Rainbow Loom and its arts & crafts boom

More than two million Rainbow Loom kits flew off US retail shelves in the six weeks between Thanksgiving and Christmas. With these scorching holiday sales, the low-tech product - which was just named Toy of the Year by the Toy Industry Association - is tapping into girls' social nature to drive an arts & crafts toy category revolution.
February 19, 2014

With multinational toycos investing millions in developing the latest tablet add-ons, integrated physical-meets-digital doohickeys and robotic pets, it seems a tad bizarre that the runaway hit of the US holiday shopping season was a simple crafting device—but that is exactly the case.

“It’s deliciously ironic,” says BMO capital markets analyst Gerrick Johnson. “The most low-tech toy you can imagine is the one that is capturing kids’ imaginations.”

Rainbow Loom, which was just named as the 2014 Toy of the Year by the US Toy Industry Association, was developed in 2010 by Cheong Choon Ng, a former airbag safety engineer for Nissan and now founder of Choon’s Design, the maker of Rainblow Loom. He was definitely onto something, as the homegrown bracelet-making kits were the most sought-after holiday gift in 2013.

According to estimates, more than 3.5 million units of the girl-targeted kits, with price-points ranging between US$14.99 and US$16.99, have been sold in the US since their launch. And more than two million of those units flew off retail shelves in the six weeks between American Thanksgiving and Christmas 2013.

The story of its creation is as charming as Rainbow Loom’s success is unlikely. “My daughters were making bracelets from rubber bands that they had for their ponytails,” says Choon. “I saw them trying to do it by hand and I wanted to show them that Dad is cool, too.”

However, making the tiny bracelets proved difficult because of the size of Choon’s hands, so he headed to his basement with a handful of nails and pushpins. There, he developed the first prototype Rainbow Loom. “I was excited, but my kids weren’t,” he says. “But when I added more rows and combined different colors for the bands, they liked it a lot and took it to school.”
The rest, as they say, is history. The simple kit consists of a hook, two plastic template boards, a couple dozen plastic hooks and a bag of multi-colored rubber bands. “The reaction from their friends at school was, ‘Wow, this is so cool’,” says Choon. “Kids who would never talk to me before were all of a sudden asking me for bracelets.”

Unlike other segments of the toy market, the arts & craft category has enjoyed steady growth over the last couple of years. According to the Toy Industry Association’s own data, in 2011 arts & crafts products rang up US$974 million in US retail sales. Despite a general downturn in the industry, that number grew 4% in 2012 to US$1.01 billion. And according to the latest numbers from Port Washington, New York-based The NPD Group, the category experienced the second-highest growth last year, with sales jumping up another 8% (only the youth electronics category made bigger gains at 18%). The steady year-over-year growth has been buoyed by retailers such as craft specialty chain Michaels, which has reported high single-digit comparable store sales growth for Q3 2013 in an otherwise tough retail climate.

“There has been substantial growth for craft kits,” confirms Russ Crupnick, SVP of industry analysis for The NPD Group. He contends the reason for the general category growth (including toy and overall merchandise)—and the success of Rainbow Loom, in particular—is pretty straightforward. “Most parents prefer a peaceful co-existence between tradition and technology,” he says. “They don’t want the kids on a tablet or console 24 hours a day.”

And the category’s traditionally low price-points also don’t hurt. “It’s easier for parents to get on-board when you aren’t talking about a US$100 item,” says Crupnick.  BMO’s Johnson agrees that the low-tech kits are as attractive to parents as they are to kids right now. “It’s a hunk of plastic with pegs,” he says. “Toy companies have been complaining about the rise of digital and apps and tablets for years, and the media has been calling for the demise of low-tech toys, yet [Rainbow Loom] is now incredibly hot.”

A good idea is one thing, but manufacturing a mass-market consumer product is something else. After pricing out US manufacturers, Choon decided that for the US$10,000 he had to invest in the product, manufacturing in China was the only option. “It cost me US$5,000 for the tooling of the template and another US$5,000 for the parts,” he says. “I had spent all of my time designing the artwork for the boxes using Powerpoint and then tried to sell it.”

Initially, retailers were not interested. Choon knew that he needed some kind of marketing tool to show exactly how to use the kits. Enter YouTube. “We put up videos of my daughters demonstrating how to use it,” he says. “They really worked.”  (Currently, Rainbow Loom’s YouTube channel has more than 192,000 subscribers and more than five million views.)

The cheap-and-cheerful marketing plan caught the attention of a few franchise owners of the US specialty toy chain Learning Express. And a Learning Express location in Georgia was the first to offer in-store demonstrations—that’s when then the orders started pouring in. “I think within two weeks they placed an order for US$10,000 worth of kits,” says Choon. “We looked at the order screen and couldn’t believe it. We were still assembling them at our kitchen table.”
In short order, through word-of-mouth and viral marketing, big-box stores like Toys ‘R’ Us and Michaels began to place orders and it became necessary for Choon to hire more than a dozen people to help out.

There were even reports that summer camps and school started banning the Rainbow Loom because of its widespread popularity and uncanny ability to monopolize young girls’ attention. Interestingly, it’s the social aspect of the craft that NPD’s Crupnick believes has boosted its sales. “Younger kids don’t use social media at all,” he says. “The kits are something that kids can do with friends.”

Choon agrees that the social component has propelled the modest kits to the top of many kids’ wish lists. “It’s a way for kids to get away from the computer,” he says. “It’s social. Kids are sharing the bracelets with their friends and coming up with unique patterns to share.”

Of course, a product with Rainbow Loom’s surprise success can look forward to a future plagued by knock-off competitors and increased retail expectations. In response, Choon says that he is creating new innovative Loom products, including travel kits that will likely hit US mass retail in April.

Additionally, he is considering opening the product up to in-bound licensing and says he has already fielded “many calls” from interested parties. While he concedes that the current “craze” phase isn’t likely to last, he believes that the kits will always have a stable place at retail. In the meantime, Choon is simply enjoying the ride. “It’s mind-blowing that something that started in our dining room could be this successful.”

This article first appeared in the February/March 2014 print issue of Kidscreen magazine.

About The Author
Gary Rusak is a freelance writer based in Toronto. He has covered the kids entertainment industry for the last decade with a special interest in licensing, retail and consumer products. You can reach him at garyrusak@gmail.com



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