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E-Commerce and Discounters Driving Consolidation of Euro-Toy Sector

A drop in numbers at this year's Nuremberg Toy Fair may be a sign of a realignment within the European toy retail sector, as operators look to multi-territory alliances as a means of outmanoeuvring the discounters and e-commerce operators.

Photo: During celebrations for the 70th Spielwarenmesse, the Peruvian delegation goes un-meeted and greeted.
During celebrations for the 70th Spielwarenmesse, the Peruvian delegation goes un-meeted and greeted.
Photo: During celebrations for the 70th Spielwarenmesse, the Peruvian delegation goes un-meeted and greeted.
During celebrations for the 70th Spielwarenmesse, the Peruvian delegation goes un-meeted and greeted.

While it would have been nice to report a record attendance at this year's 70th anniversary edition of the Spielwarenmesse (or Nuremberg Toy Fair as it is more colloquially known), visitor numbers were actually down 5% year-on-year. Despite this, the five-day event still played host to 2,886 exhibitors from 68 countries, as well as 66,876 trade visitors from 132 countries. As to that slight drop from 2018's 70,000 attendees, that – as ever – was nimbly dismissed by show organisers as merely reflecting "ongoing consolidation within the toy industry".

To be fair, it's true to say that the continued decline in the number of independent retailers, together with the recalibration of distribution channels, is undoubtedly having an impact on the number of visitors to any toy event. Thankfully, at least in the case of Nuremberg, the quality – if not the quantity – of the attendees clearly remained high.

In truth, the official attendance numbers at such events can be a little misleading at times. After all, the absence of packaging designers, licensing teams the size of small armies and the people who came up with the idea for a new fishing game has little real bearing on the success (or not) of any trade show. The odd anomaly aside, it's fair to say that all the requisite retail buyers had made their way to Nuremberg – and that's the kind of attendance demographic that really matters to exhibitors.

Furthermore, 61.6% of all visitors came from outside Germany, confirming the event's reputation as a truly global affair. This is, in fact, something of a rarity for toy events. The Spielwarenmesse aside, the only other genuinely international gathering is the HKTDC Hong Kong Toys & Games Fair. Although London, New York, Melbourne, Moscow and several other cities all host their own toy fairs, they are all largely focused on their respective domestic markets.

Breaking the Nuremberg attendance figures down a little, after the German contingent, the next most sizable delegations – in descending order – came from Italy, France, Spain, Netherlands, UK, Poland, China, Russia and the Czech Republic. In terms of channels, 21% of visitors were brick-and-mortar retailers, while 18% were online retailers.

Whatever their national affiliation or preferred route to market, one of the concerns that united nearly all the European toy suppliers in attendance was the pressure specialist toy retailers are coming under across the continent. Indeed, there are already signs that many such retailers may not survive, at least not in their current form.

One of the most recent casualties is Intertoys, with the company – the Netherlands' leading toy retailer – having called in the liquidators just three weeks after it had been granted court protection from its creditors. With 286 self-operated stores and 3,200 members of staff, the collapse of the company is a bitter blow to both the country's toy industry and to its wider retail sector. The one bit of good news, however, is that a further 100 stores, all run by franchisees, are not expected to be affected.

Photo: The Best of China Pavilion.
The Best of China Pavilion.
Photo: The Best of China Pavilion.
The Best of China Pavilion.
Photo: The dedicated Baby and Child Zone.
The dedicated Baby and Child Zone.
Photo: The dedicated Baby and Child Zone.
The dedicated Baby and Child Zone.

At present, all its outlets remain open while the administrators investigate the possibility of a restart or partial sale. With Intertoys' original owner, the Blokker Group, having sold the Dutch toy-store chain to Alteri Investors, a British investment house, in October 2017, this once again raises the question as to whether private-equity partners and toy retailers can ever make good bedfellows.

Commenting on the bankruptcy proceedings, a spokesperson for Intertoys said the move was a sign of the continuing challenges facing the whole of the Netherlands' conventional retail sector. The fact that the growth in online commerce has caused in-store toy sales to fall by 50% over the past 10 years was also cited, as was increasing competition from a number of discounters from outside the traditional toy market.

In the weeks since the bankruptcy was announced, the Belgian arm of IntertoysBart Smit – has been acquired by Maxi Toys, a local toy retail operation. It is believed that the new owner will rebrand the 39 outlets concerned to bring them in line with its existing network.

For Bart Smit – another former part of the Blokker empire, as was Maxi Toys itself – the acquisition is seen as not only guaranteeing the continuity of the stores and the retention of many jobs, but also as offering a secure future as part of a strongly performing international group. Recently, Green Swan, the Portuguese investment fund that owns Maxi Toys, also acquired the rump of Toy R Us' Spanish and Portuguese operations. It is expected that these will be incorporated into the Maxi Toys portfolio, alongside its existing operations in Belgium, France, Luxembourg and Switzerland.

Such moves suggest that one way that specialist toy retailers could combat the growing challenge coming from both e-commerce operators and the discounters is to come together and form multi-territory retail operations. Indeed, the past few years has seen several successful UK-based specialist retailers doing just that by extending into the international market. The Entertainer, for instance, has established franchise partnerships in multiple global territories, while Smyths has acquired Toys R Us' German operation.

Speaking of Toys R Us, sources close to a number of former senior staff members have suggested that the business may be resurrected this year, with the launch of stand-alone stores a distinct possibility. Initially, the US appears to be the primary target, with the promise of an "omnichannel approach which is tech-immersive and experiential with a smaller footprint". Buzzwords aside, what are we actually looking at here?

Well, the trading name would be the same, the management team would be broadly the same and the financial backers appear to be the same. So, inevitably, there has been some suspicion that the whole process has been an exercise in dumping debt, prior to emerging with a clean sheet.

Photo: Toys R Us: The spectre at the feast at this year’s Spielwarenmess.
Toys R Us: The spectre at the feast at this year's Spielwarenmess.
Photo: Toys R Us: The spectre at the feast at this year’s Spielwarenmess.
Toys R Us: The spectre at the feast at this year's Spielwarenmess.

The collapse of Toys R Us had a profound effect on the toy trade in 2018 – and, just as the toy industry was resigning itself to life without the retailer, it appears as though it may be back from the dead. The $6 million question (literally in some cases) is: 'Will out-of-pocket suppliers be prepared to forgive and forget?' While there is a genuine degree of bitterness towards the company, if its revival helps to stem the loss of sales to e-commerce operators, it is entirely possible that many toy suppliers will be more than happy to see it make a comeback.

Spielwarenmesse 2019 (The Nuremberg Toy Fair) took place from 30 January-3 February at the Messezentrum Nuremberg.

John Baulch is the Publisher of Toy World,
the UK's leading toys and games trade publication

Content provided by Picture: HKTDC Research
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