Germany Fear is Not a Good Counselor

GERMANY

Fear is not a good counselor

I bet all of us, who are reading this today, wish to be back in the good old days, when complaining about incapable politicians, about the everchanging dollar exchange rate and being too late with buying Christmas presents for our family was the greatest issue at this time of the year. And I bet some of us wish they didn´t have to experience, what is going on today. But it´s our life, our time and our business. So all we can do is face it, be brave and take comfort in the words, that nothing lasts forever. Not even the good times. As we learn now. But enough of this overly dramatic and slightly negative framing. As much as the British like to talk about the weather to start a conversation, we Germans love these dark and sinister framings to start a conversation, because they send these pleasant shivers down our spine and give us the unique opportunity, to clearly state, that this might scare the others, but not us. Of course. And because fear is not a good counselor and as a positive counterpoint let´s have a look at the German toy market, as one of the key industries for licensing. If we can trust the figures, that NPD provides us with, and why shouldn´t we, then the market share of licensed toys against total toys has gone up from 25% to 26% in November 2022 vs November 2021. And that is really promising. Even if this results from a lower decrease in value, compared to non-licensed toys. It means, that the market for licensed toys is more resilient, compared with non-licensed toys in times of crisis. And assuming, that 2023 will we be another year of a worldwide multilevel and multisource crisis, that is definitely good news for our industry.

The question we are facing today is, will all the positive effects that licensing brings to the table be neutralized or even be overcompensated (but in the wrong direction) by us, by retail and by the customers? Some of the future developments will

Total Licensing spoke to Peter Hollo, who is running Licensing International in Germany, owner of the TOYS & GAMES Report, high profiled management consultant and a true insider to the business. He gave us some very personal comments on how the market is doing in Germany.

be in our own hands and some will not. So let´s make the most of what we have influence on.

It is a well-known fact, that rough times are always the times of the control department. A good control can be the life-insurance for every company, but becomes its nemesis as soon as you believe in its power to solve life-threatening situations. These can only be solved and overcome by brave management decisions, even against all well-meaning advice from the bean counters.

The cost-cutting spiral very easily becomes a downward spiral. Less experienced staff, less research and development, less advertising. All this helps in the short term, but can do massive harm, when your goal lies beyond the horizon. And that is where all of our goals, especially in licensing, should be. I would not mention this, if I couldn´t already see these cost-cutting measures coming up in the market. Let´s not make them the seeds for a self-fulfilling prophecy.

We all can remember the anxious discussions about production in China, lead times and maybe not having enough stock for the holiday season. Today we all know, and that is true for many categories, there is enough stock. And even too much for starting 2023 light-hearted. Licensees or manufacturing companies and retail will have a lot to discuss in the coming year. Because retail in many categories will be overstocked. And financial resources will be bound in too much inventory, making it hard for many retailers to place new orders. This will probably become one of the major challenges for new properties or franchises to enter the market. And it will be one of the most promising opportunities to rethink and reorganize the usual licensing value chain. Every company in this value chain will be forced to rethink old models and offer creative solutions. From the licensor or ip-owner, through agencies and the manufacturers right to retail. Everybody will have to understand the necessity of cleaning up the situation as partners. Even if this means they have to waive profits for a greater and sustainable long-term good.

So far, this is what we as an industry, interdependent in so many ways, can do and will do. And speaking for the German market, I can see a lot of new approaches going exactly into this direction. But what about the customer? German customers love licensed goods, because they touch them in so many positive ways. They transform dull and boring items into wishes. Into subjects of desire. They are the brands of trust for ourselves and our families. They turn us into heroes, make our lives a little happier and more colorful and let us live our luxury lifestyle. This will not change in 2023. The milliondollar-question this past holiday season and for 2023 will be, how much of their financial resources, that they actually own or will have to make available, will they be able to spend? And for the first time in almost 80 years, not willing to spend will be the question.

The cost of living in Germany has been skyrocketing during recent months after the Russian attack on Europe. The hard working German middle class is suddenly confronted with not being able to heat their homes or to fill up their cars with gas. We suddenly have inflation around 10%. Only half a year ago this was unthinkable.

Today it looks like German consumers are holding back their money and even the toy industry, which traditionally used to be a safe harbour isn´t safe anymore. Consumers not only start saving money there, they simply don´t have any money left to spend. And that´s hitting an industry spoilt by success.

But… and I think this is very good news for 2023, as in 2022 markets for licensed goods will be more resilient than others. And we always have these high-flyers, these hype-inducing properties and franchises, that take the markets by storm. Bringing a big smile, not only on the faces of the customers, but on the industry as well.

That´s why I am pretty confident and very optimistic when looking into 2023 in Germany. And it´s this optimism, that we all need.