Changing tastes mean trouble in toyland
Big toymakers hunt for a way to revive sales
There’s trouble in toyland. Sales at the world’s three biggest toymakers — Lego, Hasbro and Mattel — slumped during the crucial 2017 holiday season, and the outlook for 2018 isn’t much better.
Kids are tiring of movie-linked playthings, such as Lego’s Batman and Hasbro’s Star Wars lineups, that used to be reliable moneymakers. Venerable brands such as Mattel’s Barbie and American Girl are showing their age.
Many shoppers are trading down to collectible figurines that can retail for less than US$10 ($13.88). And the big toymakers don’t have much involvement in the fast-growing mobile-games sector, which already commands 20 per cent of the US$187 billion global toys and games market, according to Euromonitor.
These problems “are all selfinflicted,” says Lutz Muller, president of Klosters Trading, an independent US toys consultancy. “Kids are wedded to their smartphones, wedded to social media, and the savvy marketers are using this to promote their products.”
Lego last month announced its first revenue decrease in 13 years, after dismissing some 8 per cent of its workforce in 2017. Hasbro, which ranks just behind Lego in worldwide sales, suffered a 2 per cent fourthquarter drop, although full-year sales grew 3.8 per cent. Mattel has plunged from global number one to number three after four straight years of revenue decline.
And then, on March 15, Toys ‘R’ Us announced it would close all its US and British stores.
Other retailers could take up some of the slack, but because non-specialty retailers allocate less shelf space to toys, “they put out what’s less risky,” focusing on a limited selection of proven hot sellers, says Bloomberg Intelligence analyst Mariam Sherzad. That could jeopardise secondary brands and product innovation.
While toymakers are building their own e-commerce sites, online sales account for less than 16 per cent of the global toys and games market, according to Euromonitor.
The shift towards cheap toys is yet another worry for the big companies. Sales growth in the US$10-and-under category is outpacing the overall toy market, with social media-fuelled crazes such as a line of miniature collectibles based on Hatchimals, tiny stuffed animals that “hatch” from plastic eggs. They’re made by Spin Master, a Canadian company whose revenue growth has dwarfed that of Hasbro and Mattel in recent years.
Social media is central to Spin Master’s marketing strategy. The company built anticipation for Hatchimals before the product’s launch in late 2016 with YouTube videos, and other online posts that showed the plastic eggs without disclosing what was inside.
Some toymakers still have reasons to celebrate. While sales of Hasbro’s Star Wars toys have been tepid, it struck gold this year on the hit movie Black Panther. The company says “robust demand” means it is ramping up production of items linked to the movie’s superhero star.
Hasbro chief executive Brian Goldner expects movie-linked toys will continue to drive sales growth. Hasbro is also transforming brands such as Monopoly and My Little Pony into mobile games.
Lego is stepping up investment to pair its traditional plastic-brick toys with digital technology.
And Mattel has teamed up with NetEase, China’s second-largest videogames publisher, to develop mobile games and create digital content linked to Barbie, Fisher-Price and other brands.
Investors, though, don’t seem convinced that the industry is on track for growth. Mattel shares are down nearly 50 per cent over the past year; Hasbro’s are down about 15 per cent. —
Kids are wedded to their smartphones, wedded to social media, and the savvy marketers are using this to promote their products. Consultant Lutz Muller