Black Friday has always amplified supply chain challenges in the toy industry. But now, analytics is helping retailers seize control of an unpredictable market.
Black Friday is always one of the most important days of the year for retailers. It kicks off a huge period of spending through until Christmas, with 30% of all retail sales occurring over the Black Friday weekend and the average adult spending around $400.
For many people, it’s a chance to secure the TV or fridge they’ve been waiting for at a discounted price. But for parents – and other gift-givers – it’s a perfect opportunity to get special prices on toys ahead of the festive season.
Year after year, toys come out as the top product category of the Black Friday weekend. In 2020, major US retailer Walmart made a huge $44m in this weekend alone. It means retailers face the difficult challenge of predicting what the biggest new toy trends will be, forecasting sales, and putting the measures in to ensure supply meets demand.
The challenge remains the same every year, with specific toy categories and brands outweighing others on the market and causing stock issues worldwide. But now more than ever, toy retailers can use big data analytics to predict buying patterns and prepare for the busiest shopping weekend of the year.
Unique challenges for the toy industry
Like all retail industries, toy retailers can use analytics to better understand stock shortages and predict demand – from studying current and historic buying behaviour to conducting deep target audience analysis. For example, Amazon ranks products based on available inventory, how its customers have engaged with the products in the past, and how the products fit in with current purchasing trends.
Many toy retailers also use big data tools to make price comparisons in real time over the holiday period, ensuring their stock is being sold at the most competitive and profitable prices.
However, the toy industry faces its own challenges that make using analytics a little more difficult. Slow development times and unexpected consumer responses mean it’s incredibly difficult to make accurate predictions on which toys will sell best, and adapt when stock begins to diminish.
Just look at Disney’s Frozen for example – when the film unexpectedly became one of the biggest movie hits of all time, parents were fighting to get hold of limited merchandise supplies.
Also, while brick-and-mortar stores continue to dominate the toy industry, e-commerce is rising rapidly – eMarketer says that e-commerce sales are projected to grow 34.9% year-over-year. This means the task of tracking consumer buying behaviour will be increasingly spread over both physical and digital channels. Plus, retailers will need to adapt to other challenges commonly associated with e-commerce, such as higher product return rates.
Meeting these demands isn’t unachievable – with the right customer data sets and advanced analytics capabilities, toy retailers will be able to gain a complete view of their customer journeys across all channels. But historically, the toy industry has always had a major data shortage.
New opportunities with connected toys
While other retail industries such as fashion and technology have a huge volume of behavioural data sets available due to the digital presence of their demographics, toy retailers have much less data to play with.
To add to this challenge, children are increasingly moving away from toys and towards gaming at an earlier age, which means there’s a shorter window for toy manufacturers to target younger age groups.
But the toy industry has started to adapt in the past decade. Toy makers and retailers are shifting towards hybrid, connected toys that blur the lines between physical and digital play. Popular examples like Skylanders and Disney Infinity combine physical toys with gaming experiences, borrowing from the retail models established by popular mobile games such as Candy Crush and Clash of Clans.
The retail models of Skylanders and Disney Infinity draw customers in with a low-cost entry point for the base game, and keep customers engaged with additional NFC-enabled toy figures that interact with the base model. Not only does this create a longer shelf life for the product – it also gives the retailers and toy makers a new source for data collection on player behaviour.
Balancing the power of data with privacy
Following the launch of these hybrid toys, other companies have started to follow suit. Many retailers are investing in internet of things and connected toys – toys that connect to the cloud during play and produce valuable data on consumer behaviour, such as the time a user spends with the toy. Insights like these will ultimately help create greater accuracy in predicting trends and adapting supply chains to meet demand.
Big industry players have jumped on board this new trend, too. Lego has introduced its connected toy range Lego Dimensions, and Mattel has launched an AI-powered barbie doll that sends data back-and-forth between the company’s control centre to power two-way conversations.
We’re also seeing dedicated data management companies enter the toy market. For example, the technology company AIJU in Spain has created the platform ‘Cloud4Toys’, where all big data related to smart toys is collected. Companies that want to access the data will have to prove they’re using it to improve future products, and that they’re meeting ethical guidelines related to child data usage.
A chance for toy retailers to regain control
It’s hard to tell whether connected toys will become the new normal for the toy industry, but they do offer some compelling opportunities for toy retailers to take back control of their supply chains and sales – especially for landmark events like Black Friday.
The insights from these toys offer solutions to age-old challenges in the industry related to stock predictions and unexpected trends. And in years like 2021, where the toy industry faces major worker and container shortages, along with supply chain bottlenecks, insights like these could be critical to adapting fast.
Analytics at The Smart Cube
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To read about some of the ways we’re helping our clients, or to learn how we can help you achieve your own business goals, visit us.