How to Succeed in Specialty Toys: Veteran Kevin McGrath’s 35-Year Insights

EP35_06-26-24_Kevin McGrath

Intro: [00:00:00] Welcome to Toy Business Unboxed, your gateway to the secrets of the toy industry. Here, Jason Hsieh, a toy entrepreneur and expert in the field. “Every product we develop is really inspired by some of the real life experience that we have with our son.” “60 percent of all toys last year were sold on Amazon.”

“Be passionate about it. Because it’s a road. It’s a journey.” “Like when you have an idea that you think is gonna somewhat change the world, make things better, I’d say go for it.“

Jason Hsieh: Hello, Welcome to another episode of Toy Business Unboxed. I’m your host, Jason Hsieh and in this episode, we do a deep dive into the world of specialty toys with Kevin, a seasoned toy industry veteran with over three decades of experience. Kevin is also a founder of [00:01:00] Original Toy Company, and he’s going to share his remarkable journey with us from international manufacturing to establishing a renowned president in Americans specialty toys industry. Thank you so much for joining us on the podcast today, Kevin. 

Kevin McGrath: Good morning, Jason. Glad to be with you. 

Jason Hsieh: Can you tell our listener or an audience a little bit more about your journey into the toy industry? What inspired you to start the original toy company? 

Kevin McGrath: Thank you. I’ve put in probably over 35 years. I came into the business about 35 years ago. I had the pleasure of running James Galt company Inc, which was a company based in England. I ran their U S and Canadian operations, they had educational products and toys. And they were one of the oldest toy companies in the world at that time. I then served underneath them for many years. And then I had the opportunity probably about 20 years ago to create my own company and create my own products. That’s pretty much how the original toy company [00:02:00] was established and invented. And here we are we keep going and doing some great stuff and we’ve stayed totally specialty from day one. We’ve never drifted to the left or the right, we’ve always gone straight forward. And I take great pride in that because I think that there’s not a lot of people or companies out there that can say they’re true specialty and we were one of those folks and we carry that banner very proud.

Jason Hsieh: Thank you for sharing that. And with such a diverse background in international businesses and manufacturing, how have you seen the specialty toy industry evolve over the last three decades? 

Kevin McGrath: That’s a good question. I think it’s changed dramatically since the first days that I came into this industry. It’s on a return venture if I can put it in those words I think that we saw some hiccups and we saw some ups and downs in the industry over the last 30 years. But I’ve seen some really good daylight in the last, they’d say five years. And it seems to be as leveled off which is great and [00:03:00] I think that the consumer recognizes that the specialty toy side of the business is here to stay folks going to their neighborhood toy stores for service, they’re going there for product, they’re going there for education. Nothing against the mass market, but you’re not going to get that type of service and you’re not going to get that type of quality of product in the mass market. I think that when you go into a store and you have a question, the specialty folks around the United States and North America are there to serve their customers and take care of them and answer questions, point them in the right direction for products that they want to use as a gift, birthday gift for their own children and going forward. I think that it has changed, dramatically and I think that it’s changed for the better.

30 years ago, there was a hell of a lot more specialty toy stores in the United States than there is today. But the good news is it has leveled off, as I’ve said. And I think that you’ve got a market out there in [00:04:00] specialty of probably somewhere, give or take a couple hundred, but somewhere in the neighborhood of 2500 to 2800 unique specialty toy stores that are out there on the main streets of the USA.

Jason Hsieh: Oh, that’s a good, interesting stat. I didn’t realize there’s still that many. I feel like the Amazon of the world and all the big retail store is really taking a lot of the market share away from the specialty store. But I also think that’s a lot of very unique advantage that specialty store have and that special human connection that the store specialty store owner that have was their customer that you can not replicate that with target or Walmart or even Amazon. 

