The toy industry is highly competitive. Different products line the shelves at major retailers, and the toy retailers spend a considerable amount of money to advertise their products in places where it will benefit them. Retailers also compete against themselves, but the newest competition may soon become a new technology that is slowly appearing in the market- the 3D printer.
The five competitive forces include buyer bargaining power, substitute products, seller bargaining power, new entrants and rivalry between sellers.
Individual customers currently have minor bargaining power when it comes to purchasing toys. The price may not be affected based on the relationship held with the retailer if the buyer is an individual. Large retailers have buyer bargaining power because they can choose which competitive product to sell. The manufacturer may have a bargaining buyer power against their supplier if they are in a position of highest production compared to other manufacturing companies. If they are the largest consumer of a certain material to produce their toys, they have buyer bargaining power against their supplier.
Substitute products are more apparent in age groups that do not yet understand the difference between one brand and a type of model. For instance, a younger age group is less likely to understand the difference among design, functionality and brand name, whereas an older age group is more inclined to gravitate towards a brand name that has positive feedback and reviews. In the manufacturing process, substituting products is more commonly used to reduce costs. For example, using one type of plastic that is less costly and can result in a very similar finished product would be an advantage to the manufacturer. If the costs outweigh the revenue potential, manufacturers may find methods of substituting parts for their products.
A supplier bargaining power in the toy industry is most clearly evident during the holiday rush. Once stock has been exhausted and only a limited amount of retailers carry a very popular product, the supplier (retailer) is able to have bargaining power over the consumer. In the manufacturing business, when there is a shortage of raw material, the supplier can have bargaining power over the manufacturer of the toy product. Supplier bargaining power also exists when there are a small number of suppliers that can cater to a specific type of product. Limited or short supply also results in supplier bargaining power.
There is a low barrier to entry for new toy products if the creation is new and original, because no other direct competition exists at the time. Similar products may be on the market, but novelty is important for the current generation.
Rivalry among competing sellers is strong. A business needs consumers or it will fail. Retailers can compete by offering a wider selection of their products, providing attractive types of services, competing with their pricing, and marketing their products appropriately based on their location and demographics.
Although 3D printing is still considered a novelty and not as easily accessible,
