IP owners go global for retail insights post-TRU

Why brand owners are examining regional consumer products programs in international markets to gain insights and build strength before tackling the US.
September 25, 2018

Saying goodbye to the behemoth that was Toys “R” Us has meant saying hello, bonjour, hola and ni hao to a new retail point of view. The liquidation of TRU in the US and multiple global markets has led many IP owners to look abroad when launching consumer products programs—before they attempt to crack into the increasingly unforgiving US market.

In March, Toys “R” Us began the process of shuttering its American operations, resulting in the closure of more than 700 remaining US stores. At the same time, TRU announced it would move forward with UK store closures as it entered into insolvency administration in the region. A month later, Irish retailer Smyths Toys Superstores acquired TRU’s operations in Germany, Austria and Switzerland, while Toronto-based investment firm Fairfax Financial Holdings prepared to take over its Canadian assets.

According to market research firm The NPD Group’s consumer tracking service, Toys “R” Us represented roughly 12% of US toy industry sales in 2017—a piece of the pie that competitors like Walmart, Amazon and Target will be happy to gobble up.

Before its demise, TRU was affectionately known as the industry’s showroom because of its willingness to take a chance on new brands. Now, its closure leaves a gap in the market beyond the loss of retail channel diversity.

“There’s an appetite for product here in the US, but the problem is that retailers are the gatekeepers,” says Pam Kunick-Cohen, head of brand management, licensing and merchandising at LA’s Technicolor. “Toys “R” Us was always willing to take a risk on a new brand. Losing [it] is a big blow to the kids industry overall. Now, the US is probably the toughest market to crack.”

As a result, IP owners are looking overseas for more amenable markets. By launching in territories like the UK, Latin America or Australia, a company like Technicolor can build strength for a brand and create best practices that can then be applied in other regions (including the US of A).

For example, Technicolor’s animated underwater adventure series The Deep is showing strength in the UK, Germany and Australia. The series—which targets kids six to 12—originally premiered in Australia in late 2015 and has gone on to launch in dozens of territories. Because the show has seen such success with broadcasters like CBBC, Super RTL and ABC Australia, the brand’s consumer products programs are significantly more developed in those regions.

Kunick-Cohen says Technicolor is currently studying the consumer products programs in successful markets like the UK and Australia to learn which SKUs are most popular. That information will be applied in the US moving forward.

Kunick-Cohen says the consumer products program in the US will take longer to build, as the brand is still finding its sea legs with audiences on Netflix and Universal Kids (where episodes starting rolling out in 2016 and 2017, respectively). She says international efforts can only help Technicolor build up The Deep‘s profile stateside, as partnerships like the one with France Télévisions—which saw Technicolor work with the broadcaster to build out French-language social media platforms for the brand and bring on French influencers to raise awareness in the region—will provide learnings that can later be applied in the US.

“Our strategy is to look at which markets are performing, using those territories to build a case study that can be used in other territories,” Kunick-Cohen says.

APC Kids shares data with agents across territories, including which Kid-E-Cats SKUs are doing well

APC Kids shares data with agents across territories, including which Kid-E-Cats SKUs are doing well

Testing 1, 2, 3

Technicolor is taking a similar approach with Monchhichi. Originally a toy range from Japanese toyco Sekiguchi that launched in 1974, Monchhichi has grown into an evergreen lifestyle brand in the region that is particularly popular with teens and young adults, who grew up with the IP.

Technicolor’s French studio, Technicolor Animation Productions, acquired the rights to develop Monchhichi into a CG animated preschool property in partnership with Sekiguchi and Japan’s Silverlit Toys. TF1 was tapped as the core broadcast partner for Monchhichi, and rolled out the first season in fall 2017. The preschool-focused consumer products (including Silverlit’s range of playsets and plastic figurines, as well as publishing from Les Livres du Dragon d’Or and PKJ) launched in France this year. By targeting preschoolers, Technicolor is laying the groundwork to hopefully build the same long-term affinity for the brand in France as exists in Japan. The same strategy will be employed in territories around the world moving forward.

Using France as a testing ground before rolling out to secondary European markets, Kunick-Cohen says Technicolor is building awareness and affinity for the new preschool line before making any moves in Japan or the US.

