14 minute read
Special Feature - The Entertainer
The Entertainer - rolling out opportunities
Following a successful 35-store trial, The Entertainer is now rolling out its curated toy zones to all UK Tesco stores and several larger stores in ROI. Toy World’s John Baulch and Rachael Simpson-Jones paid a visit to The Entertainer’s Amersham HQ to find out more about the rollout’s progress – and address some of the rumours that have been swirling around the toy industry – with the help of Andrew Murphy, Group CEO of The Entertainer, and Geoff Sheffield, chief commercial officer.
As we arrive at The Entertainer’s head office for this catch up, a screen in the foyer informs anyone stepping through the revolving door that the retailer is now on Week 7 of its Tesco rollout. 130 stores down, 675 to go. A softspoken Scot who weighs each statement carefully before sharing it with us, Andrew Murphy says progress so far has been remarkably smooth, with only two store installations delayed by logistics challenges.
The scale of the rollout is a far cry from the 35-store trial The Entertainer successfully undertook in October 2022, leading the team to adopt a ‘learning mentality’ that will persist throughout. “We’re essentially keen students,” Andrew explains. “The key lies in understanding the realities of how supermarket trading environments differ from specialist store environments, how the seasons play out, how impulse shoppers behave versus destination shoppers. To be perfectly honest, this year’s rollout is really all about blowing the doors off 2025.”
The Entertainer’s ability to adapt to new learnings as they arise depends on individual circumstances. The pace of the rollout cannot be altered – the completion date is set for October half-term, for obvious reasons – and while the number of bay installations varies hugely (between one and 47, depending on the size of the Tesco in question), Andrew doesn’t foresee any ‘hiccups’, as he refers to them. He’s the epitome of quiet confidence.
When The Entertainer’s staff were first informed about the move, the initial kneejerk response was (understandably) one of anxiety. Concerns regarding the cannibalisation of the retailer’s specialist stores had to be addressed promptly and pragmatically: it’s not like Tesco wasn’t already a part of the toy retail landscape, so going in and producing an improved offering means the Tesco deal runs adjacent to, not instead of, The Entertainer’s existing store portfolio. That elephant in the room dealt with, everyone is undeniably excited about what the rollout will mean for the success of The Entertainer moving forward.
Those selected to include the new Tesco departments as part of their remit are likewise delighted with the deal, which has finally released a slew of career development opportunities. Store managers are now able to become area managers, assistant store managers can move up to fill the gaps left by the store managers, and so on. For those that have spent the past 15 months working exceptionally hard on turning the trial into a longterm strategic partnership, as well as those who’ve been patiently waiting in the wings for their turn to move up the career development ladder, seeing it all come to fruition is both satisfying and exciting.
Geoff, too, seems pleased with how the rollout is going, though he notes that thus far, installations have largely been in smaller format Tesco stores and therefore easier to execute. The Entertainer has been working with eXPD8 as well as other third-party partners, some new to Toys, with the retailer leveraging its expert oversight to ensure everyone understands what’s expected of them and the high standard of installations required.
When asked how The Entertainer’s suppliers have reacted to the move, Geoff smiles somewhat ruefully and replies: “Well, as you can imagine, I’ve had a lot of conversations since the news broke on 4th January.” Indeed, it was the topic on just about everyone’s lips at London Toy Fair 2024 and reactions were varied, to put it mildly, even though, as Geoff sees it, it was not beyond the realms of possibility that Tesco could have exited the toy industry altogether – and that would have been disastrous.
“I think everyone just needed a little time to get their heads round what the deal would mean for them,” he adds. “As time has passed and suppliers have realised the opportunities the rollout offers, we’re seeing tangible engagement. Conversations are becoming more encouraging and new commercial thinking is being unlocked. Yes, there are pinch points for some of our partners when you look at what they were previously doing with Tesco, but the choice is to get on the bus – or not.”
Andrew furthers the bus analogy here: according to him, some suppliers are seated, belts fastened, guidebooks out. Others are making their way down the aisle, looking for a seat, and yet more are waiting at the bus stop for their turn to get on. “We need the right type of participation and support from our suppliers, so if you don’t believe in what we’re doing, then this isn’t the journey for you,” he says, matter of fact. “To some extent, suppliers need to forget what came before. Take the example of retail landlords versus post-pandemic. The days of being charged pre-pandemic amounts for your space were over when lockdowns came into effect, landlords just didn’t realise it straight away (or didn’t want to admit it). By and large, it’s irrelevant what happened before. We’re obviously on the positive side of the equation, but the question is whether suppliers want what’s available to them in the future. And by the way, that’s not set in stone: we can shape partnerships together. The Grants’ business is founded on relationships, and deep investment in the Toy industry and its longevity. People know by now that we’ll get to any reckoning much faster, and with much less BS, than could arguably be expected from some other retailers.”
