Playtime is over when it comes to digital experiences
Is it too late for toy giants to win in digital?
17th Apr 2019
Playtime is over when it comes to digital experiences
Coming out of the annual Toy Fair at the Javits Center, toys are top of mind for many retailers and marketers. Between working in digital marketing for nearly a decade and being an avid toy enthusiast for double that, the convergence of these two spheres is undeniably an area of bliss for me.
Toy makers Mattel, Hasbro and LEGO have always had different products targeting specific audiences, but Hasbro’s recently launch HasbroPulse is a timely and very tangible example of customer-lead digital experiences in the ever enduring toy industry. However, given the concerning current state of the industry, is it too late for a toy giant to win in digital?
What’s Happening In The Toy Industry?
Without a doubt, everyone read toy headlines last June about the final nail in the ToysRUs coffin. As a refresher, the 70 year old company announced closure of the remaining US stores that managed to escape the prior bankruptcy announcement. This did not just mark the end of the national toy chain era, but, more importantly, it made the experience of walking into a toy-filled store to discover the latest offerings from toy makers big and small much more difficult.
ToysRUs’ financial troubles were not the only recent quake in the toy industry. In 2017, the unthinkable happened when LEGO, previously the #1 global toy maker, reported a sales drop for the first time in over a decade. Tokyo-based Bandai Namco took the #1 spot from the Danish block company with their portfolio of video game and entertainment focused toys.
While Geoffrey the Giraffe and LEGO are not having the best of luck lately, the sky is not exactly falling in the toy market. NPD Group data shows the overall market size of toys in the US continues to see growth since 2013:
Total US Retail Sales of Traditional Toys & Games (at current prices)
Can Toy Giants Control the Buying Experience?
It’s no secret that Amazon, Wal-Mart and Target are the top US toy sellers and, as a result, are the hands directly controlling the toy buying experience. With the exodus of ToysRUs, in-store shopping destinations have been further fragmented with toys turning up in aberrant places like Best Buy, Barnes & Noble and Walgreens.
Toys can probably be sold anywhere and, frankly, some toy lines may indeed sell better when placed outside of the traditional toy aisle. Target, as an example, has been moving more and more movie-related action figures into the electronics section to pair with accompanying entertainment releases. Some brands, such as NECA, have been less than thrilled with how their toys are offered in-store to customers and launched a social-media based ambassador program in an effort to improve experiences. There’s certainly a balance that can be reached of appeasing toy brands while simultaneously improving the shopping experience by better fitting toys into shoppers’ trips.
ToysRUs, though at one point the largest toy retailer, was forced to shutter its doors, while a company like LEGO, is in a mostly all-around good position who sells their products through retailers and in their own stores, finds themselves in a very good position. Most of the toys found in ToysRUs were made by other companies and the retailer had plenty of incentive to create the best toy buying experience to increase sales. What does this show us? Perhaps LEGO is at an advantage by making the toys and keeping control of some of the toy buying experience by having their own stores.
Are Hands On Experiences The Best Experiences For Toys?
LEGO is arguably the toy company holding the most cards — from toy making to creating distinct customer experiences. They have over 100 physical stores that people swarm to for coveted releases, like the 7,500 piece $800 Millenium Falcon. In addition, they have nine LEGOLand amusement parks. All of this demand is both generated and supplied by LEGO owned and licensed media. Everything from massive LEGO Movie blockbuster releases, to collectors chasing down obscure Star Wars LEGO mini figures, has built LEGO into a vertically integrated toy powerhouse.
Creating a profitable and resonating toy brand experience is no easy feat. Just ask Mattel, who is celebrating Barbie’s 60th birthday this year. Ruth Handler’s creation has come a long way over the decades since she first cat walked onto toy shelves. You can find Barbie’s perfect smile on countless dolls, TV shows, iPad apps, children’s’ clothing and everywhere in between. Oddly enough though, you don’t hear about blockbuster Barbie movies, there’s no Barbie Land and, ironically, you still have to go to Wal-Mart to buy the fashion icon because she doesn’t have her own store. Enter American Girl. American Girl is to doll store experiences what LEGO is to building blocks. And Mattel knew that when they purchased the brand for $700 million 21 years ago. Young girls can step into utopia in over 20 locations with their plastic BFF to partake in salon services, birthday parties or assemble a bespoke addition to their clique with a new custom doll. I recently made a few trips to the flagship Rockefeller store with my niece and, I have to say, it is hands down an extraordinary and somewhat overwhelming experience. I understand why it’s a must-do family stop in NYC and, at the same time, I feel for the parents lugging around those giant signature red shopping bags full of dolls and accessories that could build an entire neighborhood of dollhouses. Despite the spectacular shopping experience, Mattel reported the American Girl sales were down 21% this past year. The decline could be part of the larger challenge of older doll franchises showing their age with decreasing interest, and not specific to how or where the dolls are sold.
