As the specialty toy retail market becomes more competitive, specialty chains are turning to exclusive products as a means of differentiating themselves from their rivals, and as a way of increasing their sales.
‘You’re seeing it happen with mature properties especially,’ says Nancy Overfield-Delmar, a retail consultant for Parachute Consumer Products. ‘If retailers have experienced a nice sell-through period with a property, and they think that it’s reached a plateau [in terms of sales], they will look to gain some ownership over the property to extend its life at retail.’
One retailer that is getting into the exclusives business is Zany Brainy, which recently signed a deal with the Britt Allcroft Company to develop a range of products based on its property Thomas the Tank Engine. The three-year agreement gives Zany Brainy a license to create, market and distribute through its stores a Thomas-themed beach chair, table and chair set; a lamp; a foam clock; and a calendar that comes with 24 removable miniature toys.
‘The Thomas the Tank Engine franchise does a substantial amount of business for us,’ says Tom Vellios, president of Zany Brainy. ‘What we’ve tried to do is to come up with complimentary products that would best round out a great offering.’ In deciding what those products would be, Vellios says Zany Brainy’s product development department conducted a number of tests with items within the same categories. Just what demographics Zany tested and what questions it asked consumers, Vellios would not say.
For FAO Schwarz, which stocks exclusive Barbie dolls and Star Wars figures among a number of other products based on popular kids properties, the idea of exclusives is as much a part of its identity as it is a major source of its revenue. According to David Niggli, FAO Schwarz’s executive vice president of merchandising, the chain has been selling exclusives since its inception 136 years ago. ‘I think there’s an expectation on the part of the consumer that FAO Schwarz will have product that you can’t find anywhere else, and that’s what people come to us looking for,’ says Niggli, who estimates that exclusives comprise 60 percent of FAO Schwarz’s stock.
Connie Van Epps, executive vice president of marketing for Imaginarium Toy Centers, which, at the moment, is considering creating product based on kids properties to be sold only out of its stores, says the reason exclusives are becoming more common is that they represent a ‘win-win’ situation for all of the parties involved. ‘The retailers win because they have a better opportunity for seeing higher margins; the licensors win because they’re getting additional revenue and the manufacturer wins because they’re doing business with a retailer that they otherwise would not engage in.’
Despite the apparent upside of exclusives, Overfield-Delmar says retailers should be cautious about entering into deals with licensors that have granted rights for products that resemble merchandise that manufacturers are already producing, adding that licensors often have a hard time saying ‘no’ to new product initiatives for their properties.
The danger of a crowded category aside, however, the practice of launching exclusive products continues to find more of a home in the specialty retail market than it does in a mass market, a trend that does not surprise Overfield-Delmar. ‘I think [specialty retailers] are willing to take more chances than traditional retailers do. They don’t support as many properties [as mass retailers do] and, therefore, have more time to analyze their big sellers.’
‘Unlike in mass, we [the specialties] have holes in our market,’ says Vellios. Vellios is confident that Zany Brainy’s 53 stores, plus the 20 new locations the company plans to open this year, will provide enough outlets to meet the sales minimums for most of the Thomas product. The Thomas beach chair, the first exclusive Thomas product, will be available at Zany Brainy beginning in July. SA