Story remains the best selling property in value terms in the UK, making up 7.5% of all toys sold in August 2010 after the release of the series’ third film. Tutt comments: “Toy Story is the ultimate proposition: it’s the toy world coming to life; it appeals to both boys and girls; and the parents have high awareness of the movie it brings the family together.”

But despite Toy Story’s phenomenal success, Disney film Cars has overtaken it in the past few months. Tutt predicts that retailers will be banking on Cars, rather than Toy Story, to be the hot property for Christmas, shown by the quantity of Cars-branded products currently featured in the Argos catalogue (more than 400) as opposed to Toy Story items (just over 100).

In the smaller toy items market, Lego is again paving the way for other properties by tapping into an ongoing craze among children for collectable toys. Its Minifigures small characters priced at £1.99 are sold in sealed foil bags, leaving the identity of the figure unknown until after purchase. The product tops the chart of the best-selling toys in value this year, closely followed by Lego’s Star Wars 2010 assortment.

Tutt expects anonymous collectables to continue growing in popularity for children’s Christmas stockings, also affecting the dolls category, which has grown to reach £56.5m over this last year. Tutt says: “Every year, we see new brands and ranges being launched within this sector. But this year, we’ve had two major ones Zoobles from Spin Master and Moshi Monsters.”

Moshi Monsters toys have been introduced to the market following the success of the internet game of the same name (see last week’s cover story). They top the list of properties to watch in the run-up to Christmas, says Tutt.

Moshi Monsters toys are valued by the research at £4.5m, but until now they have been a solely UK-based proposition. This month they are entering the US market, where 25% of the online game’s players are based, so the brand has the potential to grow rapidly. However, Tutt cautions: “To come in the top ten [most valuable toys], it will need some more items with higher price-points.”

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While Moshi Monsters was based on an internet game, the more traditional doll category is being bolstered by a revival in fashion-themed dolls, sales of which were up 32% on last year.

The category has also been revived by new products from Mattel, including Monster High for older girls (9+) and the new Disney Princess Rapunzel from the film Tangled (rated third in the top properties list with a value of £3m).

Tutt says: “Fashion dolls go through cycles. For a long time, Barbie was pretty much on her own, market leader and unchallenged. Then Bratz came along and took most of the European toy market by storm.

“But as the Bratz bubble burst, girls moved away from fashion dolls altogether, instead focusing on fashion accessories. Now Barbie has recentered its marketing and positioning around her core values of fashion and fashion play.”

The revitalisation of Barbie and success of Lego may not only revolve around their potential for imaginative role-play but also the longevity of these brands. They are well-known to parents and trusted to deliver value for money in economic uncertainty.

Lego’s Buxbaum argues: “In challenging economic times, people tend to gravitate towards more trusted brands. If you look right now at the top 10 manufacturers, all of them are seeing growth. I think that might be a product of people going to what they know and feel comfortable with.”

The newer territory of hi-tech products for children, including Apple iPads and tablets from V-Tech and Leapfrog, are also expected by NPD to do well for Christmas. Tutt says this area is ripe for growth, following on from a rise in the numbers of digital cameras and camcorders being bought for kids.

NPD expects the toy industry will have a good Christmas trading period, up 4% on last year, despite the economic environment. Tutt concludes: “Toy markets are very resilient. Even in the worst years of the recession, the toy market always ended up positive or at least flat. Parents will always cut out items for themselves before they cut out products for their children.”

The frontline

We ask marketers on the frontline whether our ’trends’ research matches their experience on the ground

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David Buxbaum
Director of marketing
Lego UK

There’s a lot of time left in this year. Given the seasonality of the toy business, what we see right now in this research might not mirror what we’ll see at the end of the year.

One of the reasons why we’re doing so well to date is because we tend to launch a lot more novelty or new products in the first half of the year, whereas a lot of our competitors hold off until the winter.

The toy market is up 4% in terms of value but a lot of that more than half of it is due to the VAT rise. There’s certainly growth but I’m not sure it’s up as much as we’d like.

Not surprisingly, based on the success we had with Minifigures last year, a lot of other manufacturers have taken notice of the ’blind pack’, and have come up with their own versions. The market for these types of products has more or less tripled over the past year.

Minifigures have been so successful because these are challenging economic times and as a result people are being more judicious with their money. The under-£2 price point is an amount that even someone who is a bit cash-strapped is willing to invest to bring a bit of joy to their child. They also appeal to that stage in a child’s development when they intuitively collect things.

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Graham Saltmarsh
UK licensing director
Turner Cartoon Network Enterprises

While the action figure sector might be experiencing a decline at this moment, we’re still seeing strong sales of Ben 10 action figures. Ben 10 Ultimate Alien 10cm figures were number two in the research’s top items list for the first half of this year. Among action figures, this was the number one item; and five other Ben 10 products were in the top 25.

Properties come and go; as one declines, it makes way for the next. I think the World Cup last year skewed sales figures and the Olympics will do so again next year. We just have to work with our key licensees and retail partners to ensure that when the Olympic dust settles, we are well-positioned to take a leading role on TV, online and in retail.

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Stuart Grant
Buying director
The Entertainer

As a retailer, we have seen a big trend in the past 12 months in collectable ranges. Lego Minifigures, which was launched last year, has been phenomenally successful. They really sparked off this market for foil-bag collectables at the £1.99 price point.

Birthday purchasing is usually around £10, but for the pocket money spend or the Saturday morning treat, £1.99 is an attractive price point for parents to pacify their children. To be able to have the Lego experience for that price when you look at some of its box sets which start at, say, £5 or £6 the Minifigures are great value for money. They enable children to be able to buy into the brand, but at a much more affordable price.

Lego is doing so well probably because of its perceived value for money for parents. It is on a roll/ the better it does in the market, the more money it puts into advertising. The industry is very much dominated by TV-driven advertising, so it’s a virtuous circle.

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Gudmundur Magnason
Managing director, international brand and licensing
LazyTown Entertainment

I doubt that we’ll see the level of growth we had in 2010 it was 8% according to NPD in the near future again, at least not for the UK industry.

The major reason is the reduction in people’s levels of disposable income but the second and an even bigger reason is all the competition coming from outside the traditional industry, mainly from the interactive space. These will make continued growth in the toy industry a challenge. From the standpoint of a property like LazyTown, this does not represent a vulnerability as long as we can keep up with these market trends.

I agree with NPD’s conclusion that action figures are suffering as a result of successful launches of building sets that target the same market. In my mind, this is yet another demonstration of the fact that servicing the need for entertaining children is a limited space. If this need ends up being fulfilled by an Apple iPad, the toy industry will feel it.

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