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Mattel Disney Pixar CARS 2 Diecast: What Happens at Retail When CARS Clot?

So, what exactly happens at retail when demand is lower than supply?

Like everything else, it’s complicated- there are no set answers but basically it’s like when a lion, an elephant, an alligator and a hippo all show up at the same watering hole. Everyone has their business to do but eyes each other warily.

The Big Three are really the Big Two – Walmart & Target. The only two that matter are Walmart and Target. Toys R Us will pretty much carry every toy anyway so if the other two are in, TRU is certainly in.

And faced off are two companies that control over 50% of the toy market and probably 80% of the brands – Mattel & Hasbro – so it’s an elaborate dance when lines perform not to expectations, poorly or bomb outright – neither side can scream bloody murder because both sides need each other.

In a normal course of action when a line does poorly, the question is how poorly. The worst case scenario is when the retailer has tried pretty much everything including discounting, BOGO, etc and it still just sits there – the most obvious recent example is Green Lantern. There are several options and Walmart & Target seem to differ. Walmart is more direct – they will either pack up items and send things back or they will call in toy reps to come in and swap things out. Target does not seem to favor the swap – probably because they do not like vendors wandering around their stores so Target will do more clearance discounting.

(Mattel will stock their own company stores and/or re-sell to consolidators or overseas to “bury” it away but now with the internet, it’s not an easy task).

Now, if the line seems to sell okay with discounting and it’s not a huge setback, WM & Target will simply accept it as a normal course of business. For instance, most apparel is based on selling 60-75% at full price, 20% discounted nearly breakeven and the rest at a loss. Most toy lines tend to fall under these guidelines as most toy lines last 3-9 months depending on when the DVD or holiday period is – so as long as it drove in enough business (shoppers to the stores), good enough … and even if it’s very poor – if the stores did not commit a lot of inventory, they might grumble and remind the sales rep, “You owe us one,” it’s mostly just the normal course of business – not everything is a hit or even a mild success.

WM tends to throw their weight around more – partially because they have 60% more stores than Target so even at carrying the same inventory level, they have committed that many more dollars. So, the worse case scenario is that Walmart says they won’t pay for something and they are returning it. But there can also be some negotiation. Walmart also knows they are not going to cut off their nose – after all, Mattel has Hot Wheels, Barbie & Fisher Price so even if something performs poorly today, there’s tomorrow to think about but same with Mattel. If Walmart is going end up buying $1 billion dollars worth of toys this year, why salt the Earth over a few million dollars?

So, it’s a dance.

This is one reason why small toy companies cannot really make it because if Walmart commits big to a line and it does not sell, WM can simply charge everything back to you and pay you nothing. You have no real recourse as WM is not afraid you won’t supply them down the line as they would be in making too many arbitrary decisions regarding Mattel or Hasbro products. But conversely if Mattel and Hasbro sells WM on a movie that ultimately bombs, Mattel or Hasbro is NOT going to hold WM’s feet 100% to the fire and say NO RETURNS, PAY UP or we’ll cut you off …

Of course, sometimes a retailer will go hog wild and say WE WANT TO GO BIG with this – then of course, the toy manufacturer will get that in writing. 🙂

With most lines, it is a short term deal so it can simply be sealed off and it’s done. CARS is different because it’s clearly a Disney evergreen line with shorts, a theme park section, more films (DVD only or otherwise), etc, etc … so while there might be short term hiccups, in the long run, there’s still money to be made and of course, this is true on Mattel’s side – just as Mattel paid for the new Target CARS banners and extended section elements (out of merchandising dollars) to hopefully juice up sales.

But going forward, Walmart as of now seems that they are definitely de-emphasizing CARS diecasts and Mattel CARS. This might be a temporary situation as when CARS Land opens or when Toons returns, they might re-commit more but as of now, WM seems to have returned a few hundred thousand CARS items and have said no to new CARS 2 exclusives. There does not seem to a major shift at Target & at TRU – maybe because they know what Disney is committing to promotional and marketing dollars to the opening of CARS Land in June – and Target is taking a more wait and see approach.

So, like everything else, there are never any set answers … the question is whether the watering hole is big enough for everyone or one false move set off some stampede …

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