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All Dolled Up?

Sales for girl-skewing toys and products are at an all-time high. The boys action figure category, meanwhile, is stalling. We separate fact from fiction when it comes to gender shifts in the toy aisle.
August 18, 2014

Disney Princess is a queen in the doll aisle, consumers have been very kind to Lego Friends, and Rainbow Loom’s  popularity now stretches from North America to Europe. From arts & crafts and construction to dolls, girls seem to be scooping up toys at an unprecedented rate right now.

To put things in context, Hasbro’s girls division generated US$300 million in annual sales in 2003. Fast forward to 2013, and the division topped US$1 billion in annual sales for the first time, driven by the successful revival of My Little Pony and its spin-off line Equestria Girls. And the stellar sales of Hasbro’s Nerf Rebelle bow-and-arrow set, driven by the popularity of archery-heavy movies like The Hunger Games and Brave, certainly didn’t hurt.

Looking at Lego,  boys represented 90% of its consumer base in 2011, but one demographic left behind offered plenty of room for growth.

“Lego recognized that half the children’s population were girls,” says Lutz Muller, president of Vermont-based Klosters Trading Corp. The Danish toyco launched girl-targeted Lego Friends construction toys in 2012, and retailers couldn’t keep up with demand. The success of the line helped Lego topple Mattel as the world’s most profitable toymaker. The brick-builder’s 2013 net profits reached US$1.12 billion, a 9% increase over the year prior. Muller estimates girls now make up approximately 40% of Lego’s total market.

And then there’s Disney’s Frozen, the highest-grossing animated movie of all time. The female-centric tale caught fire in consumer products circles, generating big sales for licensees like toycos Mattel and Jakks Pacific. In fact, merchandise based on the film outsold that of any other licensed product over the first quarter of 2014, according to The NPD Group.

So, from the headlines, it would appear as though girls toys have never been more popular, but analysts say the success of these IPs shouldn’t be misread as growth across the entire girls market.

“If you strip off [Disney] Princess—particularly Frozen—in the last nine months, the girls business has been largely flat,” says Stephanie Wissink, a senior research analyst with Piper Jaffray in Minnesota.

For the first quarter of 2014, sales for Hasbro’s girls division jumped 21% compared to last year. Mattel, on the other hand, saw Barbie sales tumble 15% in Q2 2014, the eighth time sales of the brand have dropped over the past 10 quarters. “It’s really just been a rotation,” Wissink adds. “It’s not as if value was created in the channel. It’s just that the apple pie got sliced into different sizes, and different players got each piece.”

Across the US, doll sales have remained relatively unchanged—generating roughly US$2.7 billion at retail annually, according to NPD—over the past three years. One brand’s popularity comes at the price of another being left out in the cold. “This time next year, we’re probably going to be talking about the decline in the girls toy market because of Frozen going down,” says Needham & Co. toy analyst Sean McGowan. “If it’s not next year, it’s the year after.”

Recent headlines are different when it comes to boyland. Hasbro’s boys division struggled to find momentum last year, and the company’s net income for 2013 dropped by 15%. Spider-Man action figures, for example, appear to be caught in a web of movie sequel fatigue. In the week leading up to this year’s release of The Amazing Spider-Man 2 (the franchise’s fifth movie in 12 years), some Toys ‘R’ Us outlets had a promotion for 25% off all Spider-Man figures.

Captain America hasn’t come to the rescue of boys toy sales—or master toy licensee Hasbro—either. When Captain America: The Winter Soldier hit theaters on April 4 to rave reviews, Cap had an average of 72 running feet of shelf space at Walmart, Target and Toys ‘R’ Us combined, according to Klosters’ Muller. But by May 2, the superhero’s real estate had dropped to a total average of 14 feet among the three major retailers. Inevitably, space was needed for Godzilla, Transformers, X-Men and How to Train Your Dragon 2 toys.

“These movies cannibalize each other,” says Muller. “If you look at the action figure movies per year in 2007, there were four. This year, there are 12 movies.” Hasbro is the toy licensee for six of these films, but more action figure movies arriving in theaters means a shorter life cycle for their toys in stores, regardless of their manufacturer.

