COVID-19 takes its toll on toys

Movie delays create merchandising challenges for toy retailers

What’s a retailer to do when a licensed toy hits the shelves but the film it’s tied to doesn’t hit the screen? With theaters closed and film production shuttered, much-anticipated movie releases from “Trolls World Tour” to “Top Gun: Maverick” have been delayed. But toys, collectibles and other merchandise based on TV and movie characters are prepared for market long in advance, which leaves retailers with licensed products that are living in limbo.

Rumblings about Hollywood delays and the downstream impacts started making the rounds early in the year. “This goes back to Toy Fair in New York in February, when we first started talking about potential movies — and not even TV yet — that would be delayed,” says James Zahn, senior editor at The Toy Insider, of discussions at 2020’s annual toy industry trade show.

Toy Consumer Trends

Learn more about the evolving state of toy and gaming retailers here.

As the pandemic continued and activities stopped, the first movie to see major impacts was “Trolls World Tour” from Dreamworks. It served as a test subject for the industry. “The merchandising for Trolls and all of the external licensing promotions were already at retailers in January and February before the pandemic hit,” Zahn says. “The marketing for the film was also already done.”

Toys, cereal boxes, bedding and a range of other tie-in products were in the marketplace. But what to do with the movie? Digital to the rescue: Along with showing the film on a few drive-in screens in the United States, Zahn says, “They went ahead and put the movie out as a digital rental in April.”

That decision helped move toys already in the pipeline. When the traditional home video window came up this summer and consumers snapped up the movie on Blu-ray and digital HD, more toys made their way into shoppers’ hands.

Tough choices

But things went from bad to worse. The latest Scooby Doo installment was ready for release and “Scoob!” had a long list of toy products on deck to accompany it. Not only was there no movie in theatres to support the merchandise, there would also be no foot traffic in retail stores due to the shutdown.

Even where stores selling toys were still open, children weren’t wandering the aisles discovering new items. “Most parents weren’t taking their kids to the toy departments,” Zahn says. Warner Bros. opted to make the movie available for digital rental and purchase, getting the film in front of families at home and helping trigger merchandise sales.

In June, the dominos really started falling for the remainder of 2020. Illumination pushed the release of “Minions: The Rise of Gru” to mid-2021. Studios also had a bevy of bigger-budget movies with huge marketing tie-ins to contend with, including the new Fast and Furious franchise installment and Marvel’s “Black Widow.” “Top Gun: Maverick” was bumped twice, first to December 2020 and then to July 2021.

Retailers with a contingent of licensed toys on hand faced some tough choices. “Do you leave them on the shelves and have them sit and collect dust instead of replacing items with something that will have quicker turn?” Zahn says.

Another option was to dedicate warehouse space for the next year to house tie-in merchandise until the films were finally released. Or brands could opt to cut their losses and clearance the items now. “We’re seeing all of the above,” Zahn says.

Waves of demand

Manufacturers have some influence over how retailers deal with their toys. Mattel chose to leave some Minions products on the shelves — previous films in the franchise are likely to help sell the latest crop of toys — but they’ve held back a handful of key items. “They're keeping two or three hot SKUs and they’ll release those next summer when the movie comes out,” Zahn says. “They're doing the best of both worlds.”

Toys tied to films and TV franchises with established fan followings have seen some success, such as merchandise associated with Trolls and Mulan. “Trolls is a property that fans already knew and loved,” says Ken Seiter, executive vice president of marketing communications at The Toy Association. “It also helped that ‘Trolls: The Beat Goes On!’ series is still streaming on Netflix to bolster demand for product.”

Even those items that reached retail early have factors working in their favor. Seiter says there’s often “a second wave of demand for toys when they head to streaming platforms where they can be watched over and over again,” and points to Disney’s “Frozen” and “Moana” as examples.

Research from NPD Group found that, across 12 global markets including the U.S., Disney’s Frozen was the largest gaining toy property in the first half of 2020 and Star Wars was second in line.

Kid-driven sales

With preparations for holiday sales just around the corner, questions remain about how 2020 will stack up for retailers. Though Learning Express Toys and Gifts doesn’t do a huge business in licensed toy products, Lisa Visco, vice president of merchandising at the Devens, Mass.-based retailer, says, “There could be an impact in late fall — November and December — which is the peak selling period for toys, of course, and a time when movie- or TV-driven product is biggest.”

Knowing there are ongoing challenges with release dates and merchandising schedules, she says her team is looking to leverage “wow”-type items this holiday season. “Unique items that are a bit more expensive,” she says, “as there is a sense that parents (or grandparents) may want to ‘treat’ their kids or grandkids, given how tough this year has been for all.”

In the early stages of the pandemic, Seiter says parents controlled most of the purchases, often opting for educational games and toys to take advantage of new-found family time. “As we move into the holiday season, kids will once again be in control of what they want on their wish lists, which means a return to more character-driven product purchases,” he says.

Though there may be fewer products tied to movies and television on offer, he anticipates some entertainment properties will still be hot sellers. “For example, ‘Star Wars: The Mandalorian’ product is rolling out now, and it’s a solid bet for all toymakers involved, from Mattel to Hasbro to Kellytoy.”

The schedule for TV and movie tie-ins will remain fluid well into 2021. Film crews, only recently back on the job, have already reported new delays due to positive COVID-19 tests and other issues. In addition, several of next year’s important annual toy industry events have been postponed or will transition to a virtual format.

Some of those are fan events, Zahn says, that fuel sales for licensed products. Organizers are closely monitoring conditions as they tentatively plan events for next spring and summer. “As we inch closer to those 2021 dates every day and the pandemic doesn’t show any real signs of change, there’s going to be a big worry there,” Zahn says.

Entertainment companies continue to advertise to ensure their franchises remain on customers’ radars. Between YouTube, digital content distribution platforms, dedicated outlets such as Nickelodeon and other online channels, Zahn says, “The toys are still getting in front of kids and they know what’s hot.” Time will tell if that visibility turns into sales.

Suggested

NRF expects holiday sales will grow between 3.6 and 5.2 percent
 
November 23, 2020
Through the retail lens: Holiday 2020 and the shopper mindset
 
November 23, 2020
6 ways retailers are making holiday shopping safe, merry and bright
 
November 20, 2020