The global toy industry is highly competitive and has low barriers to entry. The increasing competition comes not only from other toy manufacturers but from other forms of children’s entertainment, such as digital gaming products, digital media, and traditional analogic-digital play combined products.
In this competitive playground, Lego was the leading toy company worldwide, with over 7.2 billion U.S. dollars in revenue in 2020. The top five rankings were completed by Tokyo-based Bandai Namco (over 6.5 billion), Hasbro (almost 5.5 billion), Mattel (over 4.5 billion), and Jakks Pacific (515 million).
This article outlines where the toy industry is heading, its main trends and how brands adapt and deal with these tendencies.
What Drives the Modern Toy Industry
These are the top toy market emerging trends that brands should be aware of to gain and hold the consumer’s interest:
Growing Digitalization
With growing digitalization, digital games and e-games have attained popularity in recent years and are likely to gain mass acceptance in the upcoming years. As a result, with time, these games are likely to replace traditional toys.
In addition, there are two other prominent threats to the conventional toys market: the rise in revenues from mobile gaming, accelerated due to the surging use of smartphones and the increasing demand for video games, such as the Xbox series for both children and adults.
Moreover, the toy industry — among other sectors, such as healthcare, construction, and education — is starting to assimilate and adopt the potential of augmented reality (AR) and virtual reality (VR) and the impact these new technologies can have on the world around us as we know it.
Eco-Friendly Products
The introduction of eco-friendly construction toys is the key trend gaining popularity in the construction toys market. The main players in the toy industry are coming up with eco-friendly and sustainable products because concerns over the safety of the raw materials used in construction toys have grown. This move helps them maintain a competitive edge over the other players.
In 2022, we are seeing a surge of toys that not only incorporate more sustainable materials but also emphasize a commitment to teaching kids how to be better global citizens. In fact, a recent Toy Association commissioned survey revealed that most parents (78%) said the sustainability of a toy for their child was important to them. Toy-makers are trying to wean themselves off single-use plastics in response to the growing number of parents concerned about plastic toys’ environmental impact.
Demand for Educational-Based Toys
At the same time, learning through play trend runs parallel with sustainability and digitalization as a background in which these two main trends sit and explain why they are currently taking place.
Toys have vital importance in brain development and help acquire logical and spatial reasoning skills. Today, high-tech innovations help children progress through learning methods facilitated by smart toys. But this is not just about toys and gaming; it is also about learning through play, and how to help children build a sustainable future using their ideas and visions.
How Toy Brands Are Dealing with These Trends
Technology gives the toy industry — and every other industry — the possibility to reduce their environmental impact. In this scenario, new markets and sustainable initiatives are constantly being created to suit the digital era in what is known as the “green revolution.”
Sustainability and digitalization bring the opportunity to create new forms and experiences of entertainment. So, let us take a look at the way brands are facing the industry tendencies.
LEGO
The LEGO CEO Niels B. Christiansen explained that digitalization and sustainability would be especially critical for the business in the future. “We see the benefits of multi-year investments in eCommerce, product innovation, and a global supply chain network. Our strong financial performance now allows us to accelerate strategic investments in sustainability and digitalization,” he said.
Regarding sustainability, the LEGO Group has two ambitious targets – to make all packaging sustainable by 2025 and all products sustainable by 2030. In 2020, it was announced that, over the next three years, the LEGO Group would invest $400 million in efforts to meet sustainability targets, educate children and reuse LEGO bricks.
As far as digital transformation is concerned, the company diversified its business and focused on the digital world with video games, mobile apps, movies, apps, etc. LEGO even developed an app called Lego Digital Designer, using which users can draw and share LEGO structures. Through steps like this, LEGO can go beyond just entertainment and become a brand recognized for learning and education.
Bandai Namco
The Bandai Namco Group has set numerical targets and steps for achieving decarbonization by 2050 by reducing energy-derived carbon dioxide emissions to respond to society’s environmental problems. In this regard, the company is reducing and recycling packaging materials and containers used to sell products and services. Another Bandai Namco initiative is the “Eco Medal,” a certification system for all Toys and Hobby Business products that reach the environmental standards set for each category.
In terms of digitalization, Bandai Namco plans to spend 15 billion yen ($130 million) creating a new “intellectual property metaverse” that will include virtual spaces that let players “enjoy a wide range of entertainment” and also speak of fusing physical products and venues with digital elements. “Through the IP Metaverse, we will establish communities among Bandai Namco and fans, as well as among fans themselves,” wrote the company. “Through these communities and content, we will build deep, broad, multifaceted connections that continue for long periods of time, and we will focus on the quality of those connections.”
Hasbro
Hasbro did not announce a specific emissions-reduction goal, saying it will set both near-term (2030) and long-term (2050) targets later this year, in collaboration with the Science Based Targets initiative (SBTi), a global entity that has developed a science-based “corporate net zero standard” that companies may adopt.
“As a global leader in play and entertainment for fans of all ages, Hasbro understands the critical importance of operating sustainably to protect our planet for future generations,” said incoming CEO Chris Cocks. “Committing to SBTs is another step for Hasbro to make a positive difference for our planet and fans around the world. Our hope is others across the industry join us in this effort.”
By the end of 2022, Hasbro plans to eliminate all plastic packaging for new products. And through a partnership with TerraCycle, the company recycles retired toys into playground equipment, park benches, and flower pots.
In 2012, the company strategically changed its focus and started selling to parents – who buy toys and games – instead of the children, making a significant push into social media.