French distributor APC Kids is also using a regional consumer products launch to build strength for its animated series Kid-E-Cats, originally a Russian series developed by Studio Metrafilms. Kid-E-Cats first aired in Russia at the end of 2016 before APC Kids secured a broadcast deal with Nickelodeon for its Nick Jr. channel globally (outside of the US). The agreement covered 143 countries, and Kid-E-Cats began airing around the world at the end of December 2017.

In Russia, meanwhile, the show’s second season has aired and 28 licensing partners have launched more than 500 SKUs at retail, including activity books (Egmont), apparel (Asiatex), music toys (C-Trade) and puzzles (Steppuzzle).

Using Russia as starting point, APC Kids managing director Lionel Marty says the distributor is working closely with licensing agents to duplicate the property’s success in other territories.

To build on the licensing agents’ personal experience in their respective regions, APC Kids holds training sessions on the dos and don’ts of the Kid-E-Cats style guide. It also provides information on which products are selling well in Russia and what rights have been renewed, in an effort to focus attention on high-performing categories across the various territories.

According to Carol Spieckerman, president of Arkansas-based retail consultancy firm Spieckerman Retail, major shifts in the retail landscape have cleared the way for companies to test-and-learn in international markets.

“There have been a lot of shifts that call for these different strategies and give brands permission to look at launching CP in new ways,” Spieckerman says. “Retailers are much more open to non-US markets. It’s no longer considered an ‘also-ran’ if you launch a product or a brand program in another country. Success is success.”

Indeed, looking to other regions for product launches might be a smart strategic decision for companies’ bottom lines, considering the sale stagnation in the US. According to The NPD Group, stateside toy sales grew just 1% to US$20.7 billion in 2017, whereas markets like Mexico and Russia are growing at a rate of 12% and 11%, respectively—the fastest-growing toy markets tracked by the research firm.

Techinicolor is using France as a testing ground for its preschool take on the Monchhichi brand before tackling Japan or the US

Technicolor is using France as a testing ground for its preschool take on the Monchhichi brand before tackling Japan or the US

CP crystal ball

In fact, Spieckerman argues that having launched a consumer products program in another region is now a major asset when tackling the US market.

“It’s a way for some of these US retailers that don’t have an international presence to gain insight into other demographics that are emerging in the US.”

According to 2017 estimates released by the U.S. Census Bureau, non-Hispanic whites are shrinking in population, while all other race and ethnic groups grew between July 1, 2016 and July 1, 2017. The Hispanic population increased 2.1% to 58.9 million and made up 18.1% of the country’s total population last year. The black or African-American population, meanwhile, increased 1.2% to 47.4 million, while the Asian population grew 3.1% to 22.2 million.

Launching a property in Latin America, for example, could provide IP owners and retailers with insight into that growing group of Hispanic shoppers, while launching in Asia—where the adoption of new types of tech-forward content delivery and mobile shopping is much higher—may provide insight into what the dynamics will likely be with younger generations in North America in the next five to 10 years.

“In the past, it was very literal. If you launched in Brazil and it did well, the takeaway was that you needed to build out Brazil,” Spieckerman says. “Now, you can take that data and apply it to other markets with similar characteristics. When you’re looking at inevitable changes like demographic shifts, generation shifts and platform shifts, you can look to other markets that have those demographics or that rate of technology adoption, and you can look into the future.”

And while much of the data gathered in an initial consumer products launch can be applied to territories around the world, Kuncik-Cohen stresses the importance of understanding the specific needs of different regions and adapting rollouts accordingly.

Technicolor is sharing data from social media and retail partners with licensees in an effort to apply learnings across borders. “We’ve already had cross-licensee calls, working to guarantee that all of the pieces of the puzzle are in place in any given market,” she says. “Regions all like to look at each other, and how well a property or product has sold, but there are regional specifics.”

For example, Kuncik-Cohen says, while kids magazines are strong sellers in Europe—in Germany and the UK specifically—they don’t perform well in the US. As a result, Technicolor is launching a kids magazine inspired by The Deep with Blue Ocean Entertainment in Germany, but won’t seek out a comparable partner in North America.

Instead, the company has partnered with SimEx-Iwerks Entertainment to launch a 4D theatrical experience inspired by the brand to expand on the series in a format that resonates with US audiences. The Deep 4D: Mystery of the Ancient Amulet is a 12-minute experience featuring 3D CG animation with 4D special effects such as vibrating seats, spraying water and bubbles. Participating locations—including the Georgia Aquarium, the Texas State Aquarium and the Orlando Holiday Inn Resort—will host the film for a one-year period.

