First, you take the dragon’s egg out of the box. But this isn’t just any dragon egg—it’s a Dragamonz egg. It doesn’t just hatch, you have to smash it (preferably with a hammer) before you can peel the shell to reveal a small collectible hidden inside. Ideally, you’re doing this while live-streaming the whole thing on TikTok or YouTube.

But wait, there’s more: Spin Master’s newest plaything isn’t just a toy upon opening. The Toronto toyco designed Dragamonz (pictured above) to offer multiple layers of functionality, including a new card game, as well as animated content slated for broadcast on Amazon Prime and YouTube. Additionally, there is an app with VR elements enabling kids to capture the dragon characters in real-life environments, à la Pokémon Go.

“Everyone likes the experience of opening [toys], particularly in the age of YouTube,” says James Martin, Spin Master’s SVP of global brand strategy and global business unit lead for robotics and boys IPs. “It [needs to be] more exciting than just ripping a bag open. The package is designed to prolong the experience. That is part of the fun, and it’s something different that will really stand out on the shelf.”

While Spin Master cracked the unboxing code with the viral success of previous blind packaged toys, it isn’t exactly a new concept. In fact, blind packaging is probably as old as the collectible category itself. Baseball and hockey cards are the most well-known examples, dating back decades. For just a couple of dimes a pack, the kids of yesteryear risked getting a few duplicates for the chance to secure that sought-after Mickey Mantle card…and a stale piece of bubble gum to boot.

But there’s renewed vigor behind the mystery format. The immersive experience of opening toys has become almost as important as the toy itself, adding value to a soon-to-be-discarded shell, and creating heat in a shrinking and increasingly competitive retail market. No longer a solely utilitarian concern, packaging is now an integral part of retail strategies, and toycos need to unwrap new efforts to succeed in the upcoming holiday season.

Dragamonz’s packaging approach stems almost entirely from the success of Spin Master’s other blind pack hit: Hatchimals. Introduced in the 2016 holiday season, the collectible broke precedent and sold for upwards of US$69 a pop.

The Hatchimals arrive in egg-shaped casings that self-hatch, revealing the robotic plush only after kids arrive home. To add to the experience, the creature is finally revealed in a dramatic flurry of squeaks, chirps and coos. With this concept, Spin Master created a marketing mechanism (initially conceived as an “anti-unboxing” moment by designers) that helped launch the product into the sales stratosphere. Kids and parents alike shared their experience waiting for the product’s reveal on social.

The Hatchimals brand brought in an estimated US$80 million in revenue in its first year alone.

Popular videos racked upwards of 20 million views, while word-of-mouth marketing helped propel the brand. The official Hatchimals YouTube channel has 141,000 subscribers and thousands of videos—and it’s growing every day. In its first year alone, the IP brought in an estimated revenue of US$80 million.

Carol Spieckerman, president of Arkansas-based consultancy firm Spieckerman Retail, believes the blind packaging trend is a direct offshoot of the huge popularity of unboxing videos. The engagement element is irresistible to both parents and kids, she says, and the ability to use genuine, peer-created content to promote a brand is a clear win for toy companies.

“The kids and parents are doing marketing for them,” Spieckerman says. “The user-generated content is where the magic really happens.”

Retailers who may have been hesitant to stock higher-priced blind packaging products have to temper that angst against the benefits of creating a viral hit, she says.

“The best thing in the world for retailers and brands is to have kids coming into the store like heat-seeking missiles and going right to the product on the shelf,” Spieckerman says. “Those viral moments have primed them for purchase.”

There was significant debate around the launch of Hatchimals because Spin Master knew there was magic in the element of surprise and in its hatching reveal, Martin says, but the higher cost meant parents might not have wanted to go into the purchase completely blind. A happy medium was reached when the company decided to indicate what version of Hatchimal would be inside the egg. This gave parents some guidance, while still keeping the specific toy a mystery.

In May 2017, Spin Master circumvented this issue entirely when it made the Hatchimals brand available at a lower price point with the Colleggtibles range. Available in single (US$2.99), double (US$4.99) and quadruple (US$9.99) packs, the line features a lower-tech version of the hatching experience that sees kids apply pressure to crack the egg and discover the collectible figure inside.

