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Calls for Online Anti-piracy Stance After Frozen Counterfeit Toys

Online retailing is now the new front in the fight against counterfeit toys, but does this year's mass piracy of Frozen merchandise signify a losing battle? John Baulch, Publisher of Toy World, believes industry-wide action is required.

Photo: Frozen assets: Should online retailers police product authenticity?
Frozen assets: Should online retailers police product authenticity?
Photo: Frozen assets: Should online retailers police product authenticity?
Frozen assets: Should online retailers police product authenticity?

Character-licensed merchandise represents a significant percentage of total global toy sales. As is the nature of the toy market, there is a tendency for certain years to experience higher sales of licensed products than others. In the case of 2014, it has certainly been a strong year for such sales across Europe.

Of course, it helps that the European toy market, in general, is having a good time. There has been robust growth across all the European markets, with the exception of Spain. In truth, even the Spanish market is only flat rather than showing any true decline. The market for licensed merchandise in the big five European countries is also looking healthy. In 2014, to date, licensed sales have shown growth in four of these five countries – the UK, France, Spain and Italy. The exception is Germany, where consumers continue to show a greater preference for classic, traditional toys – those that are not associated with licensing – when compared to the other main European territories.

In the UK and France, licensed sales have grown at a faster rate than in the market as a whole, with both countries showing an 8% increase according to market research by the NPD Group. It is, perhaps, no surprise that these two countries have been the strongest performers with regards to total market growth this year. Across Europe as a whole, licensed toys have accounted for more than €1 billion in sales up to August this year. In total, they have collectively grown by 5% compared with the same period last year. This means that licensed toy sales have added more than €50 million to the toy market in Europe, a very impressive figure by anyone's standards.

In terms of overall licensed merchandise sales, there has been particularly impressive growth from two specific categories – construction toys and dolls. The latter category has been the main beneficiary of the big movie licence phenomenon of the year – Disney's Frozen. Sales of the Frozen licence have built steadily over 2014, bucking the traditional path of high sales on the movie launch that gradually fall until the DVD release. In fact, Frozen sales would have been far higher had licensees been able to supply the volume of product needed to match the huge consumer demand.

Unfortunately, many companies were caught out by the success of Frozen, not least Disney, the licensor. Although the company has remained upbeat about the situation, it is common knowledge that the world's largest and most successful licensing company simply got this one wrong. While it is always difficult to predict exactly how popular a movie will be, the scale of the misjudgement on this occasion is almost unprecedented. Licensees have been playing catch-up all year, as retailers have continued to increase their forecasts with each passing month. As soon as product arrives in the market, it is immediately snapped up by eager consumers. Almost a year after the movie's release, demand shows no sign of abating, an extremely rare occurrence.

Photo: Baulch: 'Blatant piracy.'
Baulch: "Blatant piracy."
Photo: Baulch: 'Blatant piracy.'
Baulch: "Blatant piracy."

The scarcity of official Frozen merchandise, however, has led to one of the toy industry's age-old problems returning with a vengeance – copycat products (in toy trade parlance, 'knock-offs'). Rather worryingly, Amazon's top-selling toy product in October was a fake Frozen doll set. The fact that the world's largest online retailer has sold massive quantities of what is clearly an illegal product raises many questions. Although the majority of consumers have no idea that it is not genuine merchandise, surely Amazon realises this? Despite this, it appears to have done nothing to remedy the situation. Can that be right and proper? Does it highlight yet another weakness in the online giant's trading philosophy? Since this situation came to light, I have become aware of a number of toy trade organisations that are keen to do something about it. Perhaps unsurprisingly, Amazon was not one of them. Whose responsibility, then, is it to police and deal with such situations?

As yet, I don't know whether this individual example of blatant piracy has been thwarted. I do, however, know that this is merely the tip of a very big iceberg. With the inevitably rapid growth of online selling, it is a situation that is clearly going to escalate. It is becoming apparent that the whole industry needs to work together to address this particular problem – trade associations, suppliers, licensors – and, of course, the online retail platforms themselves. It is to be hoped that no one organisation buries its head in the sand and refuses to take responsibility. Clearly, it is everyone's problem and it is best tackled collectively.

John Baulch is the Publisher of 'Toy World',
the leading trade title for the UK and European toy trade

Content provided by Picture: HKTDC Research
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