Retail Profile - Midco & Learning Express

Small but Mighty

Take two successful toy retailers, one either side of the pond – what happens when you get them together? That’s what Toy World wanted to find out, and why, for the first time, we’ve interviewed an American retailer - Rick Derr, from the Learning Express franchise - and a British retailer - Dave Middleton, owner of Midco Toymaster in Burton and Derby - at the same time, on the same Teams meeting. Rachael Simpson-Jones sits in to find out how the pair differ and the many things they have in common.

Dave Middleton

Very few Toy World readers will be unaware of who Rick and Dave are, but just in case, let’s start with some bios. Rick, the author of the popular monthly Toy World column Letter from America, is a regional manager and owner at American toy retailer Learning Express Toys. He’s an enthusiastic and genial individual, always more than happy to talk toys, keen to find solutions to challenges facing the industry and brimming with big ideas. Dave, winner of Independent Multi-Store Toy Retailer of the Year (up to 10 stores) at the Toy Industry Awards 2021, is a long-term friend of Toy World whose passion for toy retail is evident in the way he applies himself to both the Midco business and the wider industry. Read on to find out what they had to say.

Rick and Dave on… how 2022 is shaping up so far

On a per store basis, Rick tells me, Learning Express has just enjoyed its best February, despite the craze for fidgets (which kicked off in earnest in the US in January 2021) skewing things a little on a month vs. month basis. Though it’s slowed overall, the demand for fidget toys, pocket money items and collectibles remains high, with Squishmallows and tactile ASMR toys firmly leading the way. Rick names Mattel and Hasbro as Top 3 general suppliers in 2022, a marked change from how the land lay a decade ago. Standouts from Mattel include Barbie, Hot Wheels, Polly Pocket and games, while Hasbro’s Nerf is really starting to pick up too. Learning Express is able to compete with Walmart, Amazon and other stores on these brands by picking the right assortments and, because kids want them, the sales follow. At the time of speaking, March looked set to be another strong month for the US retailer and looking further ahead, to the breaking up of American schools for the summer, Rick feels there’s plenty to be optimistic about in the indie toy market.

“There’s a caveat though,” he notes. “I saw a post from [MGA Entertainment’s] Isaac Larian on LinkedIn about Chinese factory shutdowns due to Covid-19. I’m hopeful this won’t affect the toy market too much - we’ve all played this game before – but it’s worth keeping an eye on. There are also no stimulus cheques in the US this year, and inflation has crept up, so there’s not much extra dough around, and of course everyone is worried about the situation in Ukraine and saddened for the suffering of kids and families over there. We’re seeing a big push from the toy industry to provide financial and other support. But I digress so I’ll just say – the toy business is good.”

Dave, who often tells us he’s ‘living the dream’, concurs. Midco Toymaster is trading well up on last year, but to be fair, at this point in time in 2021 his shops (like many others) were closed. Still, his figures are over 100% up on 2019. The relocation of the Burton store from high-street to shopping centre has made a huge difference in terms of footfall and turnover, while the Derby store has enjoyed a massive increase in turnover for ‘no reason whatsoever’. While Dave is also seeing continued demand for fidgets, it’s Pokémon, a particular strength among indies, that’s catching consumers this year in unbelievable numbers. Squishmallows are also huge sellers for Dave, though he does note that Rick appears to have an easier time getting hold of stock. Funko, particularly its anime licences, also gets a mention, as does Tech Deck (Spin Master), Mini Brands (Zuru), L.O.L Surprise! (MGA), football trading cards such as Panini’s Score range, and other TCGs, not just Pokémon. Cats vs. Pickles is also popular, and with the CVP universe set to expand this year, sales will surely grow.

American sweets, still very much a novelty in the UK, also draw the crowds at Midco. Rick has a ball in this game too, though he wishes ruefully that he’d started offering candy years earlier. TikTok, he says, can be thanked for the exploding demand for non-chocolate candy, particularly sour candy, not sold in the majors. A lucrative category, candy makes an ideal add-on gift – and Rick can only be glad he has eventually hit the sweet spot by stocking it.

…on supplier relationships

While the two report similar success stories - Rick picks up on Dave’s comments regarding Pokémon, enthusing that the big trainer packs have been selling out within hours of arriving in stores – he says Funko is where the two differ. Learning Express has had to drop the brand from its assortment, noting that the relationship with indies is not quite where he’d hope it would be, but in years to come he’s keen for Funko to make a welcome return to Learning Express stores.

