9 March 2017
Fun and Games for Brexiting UK Buyers at the Nuremberg Toy Fair
Visitor and exhibitor numbers were both up at this year's Nuremberg Toy Fair, one of the premier events for the global toy and games industry, although uncertainty over prices and the impact of Brexiting Britain dominated proceedings.
This year's Nuremberg Toy Fair pretty much followed the pattern set by the industry's preceding shows in Hong Kong and London – strong attendance from the people that count, a healthy degree of common sense when it came to negotiating, and plenty of fascinating new products.
First, the numbers: 73,000 visitors from 123 countries attended the fair – known locally as Spielwarenmesse – a rise of 3.2% on last year, while the proportion of international retailers climbed to 60% from 58%. The majority of visitors came from Europe, Asia and America, while the largest territory-specific increases came courtesy of Italy, Russia and China.
A record was also set for the number of exhibitors – 2,850 companies from over 60 countries, including 2,151 international companies. More than one million products were on show, including 75,000 brand-new lines, the lifeblood of the industry.
There was also an increase in the number of international pavilions, with the event's two new additions – France and Indonesia – taking the total to 14. These pavilions have a long and noble tradition at the Spielwarenmesse, with many countries having participated in their national enclave for several decades. This year, the pavilions hosted 280 companies, corresponding to about 10% of the total number of exhibitors.
So what do these numbers tell us? Firstly, it's clear that Nuremberg remains the world's largest dedicated global toy fair, with more exhibitors and visitors than any other similar event. While more people may come through the doors of the Hong Kong Convention and Exhibition Centre in January, these include a significant number of stationery buyers, nursery buyers and members of the licensing community, all attending the various related shows that are held concurrently with the HKTDC Hong Kong Toys & Games Fair.
The increase in the number of international exhibitors and visitors attending Nuremberg, however, underlines the fact that the show is a truly global event, with less reliance on the domestic German market each year. It was this trend that – about a decade ago – prompted the show's organisers to switch the event from the original Thursday start date to a Wednesday opening day, allowing international visitors three full days attendance before the weekend. As a consequence, international visitors tend to be most heavily represented over the first three days of the event, with the domestic German toy community dominating over the last three days.
Further changes will take place next year, when the show shrinks to five days from six for the first time in its long history. Few would disagree that this particular change is long overdue. The final day of any trade show tends to be the quietest, a situation only exacerbated by the fact that Spielwarenmesse is already far longer than any other toy fair.
It could be argued that the sheer size of the show – encompassing no less than 15 separate halls – means that even with six days, it is impossible to visit every stand, but that is not the way retailers tend to approach trade shows. Most prefer to adopt a much more targeted strategy, with the majority of their time at any given show taken up with pre-arranged meetings. While some buyers do allow themselves time to wander the halls, it is seldom for more than a couple of hours.
Exhibitors have been calling for many years for the show to be abbreviated, although many local businesses – including Nuremberg's plentiful array of hotels, restaurants and taxis – have undoubtedly been lobbying for the show to maintain its current marathon duration. In general, though, there is little doubt that the right decision has been made.
Few, indeed, disagreed with Ernst Kick, the Chief Executive of Spielwarenmesse, when he said: "We are sending out a clear signal that we are aware of the pressures on both time and budgets." As a result, the confirmed dates for 2018 will be Wednesday 31 January to Sunday 4 February.
With regard to negotiations, spurred on by the Brexit decision, it was UK buyers, rather than their European counterparts, who were most frantically engaged. Six months after the historic referendum, the UK is slowly getting to grips with the short and long-term consequences of the decision, although uncertainty remains very much the order of the day, something that the business community inherently dislikes.
In years to come, it is all but certain that the UK toy community will have to cope with the country's withdrawal from the European single market and the customs union, with both presenting significant challenges. For now, though, the main concerns of many are currency issues, specifically the weakening of the pound against the US dollar.
For the handful of UK toy companies that export their wares, the weaker pound is, of course, great news. Sadly, though, the vast majority of toys sold in the UK are imported from Asia, so the fact that the pound is trading around 20% lower than it was 12 months ago has led to considerable problems. Hence the rather fevered negotiations.
So, what can be learned from this year's toy fair season overall? Well, first of all, buyers are accepting that prices will be increasing in 2017. This is true of even the ones who started the season maintaining that they wouldn't – presumably they realised that a toy department without toys wouldn't be much of toy department at all.
As a kind of knock-on from this, some retailers are looking to trade up, rather than just selecting a product with heavily reduced specifications. This is because there is a prevailing sense that, if they are going to pay more anyway, they would rather pay a little more on top and get a better value line. Buyers are also leaning more towards domestic rather than FOB deals this year, pushing any risk back onto suppliers.
There is also something of a feeling that, ultimately, some good may come of all this. There is a belief that there is little point in being too rigid and dogmatic – in short, if a product can't hit a £9.99 price point, don't try to force it. There is also a belated acceptance that chasing turnover and market share at the expense of profit is more than a little foolhardy. As a result, it's quite possible that there will be fewer aggressive promotional deals this year.
In the run-up to last Christmas, Argos, the UK's largest toy retailer, stood its ground, while Tesco, one of its main competitors, slashed prices all around. Tellingly, Argos didn't appear to suffer unduly. While Tesco may have increased its share of the UK toy business by 8.5%, the question is: at what cost? The consensus being that that increase came nowhere near to seeing the retailer break even overall.
There is also an expectation that some bridging price points may emerge. As £19.99 to £24.99 is considered potentially too big a leap, why not £21.99 or £22.99? Indeed, few other retail sectors seem so constrained by inflexible price points these days.
Overall, margin is undoubtedly going to the most widely used word over the coming months, with prices rising across the board. As a consequence, making sure the final sums add up will be more important than ever.
Within the industry, there is a sense that everything is up for grabs this year. Some lines, brands and ranges that made financial sense to stock in the past may no longer satisfy a retailer's margin requirements. Arguably, then, there is scope for suppliers to open doors that had previously remained stubbornly shut.
While no one is kidding themselves that there aren't challenges ahead, there is sense that, with a little ingenuity and creative thinking, there will be plenty who can turn the current situation to their own advantage The toy trade is, after all, nothing if not resourceful.
The 2017 Nuremberg Toy Fair – Spielwarenmesse – took place from the 1-6 February at the Nuremberg Exhibition Center.
John Baulch is the Publisher of Toy World,
the leading trade title for the UK and European toy trade