Kevin McGrath: That’s true, and I think that’s the key. And the retailers that are successful are offering that service. If you don’t offer that unfortunately, I don’t think the future is bright. I think you have to be in tune to your community. I think you have to be in tune to your customers who and what they are and what they’re looking for. And people today want, they want good value for their money, but they also want to be [00:05:00] educated on, what good toys are, what they mean and and what they want. So I think that’s again, it’s back to the service levels that are important, and also the community involvement. Many store owners across the country are deeply involved in their community and not just because they sell toys, but they care about their community and their community recognizes them as leaders in retail and especially in toys. So I think it’s a two way street. 

Jason Hsieh: What are some of the unique challenges that you have faced in the specialty toy industry and how have you overcome them?

Kevin McGrath: It’s a good question again, I think that the challenges are always going to be there. I think that sometimes they do change to some degree. I think that what we went through in the last five years with COVID we’re still seeing some remnants of that, but I’m happy to say that I think we’re seeing that daylight again. COVID did a lot of negative things, not just to the toy business, but to many different industries. We face challenges in manufacturing in [00:06:00] looking, developing product. We face challenges in the marketplace from a pricing standpoint, that’s important, not just to us manufacturer distributor, but also important to the retailers and finding a good mix of product that is going to give them margin. And that’s the magic word is margin for all of us is that it’s got to be profitable for everybody in the circle. It’s gotta be profitable for the retailer. It’s gotta be profitable for us is selling the product to the retailer. It’s gotta be profitable for the sales reps. So there’s a number of folks that are in this kind of circle of business, but I think the challenge is going forward will probably be the same. I don’t see that changing too much. I think that you’ve got to continue to reinvent yourself and I know those are tough words, but I think that at the retail level and at the at our level if you’re not doing that on a regular basis you better start because I don’t have to tell you the world is changing at a very fast pace. That would be the number one [00:07:00] challenge that I see is that you have to keep Reinventing yourself not just accepting the status quo and not like your retail store you’ve just got to you got to keep moving and get unique and different products. So again, the retailers are always looking for new and innovative products. That’s another piece of it. 

Jason Hsieh: Yeah, and I think from my perspective, because I interviewed so many people in the toy industry. I think there’s a trend of a lot of the toy manufacturer, if you want to be very truly successful, you need to almost become an entertainment company. Let’s look at what Disney is doing. Let’s look at what Mattel is doing with the Barbie movie and all that stuff is really creating entertainment. And then you have people engage and then they love the brand, they love the toy. Then they’ll buy more toys. But it’s about like almost like education and entertainment at the same time is also called edutainment. So that I think that’s a huge trend right now in the industry, because it’s more than just a product. It’s about how can you use the product, but also create content that you can engage with [00:08:00] your audience. So I think, especially for the toy manufacturer like, myself, and even for your company, it’s very important to think outside the box, how can we create more content that will be helpful and beneficial to our end user and our end consumer? 

And one more question I want to ask, how did you see Amazon being a disruptor in the industry over, since 30 years ago, Amazon is really not there yet. So when you first started, but I’m pretty sure you see the history on how Amazon was able to grow into this giant company and take over 50 percent of all market share online currently for retail. What is your perspective on that? 

Kevin McGrath: I think that’s true. I would say that when I started this journey the Amazons of the world and walmart. com and those folks, they were, there were nowhere near on the horizon we had back then, I guess I’m aging myself now. We have paper catalogs we still have a few left that we sell to that folks look forward to getting a paper [00:09:00] catalog at their, in their mailbox. And so that’s the part that I, when I started there was probably at that point, oh my God, there was probably anywhere from 15 to 20 catalogs that were out there that were designated for toys, both third and fourth quarter. And some went all the way through the 12 month cycle. And we also saw, we saw some large chains that were there that sold specialty toys and some. But they were companies that began to expand and have stores nationwide. So we saw that fall by the wayside. We saw the order catalog, paper catalogs, as we know it. We saw that fall the wayside and then slowly. You saw Amazon and folks like that developing and yes they have a huge portion of the market, growing every day. But again, I go back to, from a retail standpoint the retailers that are successful today are the folks that are making their store or stores, [00:10:00] folks get in their car and they drive to a specialty toy store in their neighborhood or in their town or their city, and it’s up to that retailer to offer product that’s unique. Yes, in many cases, you might be able to buy that same product on amazon. But folks there is still people that want to feel in touch and get educated about that particular product and if the retailer is doing their job, they’re attracting those folks. Yes, it’s very easy to sit at home and get on your laptop or your computer and place an order and 24 to 48 hours later It’s at your doorstep.