To date, one of the biggest learnings from the post-trial partnership has been the difference in customer visit frequency: many consumers do their grocery shopping weekly, whereas a visit to a toy shop might be once or twice a month. In the supermarket setting, range refreshes suddenly become much more important versus specialist stores, so ranges don’t become stale in the eyes of the consumer. Staff discounts and Tesco Clubcard deals have also become part of the picture (they weren’t during the trial). Tesco’s Clubcard programme is vital to incentivising customer loyalty and monitoring behaviour, though Andrew points out that as a totally new dynamic, The Entertainer is still working out how to maximise on the opportunities it offers.
“Going by some of the commentary on this deal, it seems some observers don’t fully appreciate just how little information we receive from Tesco because of commercial law,” Andrew explains. “When we talk about this year being a learning year, it’s not just because we’re taking a suck-it-and-see approach. We can triangulate from publicly available information, but we just don’t have big files coming our way, shedding light on the answers to our most pertinent questions.”
Within the industry, the topic of margins is one that keeps coming up. Andrew says it’s no secret that The Entertainer is looking to achieve different margins on Toys than those Tesco has historically, though obsessing over percentages means nothing until volume sales have translated into cash. The Entertainer, says Andrew, retains flexibility when it comes to product mix and margin requirements. Whilst on the topic, we asked Andrew and Geoff whether rumours regarding suppliers being asked for higher margins on Tesco lines versus The Entertainer ones were true or unfounded.
“Our intent is very much to run one business,” Andrew offers, by way of addressing the question. “We’ve no desire to make channel-specific deals – it’s just not helpful for us. But the reality is these aren’t ‘apples with apples’ comparisons; a 3,000 square foot store that we wholly own needs to be traded very differently to a supermarket aisle that two or three times a year gets an additional fabulous opportunity on 20 out of aisle pallets. So, ultimately, yes, sometimes outturn margins will be different and therefore so too will be the related deal structures we agree with suppliers. However, like I said, we’re here to run a single business and only when specific complexities within that need to be managed will there be variation between the deals we seek.”
Another hot topic of conversation in the industry is what the average product mix is going to look like once the rollout is complete. Of course, much depends on individual store formats. While The Entertainer stores carry an average of 4-5,000 SKUs, the biggest Tesco superstores can only carry around 1,000 (perhaps less), meaning lines must be condensed out of necessity. Decisions must be made on what makes the cut and what doesn’t, what the mix needs to be in order to cater to the demands of Tesco shoppers. The Entertainer’s own-brand Addo Play range forms a strong part of the retailer’s value proposition. After that, the merchandising teams are taking a straightforward top-down approach, looking first at best-sellers within The Entertainer stores – those that would make most sense to also stock at Tesco – and working through other brands from there. For those wondering, Geoff confirms that shoppers will no longer see some brands or types of toy that Tesco previously offered, in line with the Christian principles of The Entertainer founder Gary Grant.
When pressed, Geoff says the average Tesco toy aisle will be approximately a 50/50 split between Addo Play/ELC and brands from outside suppliers, a balance he believes suits the retailer, its partners, and its customers. Addo is a brand that offers both value for money and play value too, and Geoff feels this is what Tesco shoppers are looking for (not that other brands don’t offer the same, of course). The 50/50 split comes with a caveat though: that it’s not to be viewed as indicative of what the split will be once the partnership has bedded in and matured. After all, The Entertainer is a business, run by businesspeople, and it will do what it must to make the partnership work.
“One of the biggest changes has been to our forward planning,” adds Geoff. “Our commercial team has brought conversations forward: starting conversations about spring/ summer 2025 in April 2024 is maybe not something you would have expected of us, but here we are. Times change. Our suppliers need to be able to plan if we’re going to land the right product mix.”
Sitting across the table from Andrew and Geoff, we can’t pass up the opportunity to also address one of the more outlandish rumours that’s been circulating – that some toy suppliers are intending to use a loophole to circumvent The Entertainer entirely and supply Tesco directly instead, thereby securing a presence outside of The Entertainer aisles. Is there any truth in that?