Spin Master has itself recently returned to Learning Express, and Rick is seeing early success with Hatchimals, Kinetic Sand, Rubik’s and games. MGA Entertainment, meanwhile, has yet to sign a new US distributor for L.O.L. Surprise!, leaving Learning Express with two options: not stock it, or go via a re-seller with exorbitant price tags. It’s opted for the former.

“It sounds like things are easier in the UK than they are in the US,” says Dave, seemingly surprised. “I’ve long enjoyed a great relationship with Spin Master. It supports me on window displays and we take in weekly deliveries of toys. Funko perhaps isn’t always the most straightforward account, but I had a really positive meeting with Funko recently along with Paul [Reader] from Toymaster. The company has been really good to us this year. And it’s the same with MGA. We’ve got a great relationship with them. Yes, the margins are tight – really tight – but we’re not looked after too badly at all.”

He adds: “The only time we suffer is when a smaller company has something really hot, but they’re not set up to deal with the indies. If you’re Smyths or The Entertainer it’s one thing, but if you’re an indie it can be an entirely different matter.”

Dave explains to Rick, who’s curious to find out more about the logistics of things here, that the majority of US companies benefit from domestic UK operations – hence he seems to find it so much easier than Rick to secure stock. Of course, belonging to the Toymaster buying group helps too, giving Dave and his fellow members access to a raft of suppliers that indies going it alone might not be able to work with. The latter could opt to go via a distributor such as A.B.Gee, which distributes Hasbro, Mattel, Spin Master, Jazwares, Playmobil and much (much) more.

“It seems that on the biggies, the UK has some advantages in being able to work direct,” muses Rick. “Over here, it’s often the case that we’re just too small to deal with compared to Walmart and the like. But we strive to offer what kids want and work really hard to find it and offer it. Margin isn’t the be all and end all for us; I want the right products, first and foremost, and then it’s up to me to engineer the pricing and logistics that go into making it work. We might be small but we’re mighty, and we drive the volume.”

“Yeah – it’s all about the mix,” agrees Dave. “We have to offer what people want. If we’re making something on toys then we’re happy, but the bottom line is that there are some brands you simply have to stock, regardless of the margins.”

…on the rise of social media

The pair follow each other on social media. Both are active users and frequent posters, and appreciate how much the advent of social media has changed the way they do business. 10 or 15 years ago, Dave wouldn’t necessarily have known what his colleague Rick was up to over in Lake Michigan, and vice versa. Rick drove Cats vs. Pickles on social media to the point that Dave felt he needed to get involved, despite having initially seen it at Toy Fair New York and passed it over. Ultimately, Midco was first to market with the brand in the UK and sold 2,500 units in November and December 2020.

“Bingo!” Rick shouts. “Rachael, you’ve just gotta write this down – there are certain things that we as retailers have to do to win. One of those is being first and finding faster routes from source to store. Amazon used to be the one to beat on this, but the belly of that beast is too full, and parents and kids are confused by just how much it offers, what’s genuine and safe, what’s not. Of course, consumers know they can trust Learning Express and they know they can trust Midco. Curating our selections and being first to offer a new range stands us out from the rest, and the speed at which social media brings things to the public eye is a key part of that.”

Social media means retailers can now reach anyone with anything, Dave notes. On Facebook, he tells me, awareness is instantaneous. Following the arrival of a shipment of Encanto products, the Midco team put a post on Facebook. And the following morning there was a queue waiting outside the shop, ready to buy it. I know many retailers will have found this out for themselves; indies in particular are very strong on social media and use it to create a sense of community in their local area. The Midco Toymaster social pages have a combined 30k followers, while Learning Express has 2.1m. Social media has made the world a smaller place, and those toy retailers leveraging it the right way, and using it proactively, are discovering that its now vital to their businesses, wherever they may be.

…on trade fairs and buying

In January, London’s Olympia once again hosted Toy Fair, an unmissable event that kicks off the global trade fair season. We’ve also had Spring Fair in Birmingham, April sees Indx Toys & Nursery take place, while the Toymaster Show is set to make its big return in May. In the US, the trade fair calendar has not been quite so busy. Toy Fair New York, which would usually take place in February, was cancelled this year due to ongoing concerns surrounding Covid, and the next New York Toy Fair is not scheduled to take place until September 2023, the new date for the event. So how have Rick and Dave approached the buying season this year, and what stock do they place on trade shows?

