NEW YORK (AFX) -- From industry giants Mattel Inc. and Hasbro Inc. to
smaller players LeapFrog Enterprises Inc. and VTech Holdings Ltd., toy
manufacturers are lowering the age ranges for their high-tech and educational
offerings at this year's Toy Fair, betting that "toddler tech" will help reverse
several years of slumping sales.
The toy business's main event, the American International Toy Fair, brings
together in New York more than 1,500 toy makers, distributors, salespeople and
importers from 33 countries -- all of whom are fighting for a piece of the same
shrinking market while grappling with other stressors that have become endemic
to the industry.
Among the biggest challenges are the rising costs of energy and raw
materials. Toy companies are especially sensitive to rising oil prices, because
the business uses so much petroleum-based plastic in its goods. Moreover, the
toys are manufactured in Asia, meaning that higher energy prices have caused
shipping costs to soar.
At the same time, consolidation at retail means that giants Wal-Mart Stores
Inc. and Target Corp. wield considerable power when it comes to allocating shelf
space and setting prices. Those mass-market and discount stores accounted for
54% of all retail toy sales in 2005, according to data from NPD Group, a
market-research firm. Traditional toys stores represented just 20% of the
market.
But perhaps most alarming to the toy business is slumping sales, as video
games, cell phones and MP3 players compete for kids' attention and parents'
dollars. U.S. retail sales for the toy industry as a whole fell 3.6% to $21.3
billion in 2005, according to NPD. That followed a decline of 3% in 2004.
The toy industry has responded by embracing technology, adding
interactivity, creating whole new categories of educational toys and expanding
the use of sophisticated electronics in products for kids as young as newborns.
Notably, NPD said that sales of learning and exploration toys rose in 2005,
adding 6% to $400 million.
Part of the strategy is to make kids enamored of their toys and brands at an
earlier age; part of it is a response to parents who want play time to also
build cognitive and other skills. But another key element is to create must-have
items that parents for which parents are willing to pay a premium.
"The whole world of toys has changed. When we think of toys, we think of the
old building blocks, but in today's world with technology [and] computers, the
hot toys are the electronic ones," said Jim Silver, editor in chief of Toy
Wishes Magazine, an influential industry publication.
Finding a hit with a hot high-tech product can help toy makers hold the line
on prices, which are usually pressured by industry competition and the "Always
Low Prices" reason for being of Wal-Mart and its discount-retailer peers.
"Look at iPod. Apple Computer Inc. doesn't cut prices and yet look at how
many it has sold," said Chris Byrne, an independent industry consultant known as
"the Toy Guy."
"If you can demonstrate a good value to the consumer, he or she will buy
it," Byrne added. "But you look at the toys that have done well, and retailers
are marking them down. They are leaving money on the table they needn't, because
consumers are really willing to pay for things." Listen to interview with Byrne.
TV as teacher, not baby-sitter
So it's only natural that an important trend seen at this year's Toy Fair is
toddler tech, bringing high-tech toys to kids ages 3 and younger, according to
Reyne Rice, a toy-trend specialist with the Toy Industry Association.
From digital cameras and electronic pianos to interactive play mats for
infants, toy makers are courting youngsters with offerings far more
sophisticated than wooden building blocks.
No. 1 toy maker Mattel's Fisher Price division is introducing its Kidtronics
Digital Song & Story Player and its Kid-Tough Digital Camera. The song and story
player reads music and plays songs for kids starting at age 3, while the digital
camera lets kids imitate mom and dad, but comes in a sturdy, rubberized case.
"The cool thing about that is that kids are role-playing what they see
around them, and they see their siblings using digital cameras and using digital
phones," Rice said. "They see their parents using those, and so that's what they
want to role-play with."
Meanwhile, in the fast-growing educational toy market, manufacturers are
rolling out a slew of high-tech products. Fisher Price's I Can Play Piano has
been endorsed by the Music Teachers National Association. No. 2 toy maker Hasbro
Inc.'s Playskool business is introducing the Ion Educational Gaming System, in
which kids ages 3 to 7 see themselves on TV as they take part in games and
exercises that teach early-education skills.
Indeed, interactive educational toys based on plugging a console into the
family TV are out in force this year. LeapFrog's Little Leaps Grow-with-Me
Learning System targets kids under age 3, while the LeapsterTV console extends
the franchise to ages 3 and up.
Rival VTech. , for its part, has the V.Smile Baby Infant Development System
designed for children ages 9 to 36 months, among other new products.
Jakks Pacific Inc. , meanwhile, has TeleStory interactive books, where the
CareBears and the family TV team up with the intention of instilling a love of
reading.
Newborns may be too young for plug-and-play TV games, but that doesn't mean
they're left out of the digital revolution. VTech, for example, has a high-tech
toy aimed at newborns, the Explore & Learn mat -- where infants are introduced
to numbers, letters, colors and shapes as they touch various parts of an
electronic but machine-washable play mat.
The toys are popular not only because they help impart cognitive and
emotional intelligence, but also because they involve parents in the process.
"When kids are that little, parents are one of their favorite playthings, so
having their parents' time and interacting with their parents is great," Rice
said.
To an older generation raised on Lincoln Logs and Lego bricks, the high-tech
toy world might seem like it's overloading minds at too young an age with
digital gadgets and virtual experiences, but to today's children it's a natural
part of being kids, according to Byrne.
"Today's kids understand computers and the technology from the get-go. It's
part of their world; it's like the air," he said. "They don't question it; it's
just there."
This story was supplied by MarketWatch. For further information see
www.marketwatch.com.
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