Märklin is having its troubles too...

[nblum]

From the Z gauge listserv and One News in New Zealand:

"http://tvnz.co.nz/view/news_business_story_skin/461645%3fformat=html"


Traditional toys out of favour
Nov 30, 2004

With their products cast aside by children in favour of video games or television, the makers of traditional toys are facing a miserable Christmas.

Toy makers in Europe say they are increasingly finding their market eroded by shrinking attention spans and intense competition from Asia.

An electric train set, for instance, was once top of every little boy's Christmas wishlist, but no more.

The world leader in electric toy trains, the German firm Maerklin, announced in October that after several years of declining sales it was laying off 400 staff in Germany alone.

The company, based in Goeppingen, near Stuttgart, has a long and distinguished history, having started business 140 years ago by producing miniature lead soldiers before diversifying into train sets in 1891.

But Maerklin has learned that tradition counts for nothing. "Today, we really are faced with extinction," said the company's chief executive Paul Adams.

The German doll maker Zapf is also facing a lean future after seeing a spectacular collapse in demand.

The company warned in November that it could no longer meet its annual target of 190 million euros ($A320 million) turnover. In the first nine months of this year, pre-tax profits were down 40% on the corresponding period last year.

Some even bigger names in the toy world are faring no better.

Lego, the Danish maker of the renowned multi-coloured building bricks, is facing the biggest loss in its history this year, between $A340 million and $A450 million.

"A number of factors have made the market a difficult one, starting with a change in mentalities," said Sean MacGowan, a toy industry analyst at banking firm Gerard Klauer Mattison.

"There are far more distractions for children these days," he said. "And we are seeing childhood effectively shortened, with children interested in new technology from an earlier and earlier age."

So television, the internet, video games and mobile telephones have taken a heavy toll on toys that require an element of concentration.

But another factor in the demise of the traditional sector is the sales policy of toy superstores, whose power has risen steadily since 1980.

"In the last 20 years, Europe has gone from a economy built on small shops to superstores specialising in knockdown prices," MacGowan said.

"It means manufacturers have been forced into producing at lower prices without really being prepared for it."

And toy makers must get it exactly right for the Christmas period, which accounts for half of all sales in this most seasonal of industries.

With their greater capacity to adjust production and their far lower costs, Asian manufacturers are at a distinct advantage in a market where reacting quickly to demand is essential.

Maerklin was once the uncontested number one in its sector, but now has to compete with smaller Chinese manufacturers who already account for two thirds of the global production of toy trains.

And analysts warn the gulf between the 'new' toy industry and the more traditional sector is set to widen, partly because many of the European toy makers are family firms who are reluctant to relocate to countries with a cheaper labour market.

"We have tried as much as possible to keep our production in Germany," said Maerklin boss Adams.

"So we raised our prices and now we find ourselves in a situation where the market no longer accepts them."