Viewpoint

Lorenzo de Benito

Sol Ostrovsky

Both experts in the Iberian toy market, Sol Ostrovsky has worked as a buyer for Universe of Imagination Spain/Portugal, Toys R Us Iberia, before moving on to be a category manager at Toys R Us in the US, while Lorenzo de Benito is a former Toys R US top executive, who served as CMO for Spain and Portugal and European general merchandise manager.

2020 toy sales in Spain saved by the Three Kings

The Christmas season in Spain lasts two weeks longer than in any other country due to the celebration of Three Kings Night on January 5th. These two weeks account for close to 15% of the total year sales, with an average retail price 20% higher than the rest of the year.

After suffering a severe national lockdown from March until June 2020 and additional regional lockdowns during the summer and autumn, toys sales in Spain were showing a huge decrease by the end of December. Fortunately, those numbers have been softened by a strong Three Kings Week and a shifting of days in the retail calendar. The total year result of -7% could have been far worse, in a country where the economy is declining by around 12% and the unemployment rate is climbing to 16%/20%.

The leading sales channel in the toy industry is now eCommerce, bringing Spain from the back of the line in this area to the forefront of European standards, with online penetration levels that were completely unpredictable just two years ago.

Prior to the recent eCommerce explosion, the Spanish toy market was dominated by specialty retailers owning a market share close to 40%; eCommerce penetration at this point was less than 7%. Although final numbers per channel are not yet official, the most likely scenario for 2020 is that eCommerce will have increased to almost 40% of total toy sales nationally, with an impressive growth of +60% from the previous year.

Thanks to its commercial effectiveness during lockdowns, Amazon is now the new leader of the Spanish toy market, with an estimated market share of 30%. Toy specialty stores in malls, but also in high street locations, have been strongly impacted by this shift in sales with their market share now under 30%. Toy stores have not been able to capitalize on the opportunity to play an omnichannel role in this new environment, as many were unprepared for rapid digital acceleration.

Mass retailers have been hit by the highest decline, close to -20%, and their current market share should be now close to 20%.

From a product perspective, as in the rest of the world, Games and Puzzles have been leading sales, with growth rates going from +30% for Puzzles to +6% for Games. The Construction category has also enjoyed an increase of +5%. In these three growing segments, a large number of the customers are adults.

Spain has traditionally been a leading global manufacturer of dolls, so this category is especially important in the country, with its share varying between 20% and 25%. Even though the top two ranking items in toys overall are dolls, this has been a difficult year for the category. Most of the sub-categories have been decreasing compared to last year, except for fashion dolls, which was up +18% driven by the extraordinary results of Barbie.

On the collectibles side, L.O.L. Surprise! has shown a decrease in 2020, but was probably affected by a change in the brand’s distribution; MGA opened its own office in Spain in November, taking over from Giochi Preciozi, which had been handling the property.

Among the 15 best-selling toys in the country in 2020, there are nine from Spanish manufacturers, which shows a strong performance from the domestic toy industry.

Cry Babies, Bellies and Superzings are three of the top selling properties in NPD ranking and have been pushed to the top by successful omnichannel digital strategies. Digital content on their respective YouTube Channels has driven millions of views, and extremely active Instagram and/or Tik Tok accounts have made direct interaction with kids and families possible on a granular level.

Interactivity is now a key strategy to make brands relevant to today’s market. In this new dimension, communication with customers works both ways and allows manufacturers who have mastered this new relationship to be fed with an abundance of consumer data.

Famosa deserves a special mention for diligence on Coronavirus protocol themed toys: fashion doll “Nancy a Day with a Mask” and nurturing dolls “Bellies with Virus Detector” were created to help kids to deal with the pandemic anxiety.

2020 was a year of consolidation for the biggest toy group in Spain: Giochi - Famosa. Giochi bought Famosa during the summer of 2019 and has been successfully working on the integration of both companies since then. The new group is now the number one manufacturer in Spain and has significantly grown Famosa’s dominant position among the other top players in the market: Hasbro, Mattel and Lego.

In retail, the capacity to manage the burgeoning eCommerce market, and the challenging logistic and marketing strategic decisions involved, has highlighted a marked difference between players. Online sales acceleration in Spain for 2020 was equivalent to that which had been forecast for the next three to five years and the new status quo won’t change back easily, even if, by the summer, mobility restrictions are removed. The overall mindset of the Spanish consumer, regardless of their age group or living environment, is now digitally focused. In order to succeed, or even to survive, retailers need to invest in omnichannel capabilities, as well as find a way to become relevant in the new digital consumer’s mindset.

It will be interesting to see how the role of mass retailers in the toy market of the future develops; will they continue to keep toys as a core or destination category for Christmas, or will they move into a more conservative cash preservation approach, treating toys as a seasonal or convenience category?

Unprecedented government support of businesses has undoubtedly had a significant effect on the overall toy market. Companies have been able to reduce their workforce structure temporarily thanks to a mechanism called ERTE, where up to 70% of workers’ salaries was assumed, in some cases, by the national unemployment organization. This has allowed retailers to adjust their costs and find financial balance in this difficult year. Despite this, some of the smallest players are already shutting down and the new market dynamics will inevitably hurt those not able to adapt to the digital/ eCommerce world.