What’s left is an uneven sales cycle that drives the boys business, says McGowan. He predicts the return of Teenage Mutant Ninja Turtles to the silver screen in August, and the Star Wars movie set for release in 2015, will breathe life back into the boys toy aisle. In addition, Disney’s purchase of Marvel and Lucasfilm should make sales smoother throughout the year. “[Disney] has no interest in having Spider-Man compete at the box office with Star Wars,” he says. “It will probably manage the [movie] release schedule in a way that will wind up optimizing toy sales as well.”

Away from the big screen, there’s more competition for the toy industry—especially when it comes to boys—from app games like Angry Birds, Subway Surfers and Fruit Ninja. There are entertainment options aplenty that kids can play anytime, anywhere—for free. “It’s not sucking dollars out of the toy industry. It’s sucking hours out of the toy industry. There’s less time to play with traditional toys,” contends McGowan. “And here are little old toy companies trying to get you to pay for plastic by the pound.”

Not to be left behind, Hasbro paid US$112 million last year for a 70% share in mobile game developer Backflip Studios. Mattel, however, might be more cautious about joining the world of electronic gaming after its 2006 console HyperScan, which combined gaming and card collecting, failed to ignite sales. And while video games have been around for decades, kids don’t appear to be spending any less money on toys as a result of their popularity.

“The children’s toy market [in the US] has been sitting at US$20 billion every year for 10 years, regardless of video game cycles or tablets,” Wissink says. “Children will still desire to play with physical toys. It’s just that they’re going to expect those toys to interact with content.”

When it comes to capitalizing on both physical toys and interactive games, Activision has flown above the competition. Skylanders were the top-selling action figures in the US over the first half of 2013, according to NPD and Activision’s internal sales data, and the franchise as a whole generated more than US$1.5 billion in revenue in its first three years on the market.

Skylanders’ success has enticed other heavyweights to enter the ring. Within one year of launching, Disney Infinity exceeded US$550 million in revenue, and the recent announcement of Infinity 2.0 adds Marvel superheroes to the mix. At E3 Expo in June, Disney Interactive president Jimmy Pitaro made his goal for Infinity clear. “We will be a billion-dollar franchise,” he said. Nintendo, for its part, announced that it will also enter the toy-to-life gaming ring with amiibo, which is set to launch later this year with the release of Super Smash Bros. for Wii U.

While new play patterns emerge, however, traditional toy companies refuse to fall behind the curve. Last year, Hasbro partnered with Rovio to introduce Telepods, a physical toy that utilizes QR codes to scan characters into an app game. The toyco has since sold more than one million Telepods and will introduce new brands like Transformers to the toy line later this year.

Kids in Europe and North America may want toys that combine physical play with interactive elements, but this trend isn’t as pronounced yet in Eastern Europe, Russia, Latin America and parts of China, according to McGowan. “These are high growth markets for traditional toy purchases because…they can’t yet afford a high-priced tablet to give to their kids,” he says. “Both Mattel and Hasbro are seeing far higher growth rates in Russia than they are anywhere else in the world.” Hasbro opened a Russian office in 2009. Mattel followed suit in 2012 and has since reported that its sales in Russia tripled last year.

Even in North America, opportunity can still be found away from tablets or TVs. When girls construction newcomer GoldieBlox won a competition from accounting software company Intuit for a highly coveted Super Bowl advertisement, its commercial featured a massive Rube Goldberg machine. The video quickly went viral. Weeks later at the 2014 Toy of the Year Awards, GoldieBlox and The Spinning Machine nabbed top prize for both the People’s Choice Award and Educational Toy of the Year. In arts & crafts, Rainbow Loom tugged girls away from the screen to become the runaway success of 2013 and win the TOTYs’ top prize.

“Now what I’m waiting for is for someone to come out with an activity kit that is specifically designed for boys,” Muller says. “And if they do this cleverly enough, you will find there is a totally new segment to be had.”

This article originally appeared in the July/August issue of Kidscreen

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