I saw folks when COVID hit that were delivering from their toy store. You could pull up from the toy store, honk your horn. Someone in the store came out and gave you that box. So everybody is trying to, again, continue to reinvent themselves. But Amazon is not going anywhere. They’re getting bigger and bigger. That’s understandable. But I think that from the retailer’s standpoint which are the [00:11:00] specialty retailers that are out there today, they continue to challenge themselves. And they continue to acknowledge their markets. It’s not just in toys. You’ve gotta have a destination today. And maybe some entertainment is involved there. Maybe there’s cartoon characters, whatever that might be in that given store. So again, all bets are off. I think you can do whatever you think your community is going to accept and what people will like. 

Jason Hsieh: There’s some very unique experience that you cannot replicate online that is only available when you have an in person store, for example, I interviewed one of the toy owners. She have a store in Seattle. What she does is she will have special community event and invite the customer to go into the store. One of the events they were asking, I think, I believe they are doing like a contest of how to decorate their toys. And then they were like, so like the winners is making it really fun as almost like competition, but also like a fun contest that the local community can, she’s trying to bring the local community together so people can [00:12:00] interact with each other. That’s what was missing during COVID. We have zero actual in person social connection. We have Zoom meeting, but that’s different than shaking someone in person with the hands and having that human to human connections. And I think that is a very unique advantage of a specialty toy store that Amazon of the world can never duplicate.

But since that’s what I do, essentially what I do is I help business to launch their toys on Amazon. So what I see, one of the common fear some of the people have is Oh, is Amazon going to take away my retail like store president and all that. I would say is actually the opposite. It should enhance the experience because a lot of the people when you are doing shopping, I do it myself. When I go into Walmart or Target, if I want to buy a toys or anything, the first thing I do is scan the barcode and read the review on Amazon. I’m not the only one. I’m pretty sure I do that all the time. Especially the higher the ticket item, the more I look at the review. It’s [00:13:00] I’m about to spend like 50 on this toy, is this going to break in two days? I feel like it actually compliment each other if you do it correctly, if you have the map pricing in place and really control the price, so it doesn’t erode and really compete on each other. That’s why when I’m consulting with my client, like having that like battle plan going in to and launching Amazon is so important. All of your retailers need to be on the same page and some retailers will try to sell your product on Amazon too. So you need to know that and try to have the exclusive like agreement in place with all the retailers. You are not allowed to sell on Amazon, only us. So 100 percent control of the Amazon Buy Box, which is also very important. But I don’t feel like it’s a direct competition because it’s very different. The experience that a specialty toy store can create, Amazon can never create that. In a million years, it’s just not possible. How can you create that in person community like feel where people like, and know people’s names? Amazon doesn’t know your name. They don’t really [00:14:00] care. They will never know your first name, but that is the experience that the specialty toy store and the store owner can replicate and can create. That is the advantage that will never go away in my opinion. 

Kevin McGrath: That’s very true. And I also think that’s another piece of the puzzle that as we spoke in the beginning of the podcast. In regards to being 100 percent specialty and protecting specialty from our standpoint, what we do is we protect the whole circle. So if there is a certain price point that we all need to be at we protect. There is companies that are doing that religiously and there’s companies that are not. Oh, I’m glad to say from our standpoint that we protect the retailer and we protect the pricing of that given product, whatever it may be, because the minute you let that loose. We pride ourselves in staying on top of that. It’s a daily job and again we’re looking for long term partners. We’re not looking for short term partners a lot of people, you know want to get into the short profit making we’re there for the long haul and i’m [00:15:00] proud to say that the people that We’ve worked with over the years are in the same thought process. And so again, you shouldn’t be, if you’re dealing with a company that you have to worry about pricing then you shouldn’t be. And I think that there’s enough companies out there that you’d feel comfortable and that they’re going to stand behind you and you’re going to stand behind them.

