Republished from NZRetail's November 2014 issue.
Having the right product range, enthusiastic staff and efficient back office systems and processes are crucial to success, according to owner Martin Monk, who says the online business is going from "strength to strength" and, now, represents 35 per cent of Toyco's turnover − compared to just 20 per cent a couple of years ago.
Toyco was created in 2009 after it split from the Toyworld group due to differences in opinion over the future of online retailing. With just one store, at St Luke’s in Auckland, Martin has no regrets about going it alone.
"We're able to fill our shop with more of what the customer needs − rather than what was forced down our throat by being part of a retail chain. We can listen and respond to what the customer wants, faster."
With a website designed by Blackpepper, and a user-friendly back office web management programme custom-built by Netweb Solutions Limited, Martin believes that Toyco has a competitive advantage. "You've got to have your products online in the best spot and at the best price and marketed well − it's no different to being in a retail store." A key feature is the ability to market and process every product through an online POS system − backed up by a highly efficient, scan pack dispatch system − meaning that orders are packed, dispatched and tracked by Courier Post within 24 hours of receipt.
The growing pains come from Martin's refusal to 'drop ship' products from suppliers, preferring instead to source stock from within the store or from a conveniently located Storage King facility upstairs. Until now, his ten full-time staff have multi-tasked across the physical and online businesses which operate under the same roof. But, Martin says, "the pressure comes on" when there may be hundreds of online orders to process within an hour and customers come into the shop wanting the same product. "We have to get that product before they pick it off the shelf. That's one of the little challenges we face."
The web management programme has built in systems that provide minimum stock levels, especially around fast-moving lines, however the time is fast approaching when the online business will have to become stand-alone. "We know we're going to grow and we know we want to go further but we'd be hamstrung by the space we've got here." As a result, additional staff are being recruited and trained to assemble an online team.
Martin is philosophical about the stiff competition from bigger players, such as The Warehouse, and from online retailers offshore. "It's definitely a challenge but it's something we can't control so you just get on and do what you can do with what you've got." By offering high levels of customer service, product selection, regular promotions and speed of delivery Toyco believes it has a real advantage over the competition.
Much of the product range is sourced from either local suppliers or the Melbourne Toy Fair in March and, with around 17,000 SKUs, Toyco offers one of the largest choices possible across a diverse selection of the world’s best brands − think LEGO, Schleich and Sylvanian Families. For the record, Toyco is Australasia’s second largest LEGO retailer (behind Myer Sydney) and has New Zealand's largest collection of Schleich animals and Sylvanian families.
According to Martin, the "single biggest challenge" comes from the lack of industry R&D going into new products for children who now prefer to play with mobile devices rather than toys. "We've had to go out and find other categories to fill needs for those parents who don't want kids to sit on iPhones and iPads all the time."
The response has been to diversify the range to include categories such as models, hobbies and collectibles, as well as outdoor sports equipment. Having ventured online, Martin says he soon discovered that "we sell pretty much anything to some extent; we weren't just limited to toys." Broadening the gift range to appeal to family members of different ages has also paid off. "We're all young at heart and all like to play with toys, so we've grown our toy range to cover a lot older demographic."
Keeping pace with online trends and staying in front of the technology by providing convenient solutions comes with the territory. Click & Collect is growing in popularity and, because more customers are either opening promotional e-mails on smart phones or buying from tablets, there's been an increased investment in a more responsive website. Martin says it's important to "put a face on the consumer" by understanding their needs and wants. "We're trying to get them to buy straight away rather than think about it overnight when maybe they've forgotten," says Martin.
While Toyco doesn't have a comprehensive loyalty programme, it does reward customers in a variety of ways through Club Toyco − which fosters special interest groups and sends out regular e-mails when discounts are available on specific brands. Collectors of certain brands can also get the equivalent of a coffee card, stamped in store when they purchase products, and the company has just launched an electronic version. They also hold an annual ‘LEGO day’ in store and unveil an original one-off LEGO piece.
In the social media space, Toyco website provides links to YouTube videos about various products. However, the main focus is on Facebook where it has obtained good traction from posts once or twice a day − that might give people a sneak peak at the exciting new ranges coming up. "Facebook is more of our target market," says Martin, "the mums in that 23-40 year old age group with kids who are on Facebook − chatting away to friends and family during the day."
However, the company's big online drive involves participation in Click Monday which produced a "veritable tsunami" of orders in November last year − and boosted online sales by a factor of ten. The ultimate aim is to extend the reach of Toyco's brand beyond Auckland to the rest of New Zealand and, while the uplift from the recent Click Monday in September was slightly down on last year, Martin says that considering the difference in timing "it was still an extremely successful promotion which gave us a huge uplift in sales and exposure of our brand leading into the critical trading period. It also enabled us to test our new systems and processes,” (see sidebar).
Being a seasonal business, Toyco is prepared for the massive uplift as Christmas approaches with good product variety, depth in key brands and efficient system in place. However, conventional advertising and fighting for Google analytics can be an expensive business, says Martin. "Fighting for keywords like Lego that everyone wants to bid on becomes too expensive for us as an independent store." Instead, the company will leverage off television advertising from its major brand partners by promoting the brands on its website and "hopefully that whole cycle flows through to a sale."
As for those retailers who might be uncertain about venturing into the online world, Martin has some simple advice. "Don't be afraid to believe in what you believe in. Make a statement and go out and do it."