Hasbro is now looking forward to better consumer engagement by using customer data to predict and satisfy their demands, integrating social media and omnichannel marketing, digital storytelling, nostalgic branding, and video content.
Mattel
Mattel’s sustainability goals are: to achieve 100% recycled, recyclable, or bio-based plastic materials in their products and packaging by 2030; maintain 95% recycled or Forest Stewardship Council (FSC)-certified content in the paper and wood fiber used in their products and packaging; and reduce plastic packaging by 25% per product by 2030 (versus 2020 baseline).
A year ago, the company launched Mattel Playback, a program that lets parents print out free shipping labels and use them to send old toys and games to Mattel collection sites for recycling and reuse.
Talking about the company culture, “Everything we do is tightly coupled between technology and business,” says Mattel EVP and CTO Sven Gerjets. That explains why “Creations,” a startup-like initiative to enrich customer engagement with limited-release collectibles during the pandemic, now fuels Mattel’s direct-to-consumer online business, opening new IP-based revenue sources for the company.
“This Mattel Creations store happened to be the place where we were able to start from scratch and leave the past in the past, but it created the platform for us to continue to scale the company,” Gerjets says. “It really has become that core hub to transform our direct-to-consumer business for the entire company.”
Mattel recently launched its direct-to-consumer business in Europe and will continue to innovate in omnichannel marketing and with other planned offerings such as NFTs — tokens that represent Mattel collectibles, such as Hot Wheels cars digitally.
How DataArt Can Help Toy Market Companies
The main focus of the toy industry is on sustainability and digitalization, creating more sustainable products with less environmental impact. With new digital technologies advancing, sustainability and learning through play are making their way into games and toys. To achieve these objectives, companies should invest in technology, execute digital transformation programs, and progress in better customer engagement experiences, among other innovations.
DataArt develops custom solutions for Retail, e-Commerce, and Distribution that can help toy companies be sustainable and predict, change and succeed in satisfying customers' demands. Our AI/ML, AR/VR, Data Management and Analytics, and EdTech relevant expertise can help businesses introduce the following solutions.
Forecasting and Demand Planning
The ability to analyze large sets of data has always been crucial to a business’s success. Accurate forecasting and demand planning provides companies with valuable information regarding prospective in their market segment (and others) and allows them to target the audience to make informed pricing, business growth plans, and market potential decisions.
In DataArt, we use AI/ML technology to improve clients’ forecasting accuracy and ensure better demand planning. This helps not only to fight waste problems, forecast sales, and prevent excessive manufacturing, but also to have better inventory management and holding costs, enhance customer satisfaction, manage the supply chain, and increase profitability.
Predicting Energy Consumption
Many companies demand a high level of energy to carry out their activities. For them, the possibility of regulating electricity consumption becomes crucial.
DataArt can help by creating a ML model to predict the level of energy consumption offering the most efficient way to reduce it and low costs using machine learning algorithms.
DataArt focuses not only on research but also on delivering end-to-end solutions that integrate into the existing or newly developed client environment. With our AI and ML services for high accuracy forecasting, predictive maintenance, highly personalized offerings, and better customer engagement, we can be a reliable partner for your business.
Reducing Packaging
Companies in virtually every industry are setting environmental targets to reduce their packaging, following a sustainability trend that is here to stay.
The good news is that DataArt can design an intelligent packaging solution that introduces smart packing algorithms. This allows optimizing the amount of packaging required, results in companies packaging needs being reduced, and is aligned with the sustainability trend. This is how we contributed with one of our clients, a leading EU retail chain, to reduce 14% the amount of packaging required given the stringent packaging constraints.
Learning Through Play
Through active engagement with ideas and knowledge and the wider world, learning through play is about continuity. Companies must achieve joyfully, actively engaging, meaningful, iterative, and socially interactive experiences.
DataArt has the expertise to build customized integrated learning platforms that deliver content in a coherent and updatable format. This way, we help our clients by offering an effective learning-through-play solution that meets their specific business and educational delivery needs.
Implementing Immersive Omnichannel Experiences
To ensure the high quality of the service they provide, many companies need a “real” situation scenario that allows their employees to train customer service without reputation loss.
In DataArt, our AR/VR experts will help provide omnichannel immersive experiences and introduce metaverse for better consumer engagement, loyalty, sales revenue, enterprise systems simulations, virtual meetings, staff training, etc.
Enhancing Customer Engagement
Customer experience has shifted dramatically. Now consumers have lots of possible channels for product research, purchases, and questions; so, retail stores require reimagining their concepts. The positive side is that such buyers’ activity leaves a trace that gives us the opportunity to build so-called CDPs, Customer Data Platforms where all possible information about the customer can be stored: profiles, segmentations, preferences, etc. That data can be then analyzed and used to create the most interesting offers for customers, and build the right product strategy.
At DataArt, we can help brands enhance omnichannel engagement, improve safety, make better predictions, and offer better shopping experiences (personalized offers, easy returns, etc.), for which our AI and ML expertise would be helpful. We can also improve UX and UI catalogs on their e-commerce, providing a seamless shopping experience, and an entertaining learning-through-play process.
Conclusion
Sustainability and digitalization go together. The toy companies that want to stay on top of trends are emphasizing environmental goals to reduce packaging and plastics, and at the same time, they are thinking about how they can grow, scale, and meet their customers where they are.
When it comes to building desired outcomes and increasing operational efficiency or making systems more flexible, sustainable, and easily adaptable, make sure to work with experienced software providers. Reach out to DataArt to learn more about services that can help you to bring technology into your business.