Inside Learning Express

Inside Learning Express

“Learning Express has its own version of the Toymaster show in June with about 150 vendors, and we can’t wait,” says Rick. “We also have a representative within ASTRA (American Specialty Toy Retailing Association) who is looking for synergies, in the same way we’re keen to find out how similar we are to Toymaster. Next week we’re also sending 14 people to Toy Fest West, on the west coast, which is the first inperson show to take place since Toy Fair New York was cancelled. Then we’ve got the Learning Express show, and then Dallas in the fall. Don’t get me wrong, Zoom previews worked, but in-person events are still needed, particularly for start-ups, the little people who need a chance to get in front of retailers and show off what they’ve got. What does remain to be seen is whether trade shows will remain as big as they have been in years gone by.”

London Toy Fair had a great vibe about it, says Dave, although some big names were conspicuous by their absence. However, The Toymaster show in May will bring all the biggest suppliers together under one roof, including those not at Toy Fair, making it an unmissable event for indies. Dave’s main concern is that those companies that enjoyed exceptional years despite not attending trade shows will no longer think them necessary. After all, trade fairs cost money - often a fair bit of it - and in today’s climate any opportunity to save on expenses is appealing. This would be disastrous for indies who rely on trade shows to see product in the flesh – after all, Dave posits, what supplier is going to bother hosting a preview for a retailer that only spends £10-20,000 a year with them?

“Fingers crossed the shows keep coming back,” Dave adds. “It’ll worry me if they don’t. I’m also worried about the moving of Toy Fair New York. My understanding of things is that Dallas is quite a closed-stand show because it’s for next year’s product, and it seems to me that Toy Fair New York, if it’s held in September, could go the same way? If I travelled out there, during the period when Midco is busy taking in all its Christmas stock, am I even going to be able to view anything?”

Rick understands Dave’s concerns, and notes that there’s still a lot of debate to be had over what ultimately happens with Toy Fair New York. Watch this space.

…on their approach to trying new things

“Right now, I’m trialling four new toys you’ve never even heard of,” enthuses Rick. “Suppliers come to us all the time to test product and they should be doing the same with you, Dave. Us indies, we’re not just shipping destinations – we’re salespeople!”

This is the same conversation Dave has been having with suppliers. He highlights that when new products arrive at Midco, they go straight on social media. When they arrive at a supermarket, they just go straight on a shelf. There, they must rely on consumers finding them by accident instead of being drawn to a store by a well-timed Facebook post. Rick’s keen to try a collaborative launch between Learning Express in the US and Toymaster members in the UK. His vision is to launch the same range on the same day at the same time (time zones taken into consideration) and then to compare notes and figures. Canada’s Mastermind Toys, overseen by CEO Sarah Jordan, could get in on it too, he says – I did say at the beginning that Rick is a man with big ideas.

Dave isn’t ashamed to admit that he regularly ‘steals’ ideas from the likes of Learning Express as well as niche retailers such as Hot Topic and Box Lunch, which don’t have UK locations or comparable competitors. It must surely be harder for our American friend to find new areas to exploit and toys to try. The American toy market also runs ahead of the UK one, meaning Dave can watch what’s working, and what’s not, and make selections based on actual sales data. Rick can’t. He’s at the front of the pack, not watching from the sidelines.

Dave also highlights that in the UK, toy retailers largely try and sell what everyone else is selling, meaning they all chase the same big suppliers: Hasbro, Mattel, Spin Master, Lego and so on. In the US, indies seem to go their own way, actively seeking out lines that aren’t stocked elsewhere. As good example of this is Rainbow Loom, an arts & crafts brand which lets kids weave bracelets, necklaces and other creations out of colourful elastic bands. Rainbow Loom was a huge craze back in 2012 and 2013, and Learning Express was right at the heart of it. Was this, Dave asks, a result luck or judgement?

“A bit of both,” laughs Rick. “It was actually a Melissa & Doug rep on vacation in Vermont that brought Rainbow Loom to our attention. She happened to spot a few pieces of what was then called Twistz Bandz in a box, low down on a shelf, and thought it looked interesting. Her niece and nephew loved it, and despite not repping it she contacted Learning Express Georgia and told them how much it rocked. 12 were ordered and quickly sold out. Another 24 were ordered, and they sold out too. Suddenly it’s on the radar. We called the inventor, Cheong Choon Ng, and told him we needed 144. He was just starting out, selling sixes and twelves, so suddenly his radar was pinging too. 50 stores were selling it in late July four weeks later, and by December that year every Learning Express store was on board and stocks were starting to run out.”

Cheong Choon Ng was made a guest of honour at Learning Express’ annual conference in Nashville, Tennessee, and a plan was hatched to ensure stock of what was now called Rainbow Loom kept coming through. In-store demos and Rainbow Loom classes were also devised, alongside instructional YouTube videos that made it easier for kids at home to create their own Rainbow Loom jewellery. The rest is history.

