How bringing a product to market got easier

By Steve Reece

Before the digital revolution changed how human beings interacted, shopped and entertained themselves, Toy products tended to have to walk a challenging path to fruition. There used to be 2 levels of conservative gatekeepers who had to agree to a product coming to market.

Gatekeeper 1: The industry

Firstly, a Toy company had to decide to place their bet on the product. Therefore, it needed to invest in R&D, tooling, inventory and marketing costs. The financial risks involved in launching new products in such a hit or miss market shouldn’t be underestimated. Many businesses have ceased trading due to betting the house on unsuccessful new products. As such there has always tended to be a structural incentive not to go too far out there in terms of product concepts. The bottom line is that (at least historically) Toy companies found it to be more prudent to mash up already known and proven elements or themes for Toys.

Gatekeeper 2: The trade

The second level of gatekeeper that new products used to have to navigate to come into existence was the retailers. The business model of stores is to make more money with the profit they will make back than to invest in a product. There are many elements of success in retail, but inventory selection and management are always major considerations. As such, just like Toy companies who avoid risky products, so retailers have an inherent imperative to only select products which they are most certain will sell through.

If you look at the types of products in the market twenty years ago, you can clearly see a bias towards mass market. There were comparatively few products targeting niche audiences and few products with concepts that were really ‘out there’, because both these types of products were largely filtered out by the two layers of conservative gatekeepers.

Broader Product Array After The Digital Revolution

What we start to see after the mass adoption of the internet, after the revolution in content viewing habits and platforms and with the rise of social media is a much broader array of products on the market, The gatekeeper filtration effect is lessening. There are several reasons for this:

Market research and big data prove demand

Market testing and consumer research became easier and cheaper. Due to technological advances and the accessibility of groups or affinities of people via social media, product originators now find it much easier to test and validate their concepts with the target audience. This means that if there is any debate over a product with retailers, Toy companies can usually access considerable data to prove the potential demand.

Pull effect powered by Crowd Funding

Funding platforms began to act as start up funding for product originators based on a certain level of consumer demand. Whereas before the digital revolution funding was a major challenge for startups, wannabe Toy companies can now cashflow their output via crowd funding platforms. They have to exchange effort, planning and organisation in advance of receiving the funding of course, but nevertheless niche or ‘out there’ concepts can now get directly funded by the target consumer. If enough of them want a really crazy product they can get it. Before crowd funding crazy ideas tended to get filtered out by the two types of more risk averse gatekeepers.

Direct To Consumer Platforms

Direct To Consumer Platforms

In addition, we can increasingly see Toy companies building their own D2C platforms and product programs where collectors and enthusiasts can vote for the products, they want to buy next. Then they acquire them directly from the producer with no interaction with retailers. This has several benefits for the Toy companies: again they can validate demand before going ahead and producing, they can build closer relationships with their communities and they can potentially sell higher price point items with much higher margin for themselves by cutting out the retailer.

There is another mighty consideration when it comes to D2C platforms – namely Amazon. We can debate if it is truly a D2C platform, because of course Amazon takes a sizeable cut from transactions and the platform does necessitate some management & interaction. In effect, Toy companies can now directly access as much as 25 to 30% of the total Toy market in some countries via Amazon alone. The Amazon platform allows the Toy company themselves to choose the products on sale, not the retailer, which gives more niche products greater access to market. If the product originators believe enough in the product, they can bring it to market via Amazon and potentially hit 1/3 of the market at their own risk without having to get the product past traditional gatekeepers in retail.

Marketing To Niche Audiences Becomes Effective, Affordable & Scalable

The proliferation of content and communities facilitated by social media, You Tube et al has also made it far easier for product originators to bring products to market. Whatever the topic or theme of your product you can tap into groups for whom your products are most relevant directly via content, influencers and PPC marketing. Pre digital, when the Toy industry relied on traditional TV advertising, to make that business model worked, the themes and product had to be mass market and targeting a broad consumer segment. That doesn’t apply any more – if you have a product targeting builders, lawyers, golf fans, you name it - you can find online groups and communities to communicate with. And while children shouldn’t in theory be broadly using social media and content platforms, we all know they are on there. Regardless of that, we can still access their parents anyway.

Removing Barriers To Entry

All of this means that we now have a much broader array of products on offer to consumers of Toy products today. The boom in ‘Kidults’ buying Toys has been partly due to the changes we have looked at here, but even withing traditional Childrens Toy categories we are seeing brands coming from a wider range of origins. For sure any plastic items still have to justify tooling, that hasn’t gone away, but for products with different materials, especially cardboard, the barriers to entry have vastly reduced and the paths to market broadened considerably.

About the author

Steve Reece has worked in the toy business since the late 1990s. He previously worked for Hasbro, managing iconic brands including Monopoly, Trivial Pursuit & Play-Doh across Europe. He has delivered $hundreds of millions in incremental sales for his employers, clients and partners over time. Steve appeared twice as an Expert Witness on toys & games for the UK Royal Courts of Justice and the courts of Hong Kong. He has extensive experience across toys & games including marketing, consumer insight, sales, licensing, sourcing and more. Today Steve runs Kids Brand Insight, a leading Consultancy helping toy & game companies profitably grow.