One of the best-known cases of a brand achieving global domination after building strength in a specific region is Peppa Pig. The animated preschool series first aired in the UK in 2004, and after building strength for years has gone on to air in 180 countries around the world in 40 languages. Because of its staggered launches, however, the property is at a different stage of its life cycle in each market.

In China, for example, Entertainment One appointed Alpha Group as master toy partner for the property in March. But because the Peppa Pig brand as a whole is so mature—and because of the size of the market in China—the rollout is growing exponentially.

The property’s licensing program in China now boasts more than 60 partners and is expanding across categories including apparel, publishing, digital and live events. By tracking which SKUs perform in various regions—and analyzing the economic climates and demographics of those territories—eOne is focusing on the categories it believes will perform best in China.

However, eOne’s SVP of international licensing, Ami Dieckman, says adapting to the specifics of the Chinese market is difficult, even with more than a decade’s worth of information from various territories.
“The challenge of brand infringement is even more prevalent in China, and we have significantly invested in brand protection resourcing as a result,” she says. Scale too is a key difference in the market, she adds, and so eOne has rapidly expanded its local team across licensing, marketing and product development.

Technicolor is building strength for The Deep in the UK, Germany and Australia as the underwater adventure property finds its sea legs in the US

Technicolor is building strength for The Deep in the UK, Germany and Australia as the underwater adventure property finds its sea legs in the US

International info

Even established brands with the means of making a splash in the US are taking advantage of regional launches.

For example, Nickelodeon debuts in the US, followed first by English-speaking markets and then non-English-speaking markets (to allow time for dubbing), resulting in financially beneficial staggered growth. Typically, consumer products hit shelves in the US between 12 and 24 months after the TV launch, with English-speaking and non-English-speaking markets following afterwards.

“Because we have different penetrations in different markets, it can take different time scales to negotiate and secure the placement for our shows on free-to-air broadcasters,” says Mark Kingston, SVP of international consumer products for Viacom International Media Networks. “Because of that, the timeline of when we launch a consumer products program can vary from a day-and-date launch in the US to 24 months later in a market like China, Japan or Germany.”

Kingston says that in addition to providing data on the success of various SKUs that can be applied to subsequent launches, managing a property that is in different phases in different regions can also be a financial benefit.

Nickelodeon's PAW Patrol is gaining momentum in China and Germany, where the preschool property is only a few years old

Nickelodeon’s PAW Patrol is gaining momentum in China and Germany, where the preschool property is only a few years old

“When you look at PAW Patrol, for example, we’ve been able to manage the life cycle of that property across the globe at different stages. That means we have consistent earnings coming through on some of our key properties for a number of years, rather than having big peaks and troughs,” Kingston says. “We’ve got huge momentum in some markets internationally, like Germany or China, where we’re only really in year one or two of the launch.But barriers still exist. Nickelodeon inked an exclusive licensing partnership with YouTube star JoJo Siwa in 2016, and the kidsnet’s Entertainment Lab is producing six three- to five-minute episodes of the animated short-form series The JoJo & BowBow Show.

While Nickelodeon has quickly built out JoJo-inspired consumer products programs in the US, Canada, the UK and Australia, Kingston says it is working to replicate her success in non-English-speaking territories.

“JoJo has been a phenomenon for us in the US, Canada, the UK and Australia, but to date she hasn’t yet resonated with non-English-speaking markets,” he says. Beyond language hurdles, JoJo’s anti-bullying message hasn’t clicked in territories like Spain, Italy, Germany, France or Asia in the same way it does stateside, where in-school campaigns have made “bullying” a part of kids’ vocabularies from a young age.

As a result, Nickelodeon is currently developing strategies to help the brand make the leap across both language and culture barriers.

Moving forward, Spieckerman says IP owners and retailers should take away more than just data from these regional consumer products launches; they should also take away a new perspective.

“They can work in a much more surgical way, gathering the data they need to determine whether to move forward and how quickly,” Spieckerman says. “Every market has a story to tell. It’s incumbent upon these brands to not be so literal about what they’re doing, and to really have their storytelling chops honed in terms of how they can parlay insights and create a relevant narrative about what they’re doing in any given region and how it translates to other markets and to the US.”

Nick is working to translate Jojo's anti-bullying message across language and culture barriers

Nick is working to translate JoJo’s anti-bullying message across language and culture barriers

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