One of the primary goals of every toyco is getting its new products stocked at big-box retailers, but the retail landscape has changed dramatically post-pandemic. Walmart, Target and Costco are more fickle than ever about giving brands even a square inch of shelf space unless they feel absolutely certain that the product line will be a home-run in the toy aisle. So, with no room for risk, toycos and emerging IPs are biting the bullet and focusing on new sales channels.

This retail strain is being felt industry-wide, with even toy giant Hasbro struggling to get its products on shelves at Walmart in time for the theatrical release of Dungeons & Dragons: Honor Among Thieves last March. At Kidscreen Summit 2023 in February, Casey Collins, the company’s head of global licensed consumer products and business development, discussed the need to stock its new lines at lower-tier retailers and e-commerce platforms, including book retailer Barnes & Noble and DTC platform Hasbro Pulse.

Collins sees new opportunities for toycos emerging in the value retail channel, where popular chains like Dollarama, Dollar General and Dollar Tree are starting to move away from low-quality merchandise to carrying officially licensed products. Business at these stores is at an all-time high as consumers worldwide battle with high inflation and the rising cost of goods. Last year, Dollar Tree opened 455 new stores across the US, and it has plans to open 650 more this year to satisfy customers’ growing need for bargains.

With 30,000 value stores currently operating in the US, matched by an equal number in Europe, Toronto’s Spin Master is diving headfirst into this channel with the development of a new value-oriented product mix for shoppers.

“In the past, Spin Master always viewed value retailers as a closeout destination for products that didn’t sell well,” says Doug Wadleigh, head of global toy brands. “But now that the value channel has become less stigmatized and is focusing on delivering stronger brands to consumers at a greater variety of price points, we’ve started to look at value as a key destination for our properties.”

Several of Spin Master’s top-performing brands are set to hit dollar store shelves this year, including Tech Deck fingerboards, Bakugan collectibles, PAW Patrol bath toys and Monster Jam vehicles. “We’re launching these brands at value because we believe this is a great brand-building opportunity for us,” says Wadleigh. “What’s most exciting for us is that value retailers are much more open to expanding the range of their price points. Most of the products are between US$1 and US$2, but we also have a healthy chunk of products under US$5, and we’re even stretching to see if we can extend that to US$10 in some cases.” Value retailers are in an experimental phase, testing out in-store promotions and seasonal product lines to help create new growth opportunities and expand into new price points, he adds.

A key challenge for Spin Master is the need to finely balance multiple product development mindsets between channels—while big-box retailers expect innovative toys infused with new tech and gimmicks to drive sales, success at value retailers hinges on finding new ways to create lower-cost items while still delivering great play value for kids.

Another newcomer that sees the value in value retailers is BBC Studios, which used the runaway success of preschool show Bluey as its gateway into the dollar channel. Suzy Raia, SVP of consumer products and business development, says the company slowly expanded into Dollar General stores over the course of 12 months, incrementally adding new products to its range so as not to overwhelm consumers too fast.

“We started with toys, with our master toy partner Moose Toys creating some figures and books that were packaged together for preschoolers in the channel,” says Raia. “Once we nailed down the price and saw that value consumers were just as interested in the property as our mass-market ones, we knew that we could start to grow the line.”

Bluey toys, party goods, seasonal items and other consumer products are now available at value retailers.

Since getting into the channel, BBC Studios has expanded the Bluey products available at value retailers to include party goods, seasonal items and a new line of consumables that’s set to launch throughout the year. And more retailers in the space have also begun to carry the line, including Family Dollar, Five Below and Poundland.

Raia says that while other brands in its portfolio—such as Hey Duggee and Doctor Who—have value channel potential, it made the most sense to start with Bluey because the IP appeals so widely in the kids and family demographic. “Bluey is a show that resonates with people from all economic backgrounds. We need to be in this channel—and every other tier of distribution—so that all of our consumers have a product mix that works within their price-point comfort zones.”

While value retailers are the hot new channel on the block for evergreen brands, emerging IPs struggling to find an audience are likely to turn towards hobby and specialty channels to start building a community of loyal consumers. Since launching in 1995, French games publisher Asmodee has really focused on developing its relationship with independent hobby retailers and game stores. The company is one of the leading distributors of board games worldwide, publishing tabletop classics like Ticket to Ride and Catan, as well as licensed games including Stranger Things: Upside Down and Marvel Champions: The Card Game.

Currently, Asmodee has a mix of 42 sales reps and support staff servicing the hobby and specialty channel, and a much smaller team of 10 managing its business at mass retail.

“It’s a very different kind of relationship in terms of how you work and sell between these channels,” says Julien Sharp, Asmodee’s GM in the US. “Mass retailers want games that sell quickly and are easy to explain, but a hobby store is usually owned by someone who is a gamer. They know firsthand what’s trending and what’s popular in the space, so you need to bring in a certain kind of sales rep who knows the mechanics of each game.”

