China Toy Fair


U.S. Companies Look to Overseas Markets for Growth

Since the domestic market is flat, American toy companies are increasingly becoming interested in exporting, says Carter Keithley, TIA President, who also informs about the New York Toy Fair, the importance of licensing for the toy business, the trends in the U.S. marketplace, and the Association’s activities.

by Daniele Caroli, editor, Giochi & Giocattoli

In order to be updated on the U.S. toy market and on the Toy Industry Association’s activities and events, I met Carter Keithley, president, at the International Toy Fair in Nuremberg, just a few days before the opening of the New York American International Toy Fair, which is managed by the TIA.

Our conversation starts from this subject: “When the Toy Center buildings were disbanded in New York, it really undercut the importance and centrality of the New York Toy Fair in its global impact,” Keithley recalls. “We are slowly beginning to regain that international attractiveness. In fact, if you are a European or South American or Asian toy retailer and you are only going to the Nuremberg or Hong Kong Toy Fair, you are not seeing at least 75 percent of the creativity of the America-based toy companies. There is a very small proportion of America-originated toys here in Nuremberg: in New York we have about 1,100 exhibitors while here there are maybe a hundred American exhibitors. We all know that it is creativity that drives the toy business and our fair in New York offers the retailers around the world the opportunity to come and see the America-based creativity. In the past, because our market is so large, American toy companies were able to be satisfied with the American market and not look that much to exporting; that has changed lately, because all the growth in the toy business has been [happening] overseas: in the year 2000, U.S. toy sales were about 24 billions [U.S. $] and global toy sales were about 54 billions but in the year 2010 American toy sales were about 24 billions and global toy sales were 84 billions. So, increasingly American companies are becoming interested in exporting and they are learning how to do it. The opportunity for a toy retailer in overseas markets to differentiate himself from the competition by coming to the New York Toy Fair and seeing new stuff that he would not see anywhere else is great. That is why we are very excited about the ITMA delegation attending the event to tell their story.”

Toy Fair: Getting More and More International
Looking at the U.S. market from a different point of view, I ask Keithley which kind of interest is there in toy products of European origin.

“This is the last year that the Jacob K. Javits Convention Center [where the American International Toy Fair is held] will be undergoing its renovation,” says Keithley. “During the three years of renovation the amount of space available to us has been limited, while our show has grown, to the point that [in 2013] we have the highest level of square footage in exhibit space that we have ever had: 375,000 square feet [34,839 square meter]; and we had to put exhibitors into corners and all kinds of places because we had no growth opportunity. Next year we shall have 40,000 square feet [3,716 square meter] of additional exhibit space available to us and we are extremely eager to bring European and Asian toy companies into the American market to show their goods to American toy retailers. In America, toy retailing is different from what it is in other markets, because it is dominated by three mass merchandising companies; therefore, in order to compete the small independent toy retailers or toy chains have to find something unique to attract their customers, as the latter know that if they go to one of the large retailers they are going to always see the same things, while the small independent retailer will offer something special, special products that in part can be found among European manufacturers getting into the American market. We know that the price point of Europe-originated toys tends to be higher than the price point of toys originated in America, but the specialty toy stores are able to apply a higher price point because the consuming public identifies them as proposing a better level of quality and originality. The small retailers cannot compete [with the mass market] on price, they must compete on service and on the unique character of their products. Business is tough, highly competitive: our New York Toy Fair used to specialize in the small specialty toy retailers but increasingly we are seeing the large volume retailers sending buyers to the event in meaningful numbers; so, they also are looking for something new. It is not just a hope that we will get overseas buyers and sellers at the New York Toy Fair: our figures show it, it’s happening. We are sure that foreign attendees will grow by 6 percent this year over last year; last year they grew by 6 percent over the year before. The media presence is also very strong, and increasing in numbers: some of the major companies, like Mattel, have huge displays and are there just because of the media [coverage]. I frequently get interviewed by consumer media in New York around Toy Fair time and they always want to know how the toy industry is doing. For 2012, the NPD data showed that basically the toy industry was flat in the United States: it was 16.5 billion [US $] against 16.6 billion the previous year. The reason there was no sales growth is because our industry was working on how best to employ new technology with their toys, since children and families are migrating to using iPads and iPhones as toys. What I have seen here [in Nuremberg] and I expect to see in New York is that our toy companies once again have learnt how to integrate the tablet and smart phone applications with their toys in very creative and successful ways. I think this development is going to drive toy sales growth in 2013 dramatically. This has happened before. I remember that when I first started with the toy industry, in 2006, there was a high level of concern among both manufacturers and retailers about what they were calling “the kids getting older younger” phenomenon, including the migration of kids to videogames. Well, about two years later people were no longer talking about that, because our industry had figured out how to successfully employ new technology in their toys and sales were going great guns again.”

