Analysis of Toy Industry's Survival
By Al Berrios (contact Al Berrios)

(Editorial Note: This Report was modified in Feb. 19, 2004 from a single paragraph into this easier to read and print format.)

al berrios & co. has identified five functional categories of toys:

developmental (0-5 yr old),
improvisational (encourages creativity & strategy),
trivia (tests recall of known facts),
collectibles (such as cards, and have secondary market), and

with the most popular being improvisational, and developmental a strong emerging category, as shown by LeapFrog's more public success and Mattel's recent entering into the market via Fisher Price.

Improvisational + Triva

Based on my discussions with industry executives, improvisational games and toys is consistent with trends showing consumers wanting to do everything from self-publish their thoughts on blogs to wanting to see more innovation from companies. There are festivals, conferences, and olympics where tens of thousands of storytellers gather to share, tell, and learn how to tell, imaginative stories ( Companies like Gnu Games have experienced amazing growth as a result.

According to company president, Kristina Kershner, most games are based on trivia, and don't really encourage creation or ideas. Her company successfully exploits consumers' desire to be creative.


Developmental toys, lead by companies like Tiny Love, are designed to be functional & safe for parents, and stimulate everything from motor functions to thought processes in babies from birth to 2 yrs old. Characteristics of effective games (note: the true effectiveness has yet to be determined as there haven't been any serious testing of children in schools who grew up with developmental toys) are melodic sounds, rhythmic blinking lights, reflective surfaces, sensory-stimulating materials, curiosity fulfillment, and 3-dimensionality (which conveys relation to surrounding environment), with the younger the child, the brighter and softer the toy and the older, the more pastels are used.

However it is difficult to convey these values to parents pre-purchase. Joel Goldblatt, director of sales for Tiny Love, believes that after nearly 10 years in existence, though, the category is primed for a substantial increase due to consumer demand for more educational choices. "Parents want their children more educated because of competition in the global market. Parents today realize that without a college degree and advanced degree the opportunities are limited. Parents want to educate their children as quickly as possible and our success with Tiny Love products for 0 to 2 years of age prove that fact."


In the collectibles category, companies like Fleer/SkyBox International LP and Fun Lines (licensor of the popular Latino-based Homies figurine sets) strive to develop new concepts and images that are relevant to collector's lifestyles. According to Roger Grass, president of Fleer, the key to the success of a licensing company like Fleer is technology, where fleer leads in investments.


And in the athletic category, where innovations are few and far between, Tucker Toys, is getting international recognition with their innovative phlat ball, a multi-faced, spring loaded ball that transforms into a Frisbee and back. Upon closer inspection of this category, al berrios & co. believes that children aren't as lethargic as the CDC would have us believe. It's just that they don't find current athletic choices innovative enough.

Until a child starts buying their own games, toy makers agree that the parent makes most purchase decisions (with surprisingly little to no feedback from the target audience on the design or purchase of toys). And until parents have a kid, they're influenced by their own memories and experiences. Martin Caveza, Department Chair at Otis College of Art and Design's Toy Design program says that when toys are designed, they're "design[ed] with intent towards target audience (children) with the goal of fulfilling a certain emotional need."

This emotional need is often explored and hopefully satisfied through the "play pattern" of the toy and can be directed one way or another based on the design and accessories that come with a toy. Parents rarely realize that the most enjoyable childhood memories of combing a doll's hair or beating up the bad guys are enjoyable because they fulfill an emotional need. This need re-emerges as the basis on which to make a purchase decision for a child, and explains the recent success of licensing older, known brands with built-in audiences. But just where do consumers go to make these decisions?

There're basically two sides of any market: premium and Wal-Mart. Premium market is strictly anti-Wal-mart since Wal-mart kills margins. They survive by offering satisfaction over convenience and having a very loyal manufacturer that also wants to preserve their margins. For example, a core Toys R Us strategy has been to secure exclusive content such as Animal Alley plush toys, and as al berrios & co. analysis has shown, choice is a key component of satisfaction in the Consumer Value Model (which we will review thoroughly in next week's REPORT).

Bottom Line

Contrary to popular beliefs, the toy industry hasn't been killed by PCs and video games, there are many innovative ideas out there not coming out of Mattel or Hasbro, and boutique toy retailers haven't all disappeared due to Wal-Mart. Although the toy and games industry has concentrated it's $20 billion around electronics and licensed ideas, there are companies entering the industry, fighting titans and idea thieves, with powerful ideas that resonate with consumer trends and will ultimately become extremely successful.

> U.S. Toy Industry: Where It's Been -- Where It's Heading
> Mattel Could Face Hurdle in Selling a Rival to LeapPad

>> Re-Evaluating Your Entry Level HR Strategies: State of Education
>> Practicality vs. Requirements: What Should We Teach Our Kids
>> A Case for Skipping Grad School

Disclaimer: The recommendations, commentary and opinions published herein are based on public information sometimes referenced via hyperlinks. Any similarities or likeness to any ideas or commentary from any other sources not referenced is purely coincidental. al berrios & co. cannot control any results occurring from advice obtained from this publication nor any opinion(s) conveyed by any reader of this publication.

(c) 2001-2005. All Rights Reserved. al berrios & company, inc. Published by al berrios & co. This Report may not be reproduced or redistributed in any form without written permission from al berrios & co., subject to penalty.