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Each country has its own commercial and cultural framework, which can lead to legislative and bureaucratic considerations as well as practical language issues. Some product categories that are strong in the U.S. are not popular in other markets.”
3. UNDERSTAND & EMBRACE THE FRAGMENTED NATURE OF THE EXPORT OPPORTUNITY
The U.S. and Canada combined make up 25 percent of the global toy market, which leaves a lot of opportunities in other countries. One of the major stumbling blocks for North American companies is understanding the fragmented nature of the export markets. When your new export salesperson comes into your office excited that they just received an order for 5,000 units from Holland, you may not share that excitement, while a single purchase order from Wal-Mart for 150,000 units would make you giddy. The reality is that North American mass retail offers a one-of-a-kind volume opportunity. Everything else outside of that is about putting together a jigsaw puzzle of many pieces, and over time this jigsaw puzzle can grow into a bigger business of many pieces, almost like a specialty-centric business with mass distribution as a bonus. Each distribution partner makes up a smaller part of the business, thus reducing the risk of having your business reliant on just a few third parties. Piecing together an export jigsaw puzzle of your own allows you to lay strong foundations to partially reduce the roller coaster effect of trading with mass retail domestically.
4. BE AWARE OF LOCAL/REGIONAL COMMERCIAL & CULTURAL DIFFERENCES
Each country has its own commercial and cultural framework, which can lead to legislative and bureaucratic considerations as well as practical language issues. Some product categories that are strong in the U.S. are not popular in other markets. For example, toys that promote aggressive or violent play do not sell well in Germany, so the action figure category is not as strong in Germany as it is in North America.
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Europe—which combined makes up around 25 percent of the global toy market—is highly fragmented, and while the European Union (EU) harmonizes standards and regulations to a degree, there are countries in Europe outside of the EU. For example, safety standards vary from country to country. If you just managed to figure out the latest domestic toy safety standards, try getting your head around EN71, REACH, and WEEE regulations in Europe. Furthermore, European employment law tends to grant the worker significantly more rights versus the U.S. Aside from Europe, Japan and China— which make up the No. 2 and No. 3 toy markets in the world, respectively—have even more significant cultural and regulation differences. The logical way to deal with these challenges is to make them someone else’s—for example, your distributor’s— responsibility, and then build on your own knowledge of all these factors over time. While the extra margin of always selling directly to retailers in each country may be appealing, I have seen far too many North American companies wander blindly into doing this, leading to major challenges and issues, such as customs and import documentation issues that cost millions of dollars to resolve, or companies hiring sales staff they could not fire without significant payoffs. In the first instance, selling through distributors for lower margin would avoid so much risk, management time loss, and other issues.
5. ENGAGE LOCAL OR EXPERT HELP
In the same way you may need to engage a specialist representative to enter a new distribution channel domestically, you may want to consider looking at expert help to kick-start your export sales. There are numerous companies offering market entry services and international representation. Again, everything has a price, but you can save years of wasted effort and investment by tapping local market knowledge. At the very least, speaking to international toy market experts will help to increase your knowledge base. ■ Steve Reece runs a toy and game industry consultancy offering product and concept representation in Europe and beyond, The strategic consultancy offers reliable and cost-saving sourcing services and consumer insight. For more details visit www.stevenreece.com.
FEBRUARY 2015