Looking For Trends In Toyland? Check Out Indie Players

Privately Owned Companies Make Up Nearly Half the Industry's Sales

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On the surface, the toy industry looks like Hasbro, Lego, Mattel and everyone else. However, that long tail made up of hundreds of "other" toymakers accounts for up to half of annual toy sales.

They're also the innovators. Mostly privately owned, they jump-start trends not just with their products but with their marketing. And social and digital media have helped level the playing field for independents that lack giant marketing budgets.

"Because Mattel and Hasbro are public ... there's a lot of pressure to produce hit toys and generate revenue," said Jim Silver, editor of TimetoPlaymag.com. Instead of being forced to rely on hit franchise extensions or licensing movie properties for sure hits, the private toymakers focus on small portfolios that include new concepts each year.

Many new toys come with ready-made marketing stories -- the engineer dad who was trying to play along with his daughters making bracelets (Rainbow Looms); the trio of college students teaching people to juggle to earn extra money (Klutz); and the toy-industry dad picking up on his daughter's fascination with gel beads (Orbeez).

And the lower costs of social and digital marketing mean small toymakers can make an appeal directly to consumers. Some do use kid TV networks, especially around the holidays, but the majority focus on interactive, word-of-mouth and social-media marketing. Uglydolls, begun in 2001 by David Horvath and Sun-Min Kim, started its trek to toy stardom with retail placement, selling its first 1,500 plush dolls at specialty stores in Japan, New York and Los Angeles. From there, news articles, celebrity sightings, unpaid product placements and toy-drive donations spread the word, all while the company strategized to keep an air of exclusivity.

"Uglydolls are something you stumble upon in the airport or at a small store, as opposed to TV or media telling you it's cool," said Alita Friedman, the company's chief brand officer. The brand topped $100 million in sales in 2009 and has since added its own retail store, dozens of licensees and a deal to create an animated feature film.

Retailers play a key role in marketing smaller toymakers' products. Sharon DiMinico, CEO and founder of Learning Express, which has 130 franchised stores, said, "You know when dozens of customers are asking for the same item, something's going on."

That's what happened earlier this year with now-mainstream hit Rainbow Looms. The co-owner of two Atlanta-area Learning Express stores placed an order of looms from founder Choon Ng and started hosting bracelet-making workshops. Two weeks later, she ordered $10,000 more. Word spread through the network and the craze took off.

Reyne Rice, a toy-trend consultant, said the industry has always been competitive, but shorter shelf lives for toys and growing digital competition is particularly tough for smaller players. "It's very much a fashion business," she said. "Smaller companies with fewer products in particular are vulnerable if the product falls out of favor or when kids move on to the next big thing."

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