TOY BUSINESS DOING
EUROPE IN
by Steve Reece, brand marketing and product development consultant
N
orth American toy and game companies can prudently and effectively expand into Europe by paying close attention to a few important factors. A frequent mistake encountered by manufacturers looking into European distribution is having an almost megalomaniacal drive to get products into every single market as soon as possible. While this ambition is understandable, the reality is that much of the opportunity can be achieved in just a few major markets. The 80/20 rule definitely applies, meaning out of 45 European countries, 80 percent of business can be done in the major five to 10 markets. It is important to focus on the markets offering the biggest returns. In a rough order of priority, that’s the UK, France, Germany, Spain, Scandinavia, Italy, and the Benelux region. The UK is not always the biggest market, but it normally offers the most attainable low hanging fruit, since the language is similar to the language in the U.S. France is quite difficult culturally, commercially, and in terms of language, but has the most similar retail structure to the U.S. Germany is easier to approach because the retail market share is fragmented, so there’s no retailer that can hold your forecast to ransom— however, they have a different product culture, so licensed plastic products are less appealing (although still present) in that market. Another practicality to consider is route to market. Due to the fragmented nature of the region, even major corporate players have only established their own subsidiaries in every market of any size relatively recently. Setting up direct-to-retail distribution in all 45 countries would be lunacy. It’s better to focus on one market first and work with distributors for the rest. The UK normally offers the most synergistic “beachhead” for
DECEMBER/JANUARY 2014
direct distribution into Europe for obvious reasons. It’s important to build a strategically constructed distributor network versus selecting the first company that says “yes.” Because the European Union is founded on the basis of free movement of goods, a distributor in one country can legally sell into other countries in Europe under the Treaty of Rome—whether you like it or not. This can cause issues, as pricing strategies vary across countries. It’s generally best to look at a distributor that can deliver pan-European coverage first—albeit normally in cooperation with other partner companies—because they have a vested interest in not muddying the waters. Agents are another important factor to consider. Under European Union law, commercial agents are heavily protected, meaning if you decide to terminate their services, you are obliged to pay them commission on customers/business they originated for up to 2 years after termination. In most cases, distributors offer opportunity with less risk, however, there are circumstances in which an agent may be the right course of action. Spielwarenmesse International Toy Fair provides a great place for getting started in the European market. This is the largest toy fair in the world, with more than 2,700 exhibitors. For many countries in Europe, this event is the toy fair, where all their buyers and many suppliers can be found. ■ Steve Reece is a brand marketing and product development consultant to the toy and game industries covering the UK, Europe, and beyond. For more information or to contact him, visit www.stevenreece.com or email steve.reece@vicientertainment.co.uk.
THE TOY BOOK • 19