This content originally appeared in the March-April print edition of Toy & Hobby Retailer. To be the first to access exclusive content like this, subscribe to the magazine here.
Toy & Hobby Retailer speaks to IBISWorld Australia industry analyst, Liam Harrison, to uncover insights and trend predictions from the market research body.
How is the industry faring?
The toys and game industry was expected to decline around 16-17 per cent in 2018-19 and a lot of that is to do with Toys R Us exiting the industry.
The other retailers have captured some of that, but a lot of that has gone to department stores and online-only retailers this year. So some of it has gone to other retailers, some of it has been captured and there has been significant decline in this year.
But there is also that shift away from traditional toys as well, which has been a small, steady decline away. Children are moving towards the digital realm and away from the physical toys and retailers have struggled to keep up with that.
What are your predictions for retailing trends in 2019?
The introduction with say Amazon in 2017-18, [means that] retailers will definitely have to ramp-up their online presence and ensure that they have a sufficiently strong online presence to remain competitive.
The trend has been that online retailers in all industries have had a general upward trend and this isn’t expected to slow down any time soon, despite the challenges that say, Amazon has had compared to other countries, with Australia’s geography making it harder for logistics chains compared to the US.
Retailers that do not keep up with their online marketing and their online retail offerings are going to struggle to remain competitive in this new environment, particularly as more and more consumers start to look online for more bargains and to simply make sure that they can get the toy that they’re looking for.
It is quite a bit of a general trend that online retailing is becoming more popular, you see for example, retail sales were very high in November compared to December [and that] is [because] people took advantage of Black Friday sales and Cyber Monday sales.
It’s very difficult for retailers to [also] make sure that they’re competitive against the department stores [too] which can offer that much broader experience.
However, that isn’t to say that they won’t be able to, they are expected to recover and improve over the next five years.
Do you have advice for small retailers in terms of remaining competitive?
Ensuring that the store has good customer service, ensuring that they’re always available and ready and having contact on social media can help create that connection with the customer and that can help them.
Even if they have a slightly higher price, they can always help the customer go, ‘ok, well I’m willing to pay that extra few dollars in order to make sure that I’m getting the best service.’ So [customers can be willing to] pay a premium in order to get a better service.
What are your thoughts on video game penetration and the shift towards digital play?
There is that interesting movement more and more towards the digital realm, you can see [it] even the upstream suppliers. If you look at Hasbro for example, they’ve been moving more towards digital offerings to try and increase their revenue streams to try and complement their physical goods.
So that gives the indication that the physical goods, although they’re still selling, that there’s limited markets left to them in the physical realm.
You’ve got kids that are sitting inside and they’re playing video games more-so than wanting a physical toy – they still want the physical product – but they also want the video games.
And with things such as micro-transactions in video games, they’re actually having to make that choice: do I want the $40 toy or do I want $40 I can spend on the latest video game to get the cool new skin?
So that could play a factor in this year, particularly as that’s a more recent development. Particularly with the popular online game Fortnite, [as this] has been explosively popular amongst kids.
Will micro-transactions become a more pronounced trend? Will the onus of purchases shift from parents to kids?
It does seem to be a little bit the case already because what’s happening, for Christmas [kids] might ask for a $50 PlayStation Network card which will then give them the money to spend on that micro-transaction, instead of getting the $20 toy.
Because the difference is, with that skin, they can show it off to their friends online when they’re playing, whereas the $20 toy just sits in their room on their shelf.
[However] that’s more for the slightly older crowd – that’s the seven to 14 year olds – if you’re talking below that, toys are still going to be very dominant. Below seven years old, [the] three to six year olds, toys are still going to be huge.
Do you think Fortnite will still be a big licence in 2019?
It’s been a strong cultural phenomenon and it will be difficult to knock it off its perch at least in the short term.
It burst onto the scene and then everyone just expected it to disappear every couple of months. Everyone expected it to drop off and drop off and drop off and it just got bigger and bigger and bigger.
I would say it’s not going away any time soon.
It may get less popular, but not to the degree where it just suddenly disappears. Instead of making $4 billion for example, they make $1 billion which is still huge – a huge revenue stream – for a single video game. ❉