In-person experiences have always been an effective instrument to build brand awareness, loyalty and consumer value in many industries. It’s is no coincidence that LEGO has continued to create masterful products and experiences while at the same time realize continued financial success as the global toy leader for so long.
What About Digital Toy Buying Experiences?
Ridiculously awesome rich in-store experiences are great and all, but let’s not forget that Amazon is the top toy retailer in the US. Most toy sales are happening online and 83.3% of all online toy sales are on Amazon.com. That’s right, more than 80 of every 100 LEGO bricks sold online are sold on Amazon. In 2017, ToysRUs held the other 12.7% of online toy sales. Clearly the toy makers are not in the driver’s seat for digital buying experiences. Is there an opportunity for toy makers to create an experience formidable to Amazon’s just in time delivery and low prices? Hasbro seems to think so with the re-launch of their direct-to-consumer online store, HasbroPulse.
No one was expecting Hasbro to announce the opening of their own stores to enhance shopping experiences for the brands they own themselves like Transformers and My Little Pony. Digital is the obvious, and likely only, answer.
A lot of people buy toys with varying interests, motives and behaviors. Hasbro has been around for almost 90 years and brought in over $5 billion last year, so it has a pretty good idea of what these different toy buyers look like. That in mind, they have chosen to start with the adult collector market as their primary HasbroPulse customer target and feature its various action figure lines for the launch. It’s no coincidence that Hasbro chose this specific customer and toy category combination.
According to the Toy Association, the action figure category had the largest growth in US toy sales in 2018 with 10% YoY growth. Also, toddler focused toys could be more of an uphill battle with Amazon dominating the online sales of that category.
Adult toy collectors have a few discernible shopping characteristics which make them a well-chosen initial audience:
- Decisive Shoppers: Mintel data shows more than a third of adult toy buyers purchased for themselves in 2018.
- Discretionary Income: The rise in millennials desiring nostalgia items is due to their increasing discretionary income.
- Collectors are Completists: The collector market consists of consumers with a certain focus who buy full product lines.
A number of online retailers sell Hasbro and other toy makers’ collector toy lines. HasbroPulse utilizes many of these retailers’ tactics as well as others from outside the toy industry:
- Prime-like membership for free shipping
- Crowd-funding projects for selling collector items too niche or expensive for mass-retail
- Subscription club/box to receive the latest Star Wars figures as they are released
- Fan-site like social media including unboxing videos
The confluence of these experiences into one online store has been better packaged as well. HasbroPulse.com has a contemporary design with lifestyle photos of products (vs bland stock photos) and a more intuitive navigation. The legacy Hasbro online store, Hasbro Toy Shop had a very forgettable aesthetic compared to many of Hasbro’s retailers. It’s clear they have been observing where collectors shop online and which experiences earn their loyalty. If Hasbro is able to gain direct sales with their collectors, there’s no doubt they will look to expand its direct to consumer experiences across its many other toy categories.
How Can Digital Strength Be Measured?
Based on data gathering, analysis and benchmarking, our Digital Strength Index is an aggregate measure of the digital performance of the top 1000 public companies in the US. The index translates to the digital strength score of companies into forward top-line growth acceleration expectations. After checking The Digital Strength Index’savailable data for US toy makers, it appears the digital strength of both Hasbro and Mattel has been in a decline since Q3 2017.
With HasbroPulse recently launched and targeting a specific customer profile for select brands, it’s too early to determine the success of Hasbro’s new approach, however, based on Digital Strength trends, we expect it to improve. The absence of ToysRUs creates a rare opportunity for retailers and toy brands to gain new toy shoppers and create new customer experiences. It will be fascinating to watch how the digital, and overall, buying experience changes in this new and uncertain toy landscape.