The toy industry is reinventing itself: from the Toy Story universe to Wall-E
28 December 2017
Children younger than eight years old already spend more than 2 hours a day in front of their smartphones and tablets, causing a decrease in the hours of “traditional” play as we know it. The question we ask ourselves is: Do children no longer want to play?
In reality, it’s not that they play less, it’s the way they have fun or entertain themselves that has changed. This has been provoked mainly by the greater penetration of mobile devices and tablets in our society.
The screen time phenomenon has always existed. Many of us as children watched Disney movies repeatedly on the TV, but now this ‘TV’ is portable, has video games – a niche found in its day by the Game Boy – and Internet connection.
Such is the growth of these smartphone heavy-users, that two of the Internet’s greats have adapted to them: Youtube launched Youtube Kids in 2015, with special content dedicated to children, and Facebook has launched Messenger Kids this year.
Faced with this situation, many people will think that the toy sector is not at its best. However, the data speaks for itself and 2016 saw an annual growth in sales of 6%, and until June of this year the growth was 6.7%. According to the Spanish Toy Manufacturers Association (AEFJ), it is expected to increase by the end of the year with Christmas and Black Friday.
Indeed, the outlook for the sector is positive year after year, as it is increasingly less limited: wholesalers distributing toys over a lifetime have seen Amazon become one of the big players, and the term “toy” itself has been redefined. Is a tablet now considered a toy?
A more conscious consumer
On this issue, we usually encounter three types of parents: those who do not let their children touch a screen; those who defend that in moderation and with parental control features, their children can surf the Internet, play and watch their favourite series on the iPhone; and those who do not exercise any kind of control.
Whether they are strict or not in relation to smartphone use, in general, the current trend depicts that the public is increasingly becoming more aware in several areas – in this case, considering parents as primary consumers.
The public becoming less and less tolerant of sexist products and polarisations of “boy or girl and” pink or blue”, has provoked the emergence of movements such as #ToyLikeMe in 2015 which advocates real toy figures with which some socially excluded children can identify more easily with.
Toy Planet has positioned itself as one of the industry’s most friendly brands by combating gender stereotypes and including socially excluded children in its Christmas catalogue. Or Barbie, who has led the concept of #YouCanBeWhatYouWant by demonstrating that the blonde doll can no longer only choose her profession, but can also be curvy or small.
Adults are looking for audiovisual content (series of drawings, films) and toys that contribute good values to children, such as the importance of team work, help them develop intellectually and be ethical. That is to say, good toys are good. And technology has a place here.
The physical toy is digitised
In relation to the smartphone boom, many of the more traditional toys have had to technologically reinvent themselves to become more attractive, including apps that complement the game, making the toy interactively “real”.
A good example of a lifelong brand is Famosa, with Nenuco Happy School. Through an app the child can interact with the famous doll as if they were the teacher. That is, the app has become an extra resource, an extension of the toy.
For now, the general trend with these interactive toys is that there is a series of pre-defined questions that the doll answers automatically – features that already existed with some toys in the early 2000s.
What’s really appealing for children is the gadget that completes the game: touching the screen is a bonus.
Within this boom of interactive, intelligent toys, there are products that have tried to go one step further and are capable of answering any question: this is the case of the Cayla doll which answers any question also through an app and an activated microphone. As if she was Siri herself, she can respond to everything from meteorological questions to who Pablo Picasso is. This product, like the “Hello Barbie” doll, had to be removed from certain markets as it was considered a “spy toy” since it could record all the conversations around it. We are therefore faced with an industry in the midst of technological development, but at the same time very closely monitored in terms of safety, as is only natural.
However, the key to this Smart Toy revolution is that it is reciprocal, i.e. that a smart toy will make the child smart in return.
That is to say, if instead of playing with a stuffed animal, you play with an interactive robot dog that jumps and barks at your request, in terms of learning the difference is minimal. Toys “of the future” (which do not have to be technological) are those with one objective: to stimulate the child to develop skills that will serve them in the future. This explains why iconic brands like LEGO with their construction blocks are still the best-selling products.
However, they continue to reinvent themselves and have evolved technologically: with the “Boost; build, code and play” range, the little ones have to create their own robot from scratch and program their behavioural patterns. The game is completed with an app with which the robot comes to life.
Robots that need to be programmed by a child are the smart toys of the moment.
Sales and distribution channels: who’s who in the toy industry
Can a smart toy be purchased everywhere? In the long standing toy stores?
On Amazon’s website you can already find the most current interactive toys in the “shop the future” section. Other distributors also have them, because they are supposed to sell all the latest products, but it is also likely that you will find them in Juguetrónica – which has found a niche in this market.
The players that make up the toy sector are so diverse that it is useful to create a breakdown of who is who and what their main competitive advantage is:
On the one hand there are the manufacturers, who increasingly promote direct sales on their website (usually not the majority) like LEGO or Playmobil. While, on the other hand, there are the distributors and department stores, which can be specific as Toys R Us or generic, like El Corte Inglés or Carrefour. A hybrid between manufacturers and distributors with a wide network of stores, are brands such as Imaginarium, who sell their own products and have a large number of stores nationwide.
Beyond Amazon as the main new player, distributors have to deal with businesses that are not part of the Top of Mind toy world, but are specialists, such as Fnac in the area of video games and freak items, or Juguetrónica within smart toys.
A lot has been said this year about the problems that arose around traditional distributors categorised as “victims of Amazon retail”. However, this has been the easy argument. At present, Amazon is not a sales leader in the toy sector in Spain and is a long way behind the leaders.