Jason Hsieh: A hundred percent. Let’s talk about your own company a little bit. The original toy company emphasizing educational play value. Can you share some of the product, or you, I don’t know if you have any product at the room that you’re in right now that you can also show on camera, but what are some of the product that you’re most proud of? 

Kevin McGrath: We have a number of products. We go from infant up to about, I’d say seven to eight years old that we talked about. The core of our product would be age wise would probably be from three to six. And we go from high quality, small impulse items to item like a trampoline. We were one of the first ones to [00:16:00] offer a nursery trampoline in the market in the United States and we’re proud of that. Majority of our product is wood. We make it out of rubberwood. A lot of it’s made out of rubberwood, a lot of it’s made out of oak and maple. So it’s very traditional products. We have a product called it, which is a very simply an elastic group of wooden blocks that we invented about it’s over 10 years now, and we’ve sold millions in the specialty market and we do a line of musical instruments for young Children. Again, that’s targeted at anywhere from four to six years old. We traditional wooden blocks, we don’t really do any craft end of it. It’s primarily infant. Impulse music building. We do a number of different products that we have developed over the years. And we also, our products that we’re proud of are products that when we bring them out they’re there for lifetime, for years, we’re not in the business of creating a product that’s going to be [00:17:00] popular for two, three years. And then we move on. Our model is basically to offer high quality, traditional type toys. And again, we’ve seen that market up and down over the last 10 to 15 years. But there is still a lot of folks consumers that are looking for just nice, traditional toys. We have product like pop up toys that we have done. We do a pop up school bus. We do a pop up firetruck. I think the summarize it’s we’re a traditional toy company and with traditional values and traditional type, wooden type products. 

Jason Hsieh: I want to transition the question to talk about how important it is to maintain relationship with sales rep and distributors? Because I’m pretty sure you have a lot of sales for a group that’s representing the company. 

Kevin McGrath: I think the short answer to that is that it again back to that magic award of relationships. In our case, we take the United States and we’ve divided it up [00:18:00] into 12 sales territories. And you have a number of sales groups that are out there offering their services to the specialty toy trade. I think there’s a couple of things that folks should be looking for. Number one is a relationship, from a standpoint that it’s a sales group or individuals that you and your company feel comfortable with and vice versa, meaning that sales group feels comfortable with you. So that’s number one. Number two is I always highly recommend that, they offer many different lines underneath one roof that they sell their toy lines. I always say that you try to look for a sales group that does not have any conflicts. Meaning that they’ve carried other companies that are the same or similar to your products. That’s not the answer because you want somebody that you’re going to have a relationship and that group is going to be with you longterm. Our average sales [00:19:00] group that we have have been with us minimum of 10 plus years, some I have sales reps that work for me that I’ve been with me over 30 years. They are relationships, we’re both partners. We’re both partners in the same type of business. And I think that carries a great value. It’s tough out there as a sales rep keeping in mind that they work on commission. So they are out there. You want a sales rep that has good relationships with the retailers and many of them do 

Jason Hsieh: When you engage with a new sales rep group, can you interview the rep and say, I want this rep instead of the other rep? How does it usually work? 

Kevin McGrath: You’re usually hiring a sales group. So within that group, you might have,

Jason Hsieh: but then you always have a player and B player within the same group, but I only want to a player. I don’t want B player. That’s representing my brand. Can I even able to choose that? 