So, while American retailers may have more of an uphill struggle when it comes to new lines that UK ones, the tale of Rainbow Loom goes to show that there are opportunities out there – if you know where to look.

…on the future of the toy industry

He may be an optimist, but something is playing on Rick’s mind. He’s worried that not enough young people are being attracted to the toy business, not just in retail but in supply and design/invention too. An energetic industry needs energetic people to keep it going, but in the states, he says, the image of retail isn’t great. Tech jobs in Silicone Valley, with their big wages and Monday- Friday working weeks, seem a much better bet among those just entering the world of work. Does the UK have a similar image problem, he asks – and is Dave worried about this too?

“Yep, this is a conversation I had with Toymaster not that long ago,” Dave replies. “I’m 41, and there really aren’t many people younger than me with toy shops. It’s such a difficult market to enter. I’ve been doing this for 20 years and I still remember my first Toy Fair: I couldn’t get on stands, no one wanted to talk to me. Maybe only in the last 10 years have I seen that recognition kick in, and I put a lot of that down to what I’ve been doing on social media. At this year’s Toy Fair, I actually had someone treat me like a celebrity. ‘Oh my god, you’re David Middleton!’ she said. Wild. She knew me from LinkedIn.”

He adds: “There are so few young people arriving at toys as a profession. Growing up, I was always big on Star Wars, wrestling and other things so I never lost interest in toys, and I carried on collecting them as an adult. But with kids today, it’s a different world. Apps, iPads… is the interest in toys being lost beyond a certain age? You need passion to run a toy shop and I don’t think there’s enough of that out there. In the UK you sometimes see people inheriting and continuing their parents’ business, but as for young new retailers? Not so much. We all need to encourage young people. It worries me that the same issues I faced as a 21-year-old are still an issue today. We need to be more welcoming or there won’t be people there to replace us all when we retire.”

It's a similar picture in the US and Canada, according to Rick, but the million-dollar question for him is what can be done about it? How can the industry change the way young people perceive it? How can they change the conversation? Dave, never one to shy away from speaking his mind, is of the opinion that the fault lies with suppliers, not retailers, and comes back to his point about the ease (or lack of it, rather) in getting on stands at the big trade shows, especially without an appointment. He also feels that the signing of NDAs and the secretive way some companies run their stands are intimidating to younger people, as are the minimum orders stipulated by some suppliers. It’s scary, he says.

The cost of living is also a factor in the low uptake of retail jobs, according to Rick, as is the perception that higher education – diplomas, degrees etc. – are vital for career progression, despite loading students with ‘ungodly’ amounts of debt. Toss in the soaring prices of new and used cars in a country notorious for its pedestrian unfriendliness, and the lingering impacts of a pandemic, and you can see why retail jobs don’t have people pounding down the door. To counteract all this, Rick has restructured the salaries of his key retail staff, and added a 401K programme (an employer-sponsored defined-contribution pension), tuition sponsorship and paid vacations.

“Outside critics tell me ‘You can’t do that, it’s too expensive’, but you have to drill down and look a little deeper,” Rick says. “If I retain Jessica, say, after 18 years of service, and she’s very good, then I retain all her knowledge and experience too. How much is Jessica worth to me, to my business? That’s the question. If you’ve managed to assemble a team of three or four really solid people then you need to give them every benefit you can, and the gratitude they deserve, so they can have the flexibility and security to continue doing what they love.”

Dave has been nodding along while Rick speaks, a look of mild amusement on his face. This is because only two days before our call, he’d had the same conversation with his dad and ultimately decided to give three of his employees a pay rise. One has been with Midco a long time and knows the stock inside and out, while another runs Dave’s Derby store as if it were his own. He knows the customers by name, no small thing for a store with a £1.3m yearly turnover, and can safely be left to run things in Dave’s absence. The third is so detail focused that they take pride in making sure both stores have at least one of everything that comes in on shelf, right down to the smallest of toys. Retail is detail, says Dave, and employees with their eye on the detail deserve recognition.

“I tell you what,” finishes Rick. “For our kids’ sake, for learning’s sake, for the sake of experiential retail, I hope we can get a handle on this because one day, people may find they can’t enjoy what we currently offer. What a shame that would be. But if we do the right things, we can leave the industry in safe hands that will carry it through into the future.”

He adds: “I’m glad I’ve finally been able to meet Dave and I hope we can carry on talking after this.”

Dave assures him that the plan is for Toymaster and Learning Express to continue the conversation the two have started. It’s likely an actual in-person meet up will be on the cards in the near future too, and whatever may come of such a meeting (I suspect more big ideas) Toy World will be right here to report back.