Shree Narayan Sabharwal – Business Head, Simba Toys India Pvt Ltd speaks about the Indian toy industry and it’s dynamics to the India Licensing Post’s editorial team.
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ILP: You joined Simba Toys in 2012. Prior to that, you headed the toys and sports category for the Future Group, across all formats such as Big Bazaar, Pantaloon, Central and Home Town.Tell us a little bit about your journey around that time and why you decided to join Simba Toys.
Shree: I joined Big Bazaar around 2005. I was taken on-board for furniture business but my boss thought that toys were a category that needed some handholding so he put me into toys.Future Group was in a very high growth stage and they used to sell through different verticals – Pantaloons, Central, Big Bazaar, Hometown etc. It was challenging& exciting because the assortment that you sell across these formats was very different, Big Bazaar was very very price sensitive, even today it is very price sensitive, compared to a Central which is a little more lifestyle and upmarket. In those days there was no Hamleys so the departmental stores like Central and Shoppers Stop which were more aspirational used to stock and sell all the expensive toys. It was a great learning because it taught me about what would sell at different price points, what would sell at scale vs what would sell in vogue and at a higher price.You were looking at volume vs value. So it gave me great exposure to a wide spectrum. In one vertical we were buying in huge quantities and the other we were buying lesser quantities in the other.
Joining Simba was a decision I took because I had always been on the buying side of the negotiation, so Simba gave me an opportunity to be on the other side of the table. In Future Group, I was trading through different verticals, and I had a team of around 7-8 people working under me and around 15 across the zones. Big Bazaar used to do a business of around INR 100 Crore (1 Bn) business, Central used to be around INR 20 Cr (0.2 Bn) business and Pantaloons used to do around 12 crores (0.12 Bn) business. So I was effectively running a business of around INR 150 odd Crores (1.5 Bn), so that gave me the confidence to run a business at scale and we were the largest toy sellers in the country. I knew of Simba because we used to meet them at the Toy fairs, they had a very big range and what I liked most was they were completely hands-on with the manufacturing process. Simba doesn’t sell anything which they don’t manufacture. It was not a trading company but mostly a manufacturing company, and I could see a huge potential for their portfolio but they were not very well represented here. Also, there weren’t too many brands, India was still opening up, and there was this German brand (with superlative production quality) and all it required was to present the portfolio across the various channels effectively and become the 3rd largest toy company in India. So that is what made me shift here.
ILP: What about the toys and sports category excites you the most?
Shree: Initially it was about scale. I was handling furniture and other hard categories before I joined Future Group. When I came to Future Group I was handed the toys category and what I loved about it, as my son as well as growing up around that time, So I could see what other things a parent looks at when buying an infant toy. We also used to bring a lot of smiles to the faces of kids. Even my experience at Big Bazaar was that when a family used to come and shop, there wasn’t much for the kids to do – s/he was not interested when the parents wanted to buy a garment. So they would run towards the toy section and play there.It was very fulfilling to bring joy to the kid’s faces, we would have a lot of fun there! Even at Simba, we have a fuse-ball table, so when people don’t feel like working they go there and have fun. It’s a great way to always stay young at heart!
ILP: According to the LIMA 2017 Global study report, the Toys market comprises 13% or $35Bn of the overall licensed goods market. How big do you reckon it would be in India?
Shree: I think around the same number, I would not put it more than 15-17% of the overall market. The Indian market is slightly dynamic, its changing now after the regulations on the safety standards. Earlier the licensed market would be 30%, but half of those would be fakes. India was a very open market, you could get anything from anywhere. So very tough to put a number on it. We sell more fakes than the original product. But now it’s changing, it’s getting tough to import fake products. In the last 6 months, starting 1st Sept.we see this when we visit the wholesale markets, the amount of fakes has come down quite drastically.
ILP: Simba Toys had plans to open over 25 retail stores throughout India. How have these fared? Any key learnings you would like to share?
Shree: Currently we have around 11 stores and in this financial year we’ve opened 2 stores. We’ve taken a pause as far as opening of stores is concerned primarily because of sales, the overall market sentiment was sluggish because of de-monetisation, then panic because of GST and in September there was a regulation change as far as the safety standards of toys and now from 1st Feb the custom duty on toys has increased from 10% to 20%. All these are great initiatives for the long term especially for a niche industry like toys in trying to get recognized as an industry by the government, it will help all the brands. Imports of fakes have gone down. There have been short-term losses. The only thing not going down is rentals. There is a dearth of a good real estate. Simba doesn’t want to open stores for the sake of it. We want franchisees to make money and there are a few proposals in the pipeline. Sales have been a lot more steady over the last few months and we see an uptick from here on without too many more changes.
ILP: Simba Toys is a licensor as well as a licensee for a few brands. That puts you in a unique position. How do you see the market for licensed products shaping up in India vs other global markets in which you operate?