The reality is that a debt caused by the investment companies who bought the distributor ten years ago has paralysed many business decisions, such as the impossibility of participating in price wars or improving in many aspects.
Many think that Amazon’s competitive advantage is obviously based in the quality of their online sales service – which is certainly growing in this sector – but that’s not the main reason. Reports with price comparisons between the different distributors and Amazon (shared during the Christmas period) reveal Amazon’s main purchasing driver: the price factor.
Despite the fact that electronic commerce continues to grow, for the large exclusive toy distribution chains – and El Corte Inglés-, selling in the establishment remains the main focus. According to Antonio Pastor, president of the AEFJ: “The data is not significant yet, as Spain still uses the web as its main source of information, and shopping in physical stores still has an emotional component that is not obtained online“.
Such is the strength of off-line in the sector that a Christmas without paper catalogues is unimaginable – which, by the way, are often only available in stores. The key to success for these companies at the moment lies in looking for an off – on combination, as we have seen in Carrefour or Toys R Us’s catalogues with virtual reality apps.
The reality is that even though online sales in the sector may not currently be the main source of income, this does not mean that it should not be. This is not due to the fact that the quality of service in many shops is not yet recognised, optimised or enhanced as it should be.
In short, it means opening your business and never seeing it as a threat, if not all players are part of it.
Some brands and manufacturers have dared, in the hope of boosting online sales, to open stores that represent a unique experience: some examples are LEGO, Barbie and Disney. Why else are these shops always full of tourists? For many people, they are iconic and a must-stop; even if they leave with empty bags, they are cool stores, like the New York store FAO schwarz in its time.
Much of the success lies in ultimately finding a reason why users buy your products, either based on price, product or service experience. If stores are not located in the main urban centres, do not offer a unique physical store experience or products are more expensive than those of the competitors (assuming they are in several stores), a clear change in strategy must be made.
A new business model for the future
All this panorama in toy retail promises a future. Although less interesting, product innovation in the case of technological or smart toys, as happened in the nineties with video game series, is a constant business. Digitising the toy offers a more prosperous business model than stuffed animals, for example, those who base their business model on creating the toys of the moment: those of TV or movies.
Every re-launch of a technological toy means an annual update of particular options and features, and, like mobile phones, usually requires the latest version or model, if you are willing to pay for it.
This is a very important factor. Compared to other retail industries, such as the textile or beauty sector, consumers who buy these products are supposed to be fully aware of their intended use.
In the case of toy purchases, the main difference is obvious: an adult does not buy something for themselves. If what their child is asking for seems silly or capricious to the parents and is also expensive, the child may get tired of asking for it. Not to mention that in most cases it will be a product with a limited lifespan, and that they will probably get bored of it soon.
This means that if adults are aligned with what the child is asking for and they can also enjoy it, it’s a bonus. As is the case with the Playstation and Wii having controls for the whole family.
In other words, toy advertisements are not ultimately just aimed at children. Brands know that they have to sweet talk the adult, just as they do the child. In this respect, social networks have helped greatly. A toy brand does not talk to a child by private message; it talks to its parents, to whom all publications are directed.
The pattern of dialogue between manufacturers, distributors and parents is set to continue in the digital environment that listens to the consumer – social listening tools are fundamental – and integrates their voices into the brand’s discourse. In the end, it’s the public to conquer.
The potential of all the big data collected by these interactive toys is enormous and will be used for making them smarter. Let’s imagine that the parents, thanks to information provided by Cayla, already know what their children want as a gift for Christmas, showing a virtual card of Three Kings on the app. On the other hand, it is what is done with that information beyond giving it a usefulness in the game or product itself.
In Spain, the technology centre AIJU (Technology centre for children’s products and technology) has created the platform “Cloud4Toys” where all big data recorded by these toys is collected and uploaded to a cloud. Companies that want to receive this information can access the platform if their objective is to improve future products.
The ethical and child protection factor is a constant issue that will always have a place in the sector. This concern will grow proportionally with the development of technological toys.
As far as players are concerned, manufacturers will continue to be committed to opening up their own direct sales path and, as before, will continue to enjoy success in making “cartoon dolls” or movies. However, they will also invest heavily in the development of smart toys and will even want to link their brands to a real adult world thanks to this technological know-how. Someday I’m sure you will be able to drive a Hot Wheels.
Specific toy distributors will promote showrooming more than ever, striving to attract users to the stores to give them a unique experience. The key, above all, will be in the location of these stores. If I have to go directly to another Autonomous Community, it is clear that I am not going to. This is why the efforts dedicated to having an excellent online sales channel will be the same.
Likewise, they will strive to find new ways of connecting with the public in the digital environment.
We are living through an era in which through social networks many brands strive to create parent communities, such as Suavinex and Club de las Madres Felices. For these brands, that are categorised as “experts”, the tendency is that all knowledge exchange can be done through an App, with a greater customisation of the user’s profile, videos of reviews of users’ products and e-commerce all within the same platform.
Toy influencers and YouTubers will remain key. Depending on the type of product, these influencers will be able to create content in a more commercial way – unboxing – or by telling a story through a video like before. However, those Instagram profiles that integrate products into everyday situations, such as @yosoyalbertbelmonte, or even customise them, which happens almost exclusively with dolls, will continue to be leading profiles. They will offer an extra bonus to the usual communications of the brands, and will be key in capturing a more adult audience focused on collecting – since we shouldn’t forget that not everything is childish.
Finally, with respect to new players, or in this case, Amazon, they will expand the product catalog and continue to look for a competitive advantage based on price and online sales service. It would be really surprising to see an exclusive flagship toy store in the middle of a Christmas campaign.