Sharp explains that Asmodee’s reps make weekly calls to thousands of stores to develop relationships with owners and learn about each one’s clientele. And the goal of these calls isn’t to stuff stores full of every product Asmodee produces, but rather to curate a list of games, expansions and accessories that are the best fit for each store’s players.

For example, some stores prefer to carry only miniatures games like Star Wars: Shatterpoint and Marvel: Crisis Protocol, in order to also sell paints, brushes and terrain that players can use to customize their figures and tabletops. Meanwhile, other hobby stores prefer to purchase a wider range of cooperative and competitive board games that players can collect for game nights with friends and family members.

Next year, Asmodee’s Fantasy Flight Games (FFG) division will roll out its latest trading card game, Star Wars: Unlimited, to retailers worldwide as it looks to take a chunk out of the booming TCG market. The first 200-card set will feature new artwork showcasing the franchise’s iconic heroes and villains from a galaxy far, far away. And the game’s hobbyist player base will get first crack at all new releases before the cards hit mass retail.

“Hobby retailers are the lifeblood of a TCG experience,” says Chris Gerber, FFG’s head of studio. “They are the hub that communities form around, and their importance for Star Wars: Unlimited is no different.”

While the Star Wars franchise has generated a broad multi-generational audience since launching in 1977, players need more meat on the bone than just a beloved IP to get them to commit to a new TCG. In response, FFG is developing and launching an organized play program alongside the game’s first starter decks and booster set. It will feature tournaments, prizes and a variety of play formats to attract both competitive and casual players.

This sends a positive message to retailers and consumers that the company is supporting the Star Wars: Unlimited community long term with new products and releases, which helps to quickly build loyalty, says Gerber.

“To be transparent, some of our competitive games have missed this mark, and our review of those experiences has taught us how important [organized play] is. I also think that limited-play formats—in which players open a limited number of packs and create decks with only what is available to them—wasn’t natively built into our previous TCG products. From day one, we made them a part of the core design for Star Wars: Unlimited because they are great ways to engage new and/or less experienced players, while also providing a different challenge for competitors. And from a retail standpoint, these formats provide stores with a built-in opportunity to move stock and engage customers simultaneously.”

While collectibles giant Funko has had success in both value and hobby channels, its sales sweet spot is now in the DTC space—specifically its e-commerce shop. According to the company’s Q1 2023 financial report, DTC sales grew by 61% to US$41 million compared to the same quarter last year. This accounts for 17% of the toyco’s total Q1 2023 net sales, beating out its biggest brick-and-mortar retail partner Walmart (11%).

Funko began developing its DTC business in 2019 after opening flagship stores in Everett, Washington and Hollywood, California. The goal was to replicate the in-person shopping experience online, and also maintain full control of inventory and exclusive product drops.

“It gave us an opportunity to get closer to our consumers by having that direct one-on-one relationship with them,” says Funko’s SVP of DTC, Johanna Gepford. “In phase one of building the site, we focused on doing limited-edition drops for events like San Diego Comic-Con, but that wasn’t going to cut it. That took us on a two-year journey of building out our vision of the site and having more of our evergreen products on there to drive traffic.”

Gepford adds that the site also gave Funko the ability to collaborate with consumers, which let the audience identify issues and propose solutions for improving the shopping experience as updates for the DTC business continued to roll out.

“We surveyed our users constantly, asking, ‘What is the most important thing to you?’ When we started tackling those issues on the roadmap, one of the biggest challenges was the shipping box. Most of our consumers are avid collectors who keep their Funko Pop! products in the box, so arriving undamaged was a top priority. We had to work with packaging engineers to create a new wrapper to make sure each figure was delivered in pristine condition.”

In March, Funko launched an overhauled DTC site, adding categories for sister brands like Mondo and LoungeFly, along with a loyalty program to entice new and returning customers to shop online. But the company isn’t interested in copying a simple “buy 10, get one free” loyalty model where customers rarely use their points, says Gepford.

“Our loyalty program is based on experiences and opportunities that you can’t really buy with money. We’re looking at using your points for Comic-con passes, entering into draws for signed items and first opportunities at product drops—all of which engage the consumer on a more meaningful level.”

The next step for Funko’s DTC business is to expand onto e-commerce platform Ebay, where it plans to sell its high-end collectibles and provide a branded marketplace that will help reassure consumers that they are buying genuine products instead of counterfeits. In 2022, Ebay acquired a US$263-million stake in Funko in order to become its preferred secondary marketplace for consumers looking to sell pieces from their collections, as well as to help expand the collectible giant’s distribution in more international markets.

Retail channels are continuously evolving, giving toycos and emerging IP owners more options than they’ve ever had before when it comes to planning consumer products strategies and reaching target audiences. Alternative retail channels all focus on building community and growing brands through word of mouth, which can be the key to getting big-box retailers on side. But toycos will still need to invest significantly, not just in developing product lines, but also in building a satisfying shopping experience for their loyal fandoms.

This story originally appeared in Kidscreen’s August/September 2023 issue. 

Photo courtesy of Fantasy Flight Games and Lucasfilm.