The Involvement of the Licensing Business
The U.S. licensing business appears to be more and more involved in the American Toy Fair. Carter Keithley explains why:

“The stories drive the sales of toys. One of the hot line of products in the United States, soon to be introduced into the European markets, is the relaunch of the Teenage Ninja Mutant Turtles, hugely successful because of the story behind it. The whole story has been reintroduced by Nickelodeon and it has set on fire the sales of toys. Similarly, I see many toy companies developing story contents directly or through partnership arrangements with the entertainment business: Hasbro for example in its joint venture with Discovery Channel, or Mattel bringing up the Monster High story first and then the toys. We have no illusion about becoming the Licensing Show. The Las Vegas Licensing Expo is an extremely important and very successful show and we go there every year. But to the extent that we can be of service to our toy companies and retailers by bringing content licensors to the Toy Fair where they can meet with potential licencees, we are ready to offer those opportunities. Attending licensors at our event will grow by 19 percent, a significant increase. The licensing community at the New York event will be offered a special educational program, Content Connection. This year we also have the Digital Kids Conference, all about the digital contents for children. The Toy Industry Association in America, with its Toy Fair, is just a creature of the toy business and wherever it is going we have to be there. The toy industry is a beautiful branch to be in because it always refreshes itself, it cannot stand still, even in difficult times.”

The Value of Play
With Keithley we discuss the fact that in the U.S., as well as in some European countries, Christmas sales are more and more concentrated within a period of just a few days before the festivity. This is a matter of concern for the industry:

“Among the national toy associations we are seeing increasing pressure from our members to try and do something that promotes the value of play in the respective markets,” observes Keithley. “This was a significant item of discussion in the ICTI [International Council of Toy Industries] meeting on January 31 [in Nuremberg]. Every national toy association is looking at creating some kind of campaign to communicate to the public about the value of play and the joy of play. Of course, the messaging has to be different in each market because the cultures are different. But we think there might be an opportunity to have some common themes that could be used by each national toy association in their value of play promotion. There is an organization called the International Toy Research Association and there is a professor from Utrecht University, Jeffrey Goldstein, who was involved for a number of years now [in 2012 Goldstein published a book about the importance of play in the development, health, and wellbeing of the child]–they will have a meeting in August 2013, in Denmark, and we will send a delegation to listen to the research that is coming out and that will provide the raw material, the contents, for our campaigns about the value of play. Now that the safety issues are largely behind us, we think it is time for us to begin a positive campaign to promote play.”

Trends in the U.S.
I ask Keithley about the main trends in the U.S. toy marketplace:

“Construction toys have continued being on fire and driving a large part of the market, because they have such a during value. Increasingly, we see the interest in educational and developmental toys, and that is why LeapFrog toys were so well placed in the best selling chart. The First Lady, Michelle Obama, has been promoting active play (the “Let’s Move” campaign) and so active play toys have come to the fore. Probably the trends are much the same in the U.S. as they are in Europe and in other markets. Although the American public is not so environmentally sensitive as Europeans are, the green movement in the U.S. continues gathering momentum. We think that increasingly there will be an emphasis on the environment-friendly nature of toys. The people who are having children are young and they tend to be concerned about these issues.”

The TIA’s Three-Year Plan
After being busy with the safety issues for a long time, which are the TIA priorities at the moment?

“We have determined we now have an opportunity to become proactive, to help our toy industry and our toy companies grow, so last October we adopted a new strategic three-year plan, after completing our previous three-year plan successfully,” replies Keithley. “The new plan focuses on positive initiatives. For example, we are willing to grow our membership, because there are still many toy companies which could be part of the Association; in the meantime, we have opened our membership to retailers, licensors, inventors, and sales representatives as we need to embrace those categories: any company, any individual who is in the toy business is eligible to be a full regular member of the Toy Industry Association and to be on the Board of Directors. In fact, by mid February managers from Toys “R” Us and Nickelodeon will join our Board. We need to harvest the potential of that larger scope of membership and we want to be the big tent that enables to nurture the relationships among all those categories. Another focus is providing new values to members: we have created a new position in our staff, a Director of Research and Strategic Data, and we are soon appointing an individual with many years of experience in this kind of field for other industry associations. There are two missions for this position. One is to gather data from outside sources and from within the industry that will help our members make better business decisions: things like a financial benchmarking study to enable a toy company to decide if it is spending too much on warehousing or personnel relative to its competitors; or gathering data on demographic trends in foreign markets to suggest where the potential is higher for toy sales. The second objective is to gather information about our industry that will support our advocacy efforts on behalf of our members: for example, in the United States our Federal Government has been reluctant to provide much support for our U.S. toy industry, because they say everything is imported from overseas; our response is that the largest value of the toy is created in the United States, because it is not the manufacturing but the creativity, the origination, the specifications, the prototyping, the testing, the marketing that really count, and all that stuff is value-added in the U.S. So we have to gather data in order to support our advocacy position. However, there are a few companies manufacturing toys in the United States and they are very successful but this is because their production can be automated; I have visited those factories and I have seen how thousands of toys are turned out by automation controlled by just a few individuals. When you have a toy that requires a significant amount of hand labor, to assemble or paint or something like that, it’s no longer possible. I am a huge advocate and believer in free enterprise as I think that it serves the consumer by finding the most economic way to do things; while I celebrate when toy products are able to be made in America, I do not suggest that all toy products should be made in America. They should be made wherever free enterprise says it makes sense, economically and logistically, so that they are accessible to the largest possible number of consumers.”