Geo-Fencing: One Year On

This article is a follow-up to my previous article on the subject: “Grimm’s Wooden Toys & Geo-Fencing: Building a Wall to Keep Americans Out”. This article will make much more sense if you’ve read the previous one already.

It’s been close to a year since Grimm’s (and later Grapat) implemented their geofencing policies. It has been almost a year since this blog and it’s writer were cyber bullied by several store owners and one wholesaler for expressing an opinion on a top-heavy market segmentation policy. 

I have a bit of trepidation writing this article. My first piece wading into this foray altered the course of my blog, brand, and several relationships I had worked hard to build. I hope that the relentless commenting and stalking doesn’t pop up again, but I’m a realist. Consider this your PSA to double check your VPN is on this time. Any readers who agree with me and want to wade into the discussion are strongly encouraged to use a sock account to avoid blowback on their brand or business.

I intend to break this article up in to several subsections. How it affected small shop owners, individual wooden toy makers, the wooden toy industry, and customers overall. Towards the end, I do have a revelation that may put this whole situation in a different perspective.

Small Shop Owners

I put out feelers before writing this piece, asking both customers and small shop owners alike how the past year has changed (or not changed) their business practices.

Jessica Lester, who owns Carry Me Mommy, based in Canada replied to my query:

“As a retailer it is awful to have items sitting on our shelves, seeing people looking and not being able to ship to them.”

I’ve personally made some large Holztiger orders from Jessica’s store and know that feeling personally. She offers quite a wide array of Grimm’s and Grapat products. I know that I would have definitely loaded up my cart with those items, given the opportunity.

When store owners have inventory that doesn’t move, their business suffers. They have bought items wholesale, which usually involves “terms”. Once those terms come due, they owe that money, whether or not those items have sold. This geofencing has put smaller international companies in hard positions. 

Small Makers

My predictions last year was that our beloved small makers would experience a surge in demand. This seems to be the case. This morning, an anonymous maker reached out to me via private message. 

“The amount of customers who have reached out for Grimm or Grapat adjacent products is startling. I don’t want to break any copyright laws, but I do think geofencing has sent people who might not have otherwise shown up on my Etsy doorstep.”

I consider this aspect to be one of the silver linings of the whole situation. Small makers gaining more business is great and should always be encouraged. 

Sidenote: This does not mean I encourage breaking copyright laws or stealing intellectual property. The anonymous small maker did advise that they refused the request.

Customers

Is it no surprise that this demographic responded in droves? Here’s a sampling of personal experiences:

“I support the reasons for geofencing. I get it, I really do. Still, I am not invested enough in the “must have the name brand” mentality when I could just buy something similar from a small shop, so we mostly do small shop and BST now unless I can easily find something in stock.” – Kaylie Kirstein

“Customer: short answer- bought less from brands that do it ” – Megan Loftus

“I  have avoided buying from *the shop who shall not be named* because I think they threw a ridiculous hissy fit instead of just being a better shop and created this whole annoying thing. I also don’t deal with the crazy drops so I just don’t buy it if I can’t find it or I would likely own a lot more grimm’s and grapat than I do.” – Kara Lind

“I’m irritated about the geofencing so I didn’t buy much! Since it was implemented I’ve acquired Grimm’s sunset rainbow & dream pebbles, and Grapat’s newest collection, which frankly was not the quality I had come to expect. I’ve only been collecting for a few years but Grapat used to be smooth and vibrant. I don’t think I’ll be making many future purchases of either brand because it’s all just so off putting. I made the bulk of my purchases from small makers, European brands that don’t control my purchasing decisions, and BST.” – Jessica

My favorite: “I still haven’t seen anyone answer why correcting wholesale pricing wouldn’t have been a more elegant solution. International shipping should be preventing Americans (or whoever) from gobbling up everyone else’s stock. If Americans (or anyone) can pay international shipping and still beat their own domestic prices then the problem is farther upstream in the process.” – Emily Troyer (visit her amazing IG here)

What Does it all Mean?

In the end, I realized there are two ways to approach the situation. First, you could look at it from the perspective of a high supply buyer versus a low supply buyer. Then examine what the motivations are therein. And I suppose, that train of thought lends itself to a critique of the American complaints. After all, aren’t we the luckiest country in the world? Isn’t it such a first world problem to have to wait for certain toy drops and claw your way to acquisition?

The Numbers

But that isn’t necessarily the whole story. It isn’t American versus everyone else. Even though a commenter on my previous article suggested otherwise, the actual issue is big business versus the individual consumer. And this is where marketing comes into play.