But some faults have appeared in the high-priced blind pack strategy: Once the driver of significant growth, Spin Master saw its revenue fall 16.3% in Q1 2019, driven largely by falling sales of its remote control and interactive character segment (including Hatchimals), which dropped 65.9% to US$31.1 million. While revenue increased overall in Q2, the segment decreased another 34.9% year over year, to US$23.8 million.

In comparison, MGA Entertainment, maker of the popular L.O.L. Surprise! line of blind packaged collectibles, has so far managed to avoid the natural slump that accompanies some trend-first products. In fact, despite an overall 2% sales decline for the US toy industry in 2018, the success of the L.O.L. Surprise! line helped boost the entire doll segment to 7% growth, according to data from The NPD Group.

All told, eight of the 10 top-selling traditional toy items sold in the US last year were L.O.L. Surprise! products. MGA Entertainment CEO Isaac Larian says the success comes down to ceaseless innovation in product and packaging.

“In short, our philosophy for L.O.L. Surprise!—and all MGA brands that come in blind packaging—is to always bring new surprises to fans in ways that keep them laughing and smiling,” he says.

Packaging-wise, MGA’s newest L.O.L Surprise! OMG dolls feature a box that transforms into a reusable dressing room playset. Retailing for US$26.99 apiece, the dolls’ clothes are wrapped in new, reusable packaging that doubles as garment bags and hat/shoe boxes.

Released this summer, the line was a success at retail and is currently the number-one fashion doll brand in the US, according to The NPD Group.

Larian says that when it comes to blind packaging, MGA is more concerned with innovation than price point.
“It doesn’t matter if the product is US$0.99 or US$50,” he says. “If the kid doesn’t enjoy the experience the toy brings, the price is irrelevant.”

Caroline Ingeborn, president and COO of Toca Boca, agrees. There needs to be a strong concept that closely ties the packaging and the product, she says; otherwise the experience doesn’t feel earned. “We haven’t done [blind bags] yet, but if we launched in a collectible category, we would consider it,” Ingeborn says. “You don’t just do it to do it.”

Instead of focusing on unboxing, Toca Boca’s H&M line lets kids interact with the products in stores.

She argues companies should be aware they are creating expectations for a product with blind packaging and that, even at a low price point, the experience has to live up to the hype.

“You need to overwhelm children with what is on the other side of the packaging,” Ingeborn says. “The products need to be really good; otherwise you are harming the trust you have with a child.”

Toca Boca put the spotlight on pre-purchase behavior to innovate the packaging around its products. Designed with retailer H&M, its latest line of children’s apparel—including shoes, accessories, socks and soft toy bags—launched in August. Dubbed the Toca Life x H&M collection, buyers interact with the products through the Toca Life: World app. The hangtags feature QR codes that, when scanned, prompt the user to download the app.

Each in-store item will have a digital collectible counterpart inspired by the line (but not H&M-branded), making the retail display multi-dimensional as both a physical display in the store and as a digital asset.

“We wanted to have playful elements that would tie the product from the physical world to the digital one,” says Ingeborn.
The program is the opposite of blind packaging, as the QR codes that are affixed to the clothing offer interaction before kids even leave the store. The underlying concept, however, remains the same—using innovative packaging design to increase customer engagement.

“The physical store is still where the rubber meets the road in the toy category,” says Spieckerman.

Spin Master’s Martin agrees, adding that retailers are prioritizing in-store experience accordingly when they evaluate a product.

“Even in the last five years, we have seen such a change in retail approach,” he says. “The days of just using a square box, putting a commercial on the air and hoping for the best are long gone. You have to offer a lot more.”

Further evidence of retail’s move into a more innovative and experiential space can be found in the recent announcement of a new partnership between Disney and Target.

This month, 25 House of Mouse “stores” will open within Target locations across the US with an additional 40 planned for 2020. Spieckerman sees the partnership between the world’s biggest content creator and a major big-box retailer as illustrative of the quest to make the entire retail experience more immersive and multi-dimensional.

“A real corner has been turned,” she says. “That partnership shows how retailers are really investing in engagement. It’s about creating a total experience backed by content.”

Spieckerman places the blind packaging trend within a larger context of offering consumers more engagement at retail. She expects the trend to keep evolving as retailers and their partners transform store aisles into immersive platforms.

“You don’t just have a brand and say, ‘We’re putting this on the shelf in November,'” she says. “There is just so much more to it now.”