CHICAGO -- Toymaker Lego Systems has found a way to obtain retail display space beyond what its market share would indicate: by offering a variety of merchandising enhancements that can be tailored to suit individual retailers.
"Through partnerships and what we are providing, we tend to have space above what our market share says we should have. Retailers are willing to work with us so we can grow into that space," said Larry Smothers, national business manager at Lego Systems, Enfield, Conn.
Lego is using in-store marketing to add value to its products without lowering the price, Smothers said in a presentation here at the "Trade Marketing in Transition" conference hosted by the Marketing Advisory Council, New York. The company's molded plastic bricks work well in creative displays and participation events that create excitement in stores, he added.
Smothers said in-store marketing is important because, like grocery purchases, more than 60% of toy purchase decisions are made at store level. Lego's in-store marketing efforts include hands-on displays, cross-merchandising opportunities and store-within-a-store concepts, Smothers said.
Lego toys are distributed widely across trade channels, but the bulk of the company's volume is done through its five biggest retail customers: Toys R Us, Kmart, Wal-Mart, Target and Kay-Bee.
A particular retail outlet may carry as few as one Lego item or as many as 200. No one Lego item represents more than 2% of the company's total business, he said.
Lego offers adjustable display or merchandising fixtures that allow retailers to respond to the seasonality of the product. More than 60% of Lego purchases are made during the fourth quarter, Smothers said.
"Most retailers we deal with expand the Lego section in the fall and decrease it significantly in the spring period. To adapt to retailers' needs we have a valance that expands to 20 feet in the fall and contracts to 12 feet in the spring. We also have a disposable valance," he said.
Lego developed the valance system to create a home site for its product line in the store year-round. The valance identifies the various segments of the Lego line that address different age groups.
"The retailers' objective is he wants us to sell more and he wants to make more profit with less inventory at any point in time. With our in-store merchandising enhancements we are trying to leverage our brand names and merchandise them in a logical way," he said.
A merchandising technique often used in food stores is also applied by Lego to its valance merchandiser: put high-turn items, especially those with price points under $10, in the center of the aisle to draw customers from both ends, pulling them past other products, Smothers said.
For retailers unable to use the valance display system, Lego has developed a blade-shaped fixture that identifies the various product lines and can be mounted on the shelf.
"We provide a lot of information to consumers. We want to make sure they buy the right item. If it is not age-appropriate, they won't come back and buy again," he said.
Lego also has found that segregating accessories, such as extra people, base plates and idea books, in a "sidecap" resulted in an "incredible" sales increase, Smothers said.
While Lego is an anchor of the construction toy category, the company has also had good results cross-merchandising with trains, he said.
"We have trains, but we are not really in the train business. The retailer we were working with had a separate area of the store for trains. We developed a system to enhance what we had and moved it into the train aisle. In the first year we were the top-selling train from that aisle. We captured the construction consumer and got the train enthusiast to try our product," he said.
Lego uses special events to build brand equity and create excitement for the category throughout the year, Smothers said.
"We will build bigger than life examples of what consumers can build and put those in the store. That gets us an incredible amount of off-shelf display space and prime locations. It creates excitement and we sell a lot of product," he said.