The Grimm’s company, their marketing team specifically, work really REALLY hard to portray an image of a “mom and pop shop”. Perhaps, 20 years ago that was the case. However, Grimm’s Spiel und Holz had over 8,000,000 € in assets on the books at the end of their 19/20 fiscal year*, which was almost double from the previous year. This is characteristic of a rapid expansion. When you look closer and see they more than doubled cash in hand from just over 2,131,948.59 € to 4,941,882.16 €, it is even more apparent that Grimm’s received a cash infusion from somewhere, either from the investors or from the owners themselves.

This is not a small company. This is a mischaracterization. Moreover, it’s marketing. Mind you, they aren’t a huge big box toy store, but the time of two woodworkers in a tiny room has long passed. In fact, the average number of employees this year was 74. This does not take into account their other locations across the EU where woodworking takes place. Furthermore, these numbers do not take into account the craziness that was the rest of 2020. When those numbers are accessible early next year, I imagine it will paint an even clearer picture of how large Grimm’s has become.

*Sidenote: Grimm’s fiscal year ends on June 30th. This is a common accounting practice to end the fiscal year elsewhere, as opposed to actual year end on December 31st. For sake of clarity to non-business minded readers, I’ll refer to each year in terms of the year it started and the year it ended in. 19/20 would mean the fiscal year started July 1, 2019 and ended June 30, 2020. It can get confusing, but bear with me.

Why is this important, Rachel? You’re about to lose me with numbers, you say. I’m getting there, I promise. Maybe I should make a flow chart…

If you can hold on to the concept that Grimm’s isn’t the tiny company it wants you to believe, not by a long stretch. If you can do that, then add to that the knowledge that as of spring of 2020, they were selling items at different prices to different countries. A rainbow that had cost $38 for a U.S. retail location would cost $22 for a UK retail location. This itself isn’t a crime. The market is willing to pay those prices. What was interesting, was that when the American consumer bought the UK item and paid for it to be shipped to the US, they generally were coming in under the US retail price. This proves the price for the US retailers was artificially inflated, and not reflective of extra fees like freight costs, import fees, or currency issues.

It’s common knowledge now that one store in particular (known on BST boards as *the store that will not be named*) campaigned heavily for geofencing and were upset that their neighbors across the way were making better sales. But why do that?

The Lie

When American stores found their stock wasn’t moving as fast as their Canadian counterparts, the common business sense thing for Grimm’s to do would be to lower prices. Consumers are like water: they flow through the path of least resistance. Shoppers overseas wreaking havoc? Give them a reason not to. Artificial controls, which is what geofencing is, never work long term. Forcing consumers to silo into separate markets is a move made by a company who wants to increase profits. In Grimm’s own words they advised that they wanted to “protect the market from external influences”. In the same video, they also acknowledged the price disparity in different markets. It’s linked here, for reference.

What follows is speculation. This is a best guess, based on what I see on their books, and what I know about the industry. I circle back to those balance sheets. Why on earth would Grimm’s make this huge economic policy shift? Simple, they wanted to maximize profits. And that’s okay…the purpose of being in business is to maximize profits for stakeholders. They wanted to expand and ensure that consumers would purchase from where they were allocating funds. It wouldn’t do to flood the US market with inventory, only to have shoppers purchase internationally. Remember from my article last year, Grimm’s was looking for more physical stores on the ground in the U.S. It would be impossible to secure that expansion if the market didn’t exist. And thus…they created the market.

BUT THEN, they sold the story of this being “the way things have always been done” and “reducing the impact on the environment” or “ensuring fair distribution across our stores”. This is the lie. And, I think that’s why I’m so irate. We saw through this last year, and now we have the numbers to prove it. It feels disingenuous.

I must remind you that this is my educated guess on what is going on – I do not have access to the full accounting books of the company, just balance sheets. This can’t be stressed enough. I also haven’t mentioned any store in particular because I would rather spend money on wooden toys than a retainer fee for a lawyer.

So, dear reader, when you are about to remind me that I’m pillaging other markets, I must remind you that, for me anyway, it isn’t about the inability to score stock in my own market. It’s about a reasonably large business telling customers what they can and can’t do, with profit being their primary motive, AND then selling a story of why it’s better for their mom and pop shop and the local economies. It’s the gaslighting, for me.

Epilogue

It doesn’t look like either large company is going to change their policy. I campaigned as hard as I could. I even started a petition on change.org. But money talks. I think there is subtle irony in the downturn we are seeing right now. As we come out of quarantine and into the sunny days, even our stimmy money hasn’t seemed to deplete local shelves. Grimm’s stock that would fly out in minutes, is still in stock 2-3 days on. Judging by the comments on my FB post, some parents have decided it just isn’t worth the trouble. Given the variety of what some of our small makers are doing, I don’t blame them. I love Grimm’s and continue to put them on our shelves, but there is something so special about a handmade toy sent with love, from a maker you feel like you know. This writer speculates that’s where the wooden toy community is heading: to smaller makers with niche products.

Just remember, you can never tell the market what to do. You can only give the market what it wants.