- Bargaining Power of Buyers
The bargaining power of the retailers are high because they are more demanding, taking deliveries later in the year and very quick to cancel orders when sell-through is uncertain. They also expect more from manufacturers, want a lot of products that will sell and at the same time wanting lean inventories.
- Bargaining Power of Suppliers
The bargaining powers of toy manufacturers are low because they are forced by the retailers to produce and ship products for the current year. This later shipments may result in the low response to consumers’ feedback, product shortages, missed deliveries, etc.
KEY TRENDS
- Lifestyle changes influenced the infant/preschool market.
1. Grandparents are living longer and are financially better off. Therefore have larger proportion of disposable income to spend more money on their grandchildren.
- Due to the increasing numbers of dual career families and single mothers, daycare centers and preschools have grown. Also, research studies shows that parents who spend less time with their children tend to spend more money on them (this may affect the revenues or sales of the toys)
- A Baby “boomlet” occurred in the late 1980s and early 1990s. These babies were born to baby boomers who waited until they were financially established to have children. Thus, they will have more disposable income to spend money on their children.
- Slowing down of birth rates
- The introduction of video games has forced toymakers to develop toys for $20 and under.
- The power of television advertising boosts the growth of the toy industry and influenced children to create demand for their products. Children, prompted by TV ads, will nag his/her parents to buy them toys
- The market of the traditional toys moves to younger age groups as video games gain popularity
- Brand loyalty
- Seasonal buying pattern for toys where the industry does more than 50% of its business in the fourth quarter of the year
LIFE CYCLE
The industry is currently characterised by its mature stage in the cycle with the significant number of mergers and acquisitions that have occurred over the past decade as players try to increase economies of scales, market share and profitability.
COMPETITIVE ANALYSIS
→ RETAILERS
Toys ‘R’ Us
- opening smaller format stores that have no backroom storage space to cut down on occupancy costs
- new pricing strategy of having “everyday low prices”
- expanding into the international market
- Having franchise agreements & joint ventures
Wal-Mart
- word-of-mouth reputation instead of advertisement (saving money on ad spending)
- offering low prices and top brand names
Kmart
- new type of payment where the good shipped from manufacturers to Kmart distribution centres would remain property of the manufacturer until they were shipped from the distribution centre to the store.
→ MANUFACTURERS
Fisher Price
- Target market: from toys-for-tots market to preschool market (age 3-7 segment)
- focus on price first and quality second
- appeal to parents through TV ads and magazines in order to keep high brand awareness
- market products to mothers in the third trimester of pregnancy
- Mattel acquisition of Fisher-price has given them the strength in the distribution system and thus can efficiently ship long distance and take advantage of offshore manufacturing opportunities
- Many of the products also is not as bulky as Little Tikes and Step 2
- High recognition in the international market (UK and Europe)
Step 2
- Manufactures large rotationally-molded toys
- Improve/Change/Add unique features to Little Tikes’ models e.g. making double-sided toy box instead of only one side, making cars made for two passengers instead of one, etc
- Using earth tones colors for the toys
- Offer their line in more neutral tones of cranberry, teal, and khaki
- Higher perceived value by offering better product proposition than Little tikes’
- Offer 1-800 number to their customers, market products through catalogs and also purchases can be made through 1-800 call
BUYER ANALYSIS
Segmentation
Toy industry end consumers can be divided into two:
- The purchaser of toys
Many infants and preschoolers do not purchase the toys they have. The parents of the child or gift givers are the ones who purchase the toys.
- The children who play with the toys
Buying criteria:
- play value: will not go out-of-date in the short time
- quality of the toys: must be reliable
Factors influencing the demand:
- what’s in or what’s hot at the moment
- the amount of advertising on a product or what the media says about a product (critics or review) can make that product really popular
When do they buy?
- the fourth quarter of the year (close to holiday season or Christmas)
INTERNAL ANALYSIS
Strategy of the marketing mix is by focusing on word of mouth, consumer print in magazines such as Parents and American Baby, and distributing consumer catalogues.
Main strengths:
- customer service
- Established distribution networks
- Good partnerships or relationships with major retailers such as Wal-Mart, Kmart and Target
- investing in product research and innovation to produce innovative and creative products
- relying on consumer input to further improve their service or products
- investing in tehnology i.e. CAD (computer aided design) systems to take rough sketches to finished goods in weeks instead of months
- operating daycare center (a very effective way to introduce/test products)
Product: high quality, easy-to-use products, meeting customers’ requirements/needs (by relying in feedback)
Problem:
Rotational molding requires heavy capital investment (as much as $850,000). Although it enable Little Tikes to test a new product idea cheaply, it is not as cost effective as standard high volume injection molding
All the plants are located in the U.S and the bulkiness of Little Tikes’ toys makes it impractical to ship them long distances
- Flooding the mass discounter with products. Discounters would only take Little Takes’ most popular toys and mark they way down which could destroy the margin opportunities for other retailers.