Kevin McGrath: No, because I think what happens is you’re looking at a certain sales territory. Let’s say it’s [00:20:00] three or four States sales territory. And in that group, there might be five people. And like with any sales organization, there is always going to be stars and there’s always gonna be maybe folks that are good as the stars, but you’re hiring the whole group and if you do it they all bring something to the party and I think that’s important. They have a tough job and again, you wanna support them as it’s, I look at them as that they are representing me in the field I’m not physically in the field, they are physically in the field. From our standpoint, you have to support them, you have to back them up and you would like the same thing in return that they’re going to support and back you up. It’s not an easy process, I can tell you that for more than 25 years, We’ve built a network of salespeople and that’s something that you cannot do overnight. That’s something you talk to retailers and find out retailers like Joe or Mary. They may not like Fred, whatever. So you try to find a nice [00:21:00] chemistry for everybody and we’ve done that. It’s not something that happens overnight, it takes time. 

Jason Hsieh: For sure. Thank you so much for sharing that. My next question is really about the product development process. How many SKU do you currently have? I can imagine you have a lot of SKU right now. 

Kevin McGrath: Yeah, in total we probably have about 225. 

Jason Hsieh: That’s a lot of SKU. It fits right into my question. What criteria do you use when you’re selecting new toys to add to the lineup?

Kevin McGrath: We probably on average, on an average year, say coming in this coming January, any average year, we probably introduce a low of eight to a high of maybe 12 to 15, totally new products, but at the same time, at the same time, we’re also looking at products that we’ve sold for many years and they are doing their job, then fine, but you are going to find product that begins to decline, and maybe that needs to be [00:22:00] revamped. Maybe this needs to be taken out of the line. So yeah, we don’t grow the SKU of anything. We control that SKU count somewhere around a couple hundred at the most. The core of the items are probably I’d say anywhere from 30 to 40 core items that are moving through the system every single day. So ideally what you’re looking for is to develop a product that is going to go into the core and, raise that number of the core up. It’d be great in the world if you had 200 products and all 200 were in the core, that’s just not going to happen. You’re going to find it, there’s a product core that constantly sells and constantly moves through the system. So we concentrate and try to look at developing our core to be tighter and maybe slightly a little bit bigger. 

Jason Hsieh: Do you also try to work with toy inventors and license their idea as well? Or do you have an in house team where you just develop everything in [00:23:00] house?

Kevin McGrath: We pretty much do develop our own line of product under the original toy brand name we do ourselves. We are also distributors for a couple different lines. Plasto, which is in Finland, which is sand and water. And then we do Bon Tempi music from Italy. They will create those products, but the original toy product that’s labeled on the box we develop ourselves here.

Jason Hsieh: Most of your product currently manufactured in China or what other country are you currently using for manufacturing? 

Kevin McGrath: Yeah, I would say a large percentage of it comes from China there is some that come from Europe, but I’d say 85 percent would be from mainland China 

Jason Hsieh: How do you balance the challenge of manufacturing China with the geopolitical issues? I’m from Taiwan as Taiwan and China is always in this Constant conflict. And with everything that’s going on, do you also try to diversify by finding more manufacturers from other countries or is not [00:24:00] so concentrated in China? 

Kevin McGrath: We began, yeah, we began to look at that diversification over the last few years. I think a lot of companies have done that. You have different markets that are emerging, Taiwan, Vietnam, India, Mexico. So again we’re looking for that on a continuing basis, probably more than we were three, four years ago. 

Jason Hsieh: What country are you, do you recommend to diversify? 

Kevin McGrath: You probably would begin to start looking at Vietnam as a possibility, possibly Thailand also, and possibly India. A number of them are going to be players. As I say, players they’re going to be able to offer, I think, better quality and better services as time goes on. Because you can see those changes occurring now. 

Jason Hsieh: My concern with those developing countries is their supply chain and their manufacturing industry is just not as mature. Because I visit China multiple times myself, I see how well [00:25:00] developed they are manufacturing their supply chain, how big their seaport is and if you go to Canton Fair, you’ll see the whole scale is crazy. It’s massive. So that’s my main concern is like, are they really ready for that? 

