Background
“Gashapon” is a Japanese onomatopoeia composed of two sounds: “gasha” (or “gacha”) for the sound of a crank on a toy vending machine, and “pon” for the sound of the toy capsule dropping into the receptacle.
TOMY, one of the worlds leading global toy companies was, Europe’s leading supplier of toy vending products.
I ran TOMY’s toy vending business unit for EMEA.
When I joined TOMY the toy vending products category’s turnover and profitability were in decline. I applied my business analysis discipline to identify the underlying issues.
I created a longer-term strategy and sought the support of the CEO. I pivoted and re-structured the business. The result was a sustainable year on year margin and turnover growth.
Business Analysis
The vending machine retail sales channel had a set of unique challenges.
- The coin mechanisms on the machines fixed the retail price.
- The product costs from China was escalating.
- In-store vending machines were operated by a third party.
All three factors had a direct effect on profitability.
The coin mechanism made it impossible to change the RRP of the product from the vending machines. Any further trade price increases would bankrupt the vending machine operators.
Compounding the fact that fewer new products were being produced the quality of the product was also changing. In an attempt to increase profitability the product changed from highly detailed “3D” figures and multi piece sets to 2D key chains, stickers and single colour 3D figures. These represented lower value for money.
Distributors and operators started to purchase supplementary products from other suppliers to underpin their TOMY business. They were also loosing distribution due to increased local competition offering a wider range of products. The impact was lower stock commitments impacting the profitability and top line.
TOMY historically led the way in innovative licensed toys for vending machines; Licensors had an interest in working with the company. As category profitability and turnover declined it started to become extremely challenging to renew and sign new product licence agreements as the business case was not as strong as it was historically. There was an increase in licensees within the category leading to increased competition, which compounded the profitability and turnover challenge.
Having identified the issue facing the business I spilt the solution into 2 phases in order to facilitate the business change in a manageable way and re-build a business unit driving profitability and long term growth.
Solution: Blind Bag Strategy
Phase 1
I recognised that as well as having a toy vending business TOMY had also started to develop early concepts for a blind bag retail business but had not been able to execute these in market.
The blind bag category had started to gain traction at retail with a number of specific licensed brands starting to gain share. I saw the knowledge, expertise and breadth of licences available within TOMY as a strategic advantage to present to retail a full offering of blind bag items to the trade. I identified that it was important to create a channel specific approach to the various retail channels we dealt with.
I felt it was important to build a cohesive brand built of top licensed products and used the Nuremberg international Toy Fair as the opportunity to launch the new category across EMEA. In order to expand the range of products available and create a retail centric range I used the existing portfolio of vending items, which either needed a higher minimum factory order quality or were historic items of a high quality with a higher price.
The result of this tactic was that not only did I increase the product portfolio quickly but it was very cost effective due to the fact the company already owned the tooling thus supporting an increased in margin for the category. As there was no maximum retail price I was also able to increase the invoice price leaving behind the limitations of the vending business.
The toy fair was a success. Retailers really saw the benefits of listing a range of blind bag items in key licences from one supplier. Within one move I was able to support a TOMY objective of increasing margin and turnover as well as supporting a retail objective to rationalise their supplier base.
This re-launch was a pivotal moment for the future of the brand as licensors re-set their view of what TOMY could offer the consumer within the category and a number of new opportunities presented themselves.
Phase 2
The toy vending business was extremely important to TOMY globally and therefore the launch of the retail business was key in demonstrating that the concept of vending toys at retail could work. Once this was proven I was able to gain permission to formally close the vending business in EMEA, North America and LATAM.
At the same time I closed the vending business I also continued to work on enhancing the retail offering. I was able to significantly improve the way in which TOMY went to market by creating internal selling kits as well as branded in store displays. The various in store displays were always created in a modular way so that the product had longevity in store and TOMY were able to secure in store real estate. This was an important development enabling TOMY to secure increased distribution in the category across EMEA.
The improvement and success of the retail offering also led to new licence agreements being secured with brands such as Star Wars (Disney) and DC Comics (Warner Brothers) which started to secure the long term future of the category within the company.
Conclusion
The change I implemented was an important one as I was able to recognise there was an opportunity to re-structure the existing business and create a longer-term sustainable strategy. The business is now delivering year on year margin growth with a growing turnover trend.
Matthew Woolf 