21 June 2017
Spinners Phenomenon Proves Need for Independent Toy Retailers
Fidget spinners might never have proved the UK's toy hit of 2017 if it were not for the flexibility and rapid response of the country's independent toy sales channel, a sector that has been considerably more buffeted than most over recent years.
One subject in particular has been dominating conversations across the toy market over recent months – the fidget spinner phenomenon. The frenzy surrounding this product has managed to put some serious smiles back on retailer's faces amid reports of lacklustre trading towards the end of the first quarter of 2017.
On top of that, there have been concerns over price rises and narrowed margins, largely on account of the depreciation of the pound. All of this, however, has largely been forgotten – if only temporarily. While such economic concerns will undoubtedly return as the year progresses, for now the mood is buoyant, particularly within the independent toy retail channel. It is this group of retailers, after all, that has benefitted most from the fidget craze.
As it's a constant struggle to compete with major accounts and the online giants, such as Amazon, it must be encouraging for independent retailers to find themselves in the driving seat for once. Their ability to react and their flexibility to effectively duck and dive has meant that, while many major accounts are still working out the logistics of how to get the best out of the spinner craze, the independents have constantly been one step ahead.
Indeed, the success of the spinner category has shone a spotlight on the key role that the independent retail channel continues to play within the UK toy market. It's a role that many would argue goes way beyond the purely monetary value of the channel.
It's fair to say that no retailer has had it easy in the current climate, with the multi-million pound fine incurred by Tesco as a result of its recent accounting scandal illustrating the immense pressure that even the largest retailers are under. It is clear, however, that the independents have myriad particular challenges to deal with – declining High Street footfall, increasing numbers of consumers shopping online, parking problems, high rents and soaring business rates. A perfect storm, pretty much.
There is also the fact that consumers are spending a larger proportion of their discretionary income on experiences and leisure pursuits than on consumer goods, while you also have to factor in the rise in the living wage and the whole currency rollercoaster. As a result, it's fair to say 2017 could turn out to be a watershed year for many independents across the UK.
Many believe, though, that for the good of the toy market, it's important that independents are given every opportunity to compete – if not on a completely level playing field, then, at least, in as fair a way as is practically possible. Overall, the strengths of the indies should not be underestimated – collectively, they tend to be much bigger risk-takers than the majors.
Indeed, many new brands would simply never have got off the ground had it not been for the support of the indies. The same is true of start-up companies, with the majors notoriously reluctant to take a chance on new suppliers.
If the toy market is overly reliant on the major accounts, when one of them catches a cold, the whole trade suffers. Who, after all, can forget the after effects of Woolworths' 2008 demise?
Equally, it is not entirely unheard of for a multi-category retailer to lose interest in toys and give the space to product sectors that they perceive as offering better margin returns, allowing them to work the shelf space harder, especially away from the peak Christmas period. A specialist toy retailer, though, is a year-round supporter and a passionate advocate of toys, not an in-and-out merchant looking to make a quick buck.
It's also worth bearing in mind that any further decline in the account base would hand the majors even greater bargaining power. Suppliers surely don't need reminding of the challenges they already face when negotiating with some major retailers. If you then factor in the majors' ability to sell at a negligible margin – or even below cost – if they deem it in line with their overall business model, it makes for a potentially uncomfortable situation for other toy suppliers.
As well as the speed to market allowed by the independent channel, spinners have also, arguably, been one of the first toy crazes where YouTube and social media have really accelerated its spread. In the past – even as recently as loom bands, the last major novelty to hit the UK market – it was possible to track a craze as it moved across the UK and Ireland. The spread of the spinner phenomenon, though, was quicker than ever before and this is where the big advantage of the independent retailers came into play, given their facility to react far quicker than their larger competitors.
As an indication of the scale of consumer demand, one independent toy retailer was worried about running out of stock over the Easter weekend. This led him to ring round numerous suppliers before he found someone, some 60 miles away, with stock. He then promptly jumped in his van and bought every last piece – some 1,000 items in all.
Figuring they would tide him over the Easter weekend at least, he put 500 pieces on the shelves of each of his two stores at 12.00 on the Thursday before Easter. By 2pm, every piece had been sold. Nice money in the till. And a very healthy profit to boot.
Of course, not every toy supplier is selling spinners and not every retailer was savvy enough to get on board from the start. Whenever the craze wanes – and, this being the toy trade, there has already been talk of the likely time scales involved – the cash it has generated will still be around. And there is another benefit.
One independent retailer claims to have gained many new customers over the past few weeks, while a number of former customers have also returned, many of whom she hadn't seen in the shop for years. When sales of spinners reach saturation point, those customers will want something else, while the retailers will have enough extra cash to take a few punts on several new ranges.
Naturally, when a craze takes off to this extent, a degree of chaos ensues. A severe shortage of ball bearings in China, as well as the escalating costs of these integral components, certainly exacerbated supply problems. Soon stories were circulating about budget versions being shipped with rusty bearings, while the Amazon website featured numerous customer complaints about cheap items that broke after a few cursory spins.
Inevitably, many spinners brought into the country had not been tested and had no CE mark. As you would expect, many of these found their way to the darker corners of the supply chain, notably market stalls and the dodgier cash'n'carries.
This should be of no great surprise. When demand is so huge and so sudden, corners get cut. Factories sub-contract and then even the sub-contractors sub-contract, making quality extremely difficult to control. Bearing factories emptied warehouses of product that had been lying around for ages, hence the proliferation of rusty components.
Then, of course, every Chinese factory with an injection-moulding machine jumped on the bandwagon. Unfortunately, this included many second and third-tier factories that had little or no experience in this area.
It was by no means just a safety issue either. One major retailer admitted that it had tested a large batch of spinners not just for safety (EN71 and phthalates), but also for spin time. Some 80% of the spinners failed and were then rejected. It is safe to assume, though, that these faulty spinners were then offered to other suppliers or retailers who were, perhaps, less diligent when it came to checking out their quality.
Thankfully, many reputable suppliers have taken the opportunity to up-spec rather than down-spec their products, so we may yet see a reversal of the traditional race-to-the-bottom, which usually follows a craze taking off. Indeed, such practices may even help prolong the life of this particular phenomenon.
The question on everyone's lips is, of course, how long will it all last? By the time the kids go back to school in September, will the category have evolved and developed? Or will the end of the summer term (the last weeks of July in the UK) prove to be the end of its natural life-cycle?
As ever, it's impossible to predict with any degree of certainty. Either way, though, it has been an incredible ride, as well as a massive boost for a toy industry that depends heavily on pocket-money priced collectable ranges to drive footfall and sales in the first half of the year.
As we reflect on the latest craze to sweep the global toy market, let's also celebrate and embrace the diversity and individuality of the independent channel. With more than enough spread-sheet retailers in the sector, it's heartening to see a bit of success for the maverick spirits at the other end of the spectrum.
John Baulch is the Publisher of Toy World,
the leading trade title for the UK and European toy trade