Kevin McGrath: I think you’re absolutely right. I think it’s going to take time with infrastructure and materials for those other countries to come online and be a player so to speak. I tell you that there is movement there now you can see it, but it’s still got a it’s still got a way 

Jason Hsieh: Have you investigate into mexico because it’s so close?

Kevin McGrath: A little bit not much not that much but looked at it. They tend to be from our standpoint of wood based products, we really haven’t found that if it’s been Paper goods, crafts, things like that. Then I think that there is possibilities in Mexico, but for the type of thing that we want and what we’re looking for at the moment, I can’t really say that 

Jason Hsieh: I see. Because I go to actually [00:26:00] Tijuana with my friend sometimes over the weekends. So I do go to Mexico pretty often. It will be nice if we can find a manufacturer that’s our neighbor, instead of all the way I see, like sitting in the container from Pacific, it’s take forever. For example, one of our container, you got stuck on the ocean and we’re still waiting for it, it’s supposed to arrive last week, but then because of the, this whole very long supply chain process, if anything went wrong, it delayed the whole thing 

Kevin McGrath: we run to that more times than I’d like to admit. 

Jason Hsieh: I know. So that’s why I’m also trying to diversify, but it’s also tricky with diversification because it’s also quality control issue. Can other country also produce a product at the quality that we are currently producing in our manufacturers in China? Right now for my brand, I have three factories that I use. One in Shanghai, one in Shenzhen, and one in Xiamen. I visited the one in Shanghai in Beijing person before. The other two, I haven’t visited them in person yet, which I want to maybe next year when I go back [00:27:00] to Asia. 

How often do you go visit your manufacturer in person? 

Kevin McGrath: Up until COVID. I was doing it a minimum of once, sometimes twice a year. Since COVID, it’s just starting to get back into that cycle. Prior to COVID, it was definitely.

Jason Hsieh: I think it’s very important. 

Kevin McGrath: Again, it’s back to the relationship. 

Jason Hsieh: As well, wrapping up today’s interview, one of the question I ask every single guest is if you had to just share one piece of advice with someone that’s just getting started in the toy industry, what would that be? 

Kevin McGrath: Ooh, it’s a good question. I guess I would say that if it feels right to you, then move forward. If you have any type of hesitation on whatever that topic may be, do some more homework. And if you don’t have that, it’s probably not the avenue that you want to go down. But I think that my advice for success is that it’s a two way street. It’s gotta feel good. It’s gotta feel good for you and if it does, you’ve done your homework then move forward, trust your judgment, but [00:28:00] also do your homework. 

Jason Hsieh: That’s a good piece of advice. Where can people find you? 

Kevin McGrath: We’re actually we’re located in Milford, Connecticut right on the coastline of Long Island Sound. Our internet site is theoriginaltoycompany.com all spelled out, .com and you can see our great products and a little bit more about who and what we are. And we we always say to people, pick up the phone. We love to talk to you. We’re not we don’t make it hard to get ahold of us and we don’t make it hard to do business. We want people to feel comfortable with us. And we’re here to serve and again, support we’ve supported, I’ve supported in my company has supported especially toy trade for over 30 years and we’ll continue to keep doing that. We’re a family owned company. So again as we move forward, our trust and our feeling is again, that support of the folks that have supported us and brought us to this far. We’ll continue to do that. 

Jason Hsieh: Is your product also available beside the website? Is it also available on Amazon right now? Or is it only on the site and the retail? 

Kevin McGrath: [00:29:00] No, some of our products are on Amazon.

Jason Hsieh: Okay. So they can definitely also find it on Amazon as well. Thank you so much for being on the show and I will speak with you soon. 

Kevin McGrath: Okay. Enjoyed it. Thank you very much.

Outro: You’ve been listening to Toy Business Unboxed, hosted by Jason Hsieh. Thank you for joining us and exploring the fascinating world of toys and the ingenuity behind them.

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