The toy industry news pipeline has been filled recently with talks of shakeups at Mattel after lackluster performance led to the resignation of CEO Bryan Stockton in January. The toyco has posted 5 straight quarters of declining sales. New CEO Christopher Sinclair recently announced a new partnership with Quirky, a company that helps people bring their inventions to market, in the hopes of sparking innovation and new ideas at Mattel.
So what’s going on at Mattel? It doesn’t seem like the toy company has made any huge missteps. Rather, there seems to have been too much reliance on some of their key classic brands, and not enough emphasis on innovation and development of successful new brands. Core brands Barbie and Fisher-Price have both been declining, and even American Girl sales were down compared to 2013. To be clear, Mattel’s net sales last year were over $6 billion (ka-ching!), so the company is hardly in a death spiral. Nevertheless, the decline in sales is cause for concern. At the same time, Hasbro has been making large gains in the girls’ market (Mattel’s powerhouse area), and Lego is coming off of a huge year with the massive success of The Lego Movie.
There is more competition than ever in the kids’ market. When I was little, Barbie was the queen of fashion dolls. All the other brands were of questionable quality. But now, there are tons of other popular, high-quality fashion dolls like Bratz, Moxie Girls, Lalaloopsy, and Equestria Girls, just to name a few. Plus, classic toys are having to compete with the influx of digital. Kids still want classic toys, but their attentions (and their allowances) are being divided between classic toys and digital games.
Toy companies have often faced similar struggles and have managed to turn it all around. For example, around the time that the Battleship movie bombed at the box office, there was a lot of talk about how Hasbro was falling behind and that the company needed to rethink its long-term branding strategy. But recently, Hasbro has had a lot of success with girl brands such as Nerf Rebelle, My Little Pony, and Littlest Pet Shop, as well as continued success in its boy-skewed action figure brands like the about-to-get-even-bigger Star Wars line. And looking ahead, Hasbro is set to take over the hugely lucrative Disney Princess doll license from Mattel in 2016. Hopefully they do a better job on these princesses than they did on the Queen Amidala dolls.
Lego had an even more dramatic recent turnaround. In the early 2000s, following much success and growth, Lego found itself spread too thin and struggling. The company hired a new CEO in 2004 and begin restructuring. They eliminated some of their more experimental product lines and refocused on their core Lego building products. The company also quit making as many specialty pieces for the kits. Lego pieces are extremely high-quality, and designing and producing new specialty pieces was proving to be very costly. By cutting the number of pieces manufactured, Lego was able to save money while also actually encouraging more creativity and innovation with the core product pieces. Since then, Lego has thrived. While the company has expanded into video games, TV shows, and movies, they’ve managed to do so while maintaining a high level of quality and narrow focus on its core brand.
This is not the first time Mattel has faced competition in the fashion doll market. While Barbie is still a huge moneymaker for Mattel, her sales have been declining for a long time. Over the years, Barbie has been aging down as tweens have lost interest in her. The edgier Bratz dolls, which launched in 2001, appealed to slightly older girls. After that, a number of edgier fashion dolls were launched, like Liv, My Scene, and Barbie Fashionistas, to try to appeal to this older girl demographic. In the end though, the one that really clicked was Monster High, which is made by Mattel but not marketed as part of the Barbie line. Monster High may not be contributing to Barbie’s numbers, but it has been a huge success for the company.
One growth area that has been getting a lot of attention is the interactive digital/toy hybrid. Games like Skylanders, Disney Infinity, and Sick Bricks turn physical toy action figures (purchased separately of course) into digital characters in the game, making the play experience interactive and seamless. Lego is releasing its own version of this concept later this year. Other companies are trying various other hybrid toys. Crayola is releasing a kit that lets you create animated videos using your own physical drawings. Mattel and Google are launching a new View-Master that uses Google Cardboard’s virtual reality technology.
Technological innovation has always been a competitive element of the toy industry. From Chatty Cathy to remote control cars to Furby, tech toys have been around and evolving for decades. With any toy innovation, a lot of the stuff is going to be gimmicky and ultimately unsuccessful, but the products that add real play value often end up finding their audience and enduring. It’s not enough just to have an online component; it has to be a good online component.
Digital innovation is important and clearly an exciting area for creativity and growth in the toy industry. But there is still a huge market for classic toys, and the challenge is to offer the right mix of products. While Mattel is in the midst of a slump now, hopefully the company will be able to come up with some creative and innovative new offerings and turn things around. I am curious to see how the next few years shape up for the company.