Shree: We are in a very early stage of being a licensor, but one thing which I’ve started to notice over the last few years is that the licensed business has started to pick up the pace. One of the reasons is that people have begun pricing products well. Its largely been led by apparel. Earlier a licensed garment of Star Wars or any other action hero etc would cost you Rs. 1499/- upwards today its available at Rs. 499/- It’s more to do with getting the pricing right and placing it across the right channels and making it available in Tier 2 & Tier 3 cities, I’m certain the licensing business will continue to grow. And with the number of fakes coming down, the licensed business is sure to grow at least by 20-25% YOY.
ILP: You e-tail across many of the popular online stores. Any plans to have your own e-commerce platform?
Shree: Not at the moment. Since we are a 100% subsidiary of a foreign company, government FDI norms prohibit us from selling directly to the customer. As and when those are relaxed, we would certainly like to have our own e-commerce site. Till then we will continue to retail online through the various online marketplaces.
ILP: When do you think a brand is a license ready?
Shree: It’s a combination of a few things, but most importantly the brand has to fit into a particular segment. You cannot push a brand down the customer’s throat. There has to be some pull for it. You can put it on the shop floor, but unless the fit is right and there is a pull for it, the brand won’t succeed. We’ve seen that with our dolls line – the world over everyone knows of Barbie but when we launched, so when we launched our own doll Steffi everyone was surprised. But our proposition was that there is an option to Barbie and Steffi was also cheaper. If your product is right and the style guides are designed well with the end consumer in mind then it will work. We started getting inquiries for other products – backpacks, notebooks etc. It was not something we went to the market and sell. We were very clear that the product was not for 0-3 years but more for 4-8 – so the segmentation was very clear, the style guides were very clear, so people started to approach us.
ILP: How do you evaluate homegrown Indian IPs versus international IPs for the Indian market? What are the advantages and disadvantages of each?
Shree: I think Indian IP’s have come a long way and brands like ChotaBHeem have superseded all expectations and it’s very heartening to see. But what we lack in India is the life of a license. In India, the life-span is very low compared to the world. In many of the other western markets, you will see that the shelf life is much much longer. For e.g. a Spiderman movie may have released in 2015 but you will still have a buyer for it in 2018. Honestly, I don’t think the licensors do justice to the property. All of us are looking for a short-term gain.The challenge is how to launch and sustain a property in the long term. And the makers of ChottaBheem got it right, if it has been able to sustain for over 10 years, then they’ve certainly done something right. Indians think very short term. We need to correct this thinking & learn to invest for the long term.
ILP: What are your must-haves while selecting a brand to license?
Shree: Most of our licenses are group licenses which we buy into on a global level. The strategy is well informed by various research, social media, and trend spotting. So its easier to identify the segment you want to play in and which characters are the best fit for the same. For us, the consumer is the kid and through various platforms, you come to know what is trending. In India, besides the toys we get from our mother company, we do school bags. We are very clear we don’t want to add to the clutter, but differentiate. We are very clear about age segmentation. We address a wide age group from 0 to a college-going teen. We have a very clear idea how many properties we are going to take and for which age group and then based on the minimum guarantees we take a decision and go ahead. We are very clear we don’t want to clutter any particular gender/age segment with too many properties.
ILP: Which has been one great success story for Simba overseas you would like to replicate in India?
Shree: I think there are many as far as Simba is concerned. India sees a lot of the launches come here a little late. One standout success for us for which Simba has the master toy license is Masha & the bear. Its one of the most watched characters on YouTube. We are launching Masha next month and the potential is huge. Another great success has been Fireman Sam, which has also been a global smash hit across the Americas, Europe etc. I’m sure if we can launch both of these wells in India 2018-19 will not only be a great year but a super year for Simba in India.
ILP: What would be your advice to a young professional looking to start a licensing business?
Shree: You need to be patient in the licensing business. Don’t look at a property for short term. Both licensors and licensees need the money quickly. But both need to first invest in the business. When we did Barcelona and Dora, we did them for 3 years, not short-term 1-year deals. The business is going to grow 20-25% YOY. Stay invested in the property and reap the rewards over a longer period of time, else there is no attachment to the property. If you focus on only making back your minimum guarantee and get out of it, that doesn’t work. In year 1 the priority should be to build the awareness, Year 2 should be about how to get it to more customers and in year 3 the sales will be so good, you will want to renew the agreement for the next 3 years. Simba is primarily a manufacturing company, so the licenses we take whether it is from Disney or Universal. Simba doesn’t like to do short-term deals. So whether it’s the Lightning McQueen car which we have been manufacturing for the last 5-7 years or Transformers for the last 3 years. So as a company we look at staying invested for at least 3-5 years. Patience is the key!
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