“None at all,” states Andrew, though he does concede that the nature of adjacent categories means shoppers could find toys outside of the retailer’s branded aisles: plush for Valentine’s Day with the cards and wrapping paper, collectibles with the magazines, certain lines in the stationery department etc. “But in the spirit in which your question is meant, no, absolutely not. It may not come as much of a surprise that some suppliers have tested this for themselves, only to then come back to us two weeks later.”
Indeed, considering that Tesco’s strategic rationale in bringing The Entertainer in in the first place was to have an outside team of dedicated experts looking after this complex category, what would be the point in it leaving the door open in such a way, meaning it would have to retain some level of oversight, systems and supply chain capacity?
The deal with Tesco also gives The Entertainer a foothold in Ireland, previously an untapped market for the retailer. Despite being ‘Smyth’s back yard’, as Andrew describes it, the team feels competition will be a positive thing in the region; in January 2023, Argos closed all of its 34 stores in the Republic of Ireland, leaving a void into which The Entertainer, via Tesco, can move. While only around 10% of Tesco’s total store portfolio, the opportunities on offer are nonetheless exciting for Andrew and Geoff.
“We went out there six weeks ago to assess the marketplace, which is very different to over here in terms of density and competition,” says Geoff. “Our Irish Tesco installations should be up and running in June or July. The whole rollout is a lot of hard yards, but it’s very rewarding when you start to see the finished stores.”
With our meeting drawing to a close, there was just time to ask Andrew whether he wanted to offer comment on Poly Toys. Teal Group, The Entertainer’s parent company, acquired the Spanish toy chain - which owns some 30 stores across the country - from an administrator in 2018, but in March this year announced it had put forward a ‘request of liquidation’ in the face of the ‘inviability of the business’. In the days that followed, the story evolved, with Poly’s Pablo Merino, country director at Poly Juguetes, getting in touch after reading John’s initial Friday Blog. We therefore felt it was only fair to give the team at The Entertainer a chance to put across its own take on the matter, which Andrew was happy to do.
“The Grants are businesspeople,” he explains, noting that their commitment to commercial success means their backing out of something should be taken as a sign it simply cannot be done. “We reached a point, not long after I joined, where it became clear that what it was going to take to realise the opportunities we wanted to realise simply wasn’t financially viable. When we took Poly on, it was a serial loss-maker (even pre-Brexit), and while we significantly improved its position in the market, unfortunately we just couldn’t improve it enough – not in a sensible way. The energy and resources it would have taken would have choked off much bigger, more strategically important parts of our business. It’s sad, it’s not something we’re happy about, but we’re not conflicted about it either. The decision made was 100% the right one.”
However readers feel about The Entertainer’s deal with Tesco, and regardless of the rumours and gossip they hear, it’s patently clear that from where Andrew and Geoff and the rest of the team are sitting, the retailer is embarking on a transformational journey to which it is unassailably committed. The wheels on this particular bus are very much in motion – all that remains to be seen is how far it can travel.
“I’d like to thank all our partners and suppliers for their support,” finishes Geoff. “It’s been a choppy first three months of the year for all sorts of reasons, but everyone we work with has been incredibly engaged and willing to work with us on overcoming hurdles and making the most of the opportunities ahead. We pride ourselves on our relationships. We know we’re not the easiest to deal with sometimes, but we’re never anything less than completely honest and transparent with our partners and as a result we enjoy really close relationships with our suppliers. I want to recognise that.”
“The Tesco deal is huge, but it’s not opportunistic: it’s a strategic response to how difficult it is to run a toy retailerhaving to own all your own property, cover all that ground, pre-commit all those costs,” Andrew adds. “This is a new business model for us moving forward - we call it the 'Total Toy Platform'. We’re never going to move away from having our own stores, they’re the backbone of our business and mean we're always fully connected to everything that’s happening in the market between suppliers at one end and customers at the other, but we’ve recognised a huge opportunity for us in the difficulties multicategory retailers face in sustaining a compelling toy offering. We can make those economics work - for them and us. Very few toy businesses across the world would be capable of plugging in to a massive supermarket chain like Tesco in the way we have, and we can do the same for department stores, discounters, garden centres or pureplays, in the UK and internationally. We're well on our way to making this a way of life for The Entertainer – not just a one-off event.”
