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Pacing Trends And Quality Advancements Trigger Capsuled Merchandise Success

Posted On: 6/26/2003

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- The evolution of capsuled merchandise over the past decade has been nothing short of phenomenal. Consumer price points, merchandise, and even demographics have all either expanded or increased dramatically during that time. What's more, these encouraging signs of a healthy market segment show no indication of slowing down or even reaching a plateau. According to several industry pros, capsuled merchandise remains in the midst of a transition toward rising quality and price points.    


To gain some perspective, one need only look at products offered just a few years ago to see how far the industry has already moved.  Not only do these items look "antique," but downright blandly primitive by today's standards. Despite the fact that many of these items may spark a sense of nostalgia, they were also cheaply made, poorly designed and wholly generic in almost every detail. If placed out on a location today, those items from days gone by would more than likely baffle today's bulk vending customer who is not only older than his counterpart of years past, but possesses a keen eye for value and style.


Compare, for instance, the product offerings by Tomy Yujin, to those of a decade or more ago. The relative newcomer to the bulk vending field has made something of a specialty of collectible figurines, currently boasting licenses for some the most well-known characters in popular culture, including Disney, Barbie, G.I. Joe, Nintendo, Pokémon, Lord of the Rings, The Simpsons, and most recently, Marvel Comics characters.


Designed to vend for $1, the characters are most often seen in Tomy's own unique line of "Gacha" machines, which also include a display cases. What's more, according to company officials, the collectible figurines are selling well at $1 price point.


"We've not only met, but surpassed our sales goals," said Tomy's Ken Barnum. "And we expect those sales to only improve as we go along."


However, according to Barnum, $1 vend is not for every location, an opinion that most in the industry share. According to industry experts, while the higher price seems to be inevitable at some future point in time, it is currently best utilized only in select locations by innovative operators.


And while dollar vends are relatively isolated, the trend is growing. As consumers have become educated to expect quality merchandise, they have also shown a willingness to pay a premium for an item that has a high-perceived value.  


"I definitely see the price points increasing. I see a lot of the major operators at 75¢ or a dollar," said A&A Industries' Brian Kovens. "The other major trend I've seen over the past 10 years is that the quality of merchandise has improved and continues to improve. As the market gets more competitive, the product quality gets more competitive, because manufacturers want to produce the best toy they can for the price point."


Kovens and A&A, of course, are major forces in this competition. A&A's lines of "Homies" figurines remain among the hottest selling items in bulk. Kovens estimates that more than 100 million have been sold to date, a remarkable number for an item available from a single supplier. "The only other item that we've sold more of is NFL football helmets," explained Kovens. "But that was over so many more years. 'Homies' has only been selling for four or five years now and each series has been better selling than the one before it."


"Homies," as Kovens is quick to point out, represents another bulk vending milestone, aside from its phenomenal sales. It is the first license that was "built" in bulk vending. That is to say, its enormous popularity is derived almost exclusively from machine sales.    


"'Homies' was not built in retail and filtered down," said Kovens. "But now it is filtering up. There was no retail 'Homies' merchandise out there. 'Homies' is the first example that I've ever seen that we, as an industry, have built a trend. Was it a fluke?  I don't think it was a fluke, I just think it was having the right item at the right time. And it can happen again.  Our machines have become major destinations for kids to get quality merchandise and they look for it. When they don't get what they are looking for, we don't receive the revenue we are looking for. Many years ago there were a lot of generic items, where today our industry follows trends and licensed merchandise much more closely, so we're more in tune to what the retail market is providing and what the consumer is looking for , we've become a major retail destination."




Danny Paszkiewicz of Cardinal Distributing also sees the trending upwards of prices as well as quality. "Nobody knows at this point whether it's going to be 75¢ or a dollar," said Paszkiewicz. "I think right now there is some confusion in the industry as to what do we jump to: do we jump to 75¢ or go right to the dollar? But I've heard nothing but success stories with both."


However, Paszkiewicz does add that those making the jump in pricing are doing so cautiously, picking both the right merchandise and right locations. "Not every location is going to be suitable for a dollar," he explained. "But some are, like the big discount stores. Also, the merchandise has to be right and it's up to us as suppliers to bring in better quality merchandise that will look good and appeal to the children at a dollar level."


According to Paszkiewicz as well as others in the industry, overseas suppliers of merchandise have taken notice and are actively monitoring American youth trends. "Some of the companies in India know exactly what the kids in the U.S. like," he said. "And they are really, really getting good at staying on top of things. They are watching our market very carefully."


The American side of the bulk vending industry is also taking more careful notice of trends among its key demographics. Several operators have reported speaking with suppliers regarding what's hot and suppliers have also admitted to tipping off operators as to the latest trends.




What does the future hold for both consumers and operators in terms of capsuled merchandise? Peter Becker, Toy 'n Joy, who helped pioneer the march toward higher prices and higher quality, sees nothing but a steady increase in quality. "Over the next five years I see a continued legitimization of bulk vending as a reputable distribution method," he explained. "With our continued focus on greater values, I think we should also see a very firm movement at least toward $1 vending."


This increased value, Becker is quick to explain, is a result of the bulk vending industry's ability to market huge quantities of product. Compared with retailers, for instance, who may consider a purchase in the tens of thousands a substantial order, it is not unusual for a single bulk supplier to stock quantities in the hundreds of thousands or millions. "We, as an industry, purchase such incredible volumes that it allows us to drive prices down," said Becker. "So, over the next five years, I think we'll be seeing more and more value as we begin to legitimize the method of distribution, and people can receive incredible value for their money."


What type of items these "incredible values" may be is anyone's guess. Likely they will include toy fashion accessories, such as the play jewelry offerings currently available in machines, though of better quality.


However, to say that the future holds simply "more of the same" would be to seriously underestimate the industry's resources and innovative spirit. For instance, when Becker recently offered a limited quantity of "Lite-Up Necklace," the battery-powered item "blew out" of machines at record speed. "With the continued increase in the value offered to the consumer, there may very well include electronic-based items in the future," said Becker. "Right now we're on the cusp of the ability , with higher price points, increased volume and lower production costs overseas , to offer those kinds of items. I would not be surprised to see $1 electronic items in the future."