At the time of writing we’re seeing an economic slowdown like we haven’t seen in our lifetimes, and this is going to have significant implications far beyond just the global toy industry.
With large sections of retail shut down in many major markets, this is definitely not business as usual, and it is sadly likely that when we finally emerge from the medical emergency we find ourselves in we will find ourselves facing a large degree of economic damage.
While the toy business has proved over and over again that it is relatively cushioned from economic downturns and hard times, things might be a bit different this time because we will inevitably lose some retailers and also a number of toy companies of long standing and good reputation are likely to fail during this horrendous period.
All of that said though, whereas there are some people out there wondering if their chosen career is basically over for the foreseeable future unless they retrain and upskill, the longer term outlook for the global toy business remains positive for a number of reasons, and that should give many of us hope and faith. Here’s a number of reasons to feel reassured about the prospects for the toy market after the pandemic clears:
The Need For Play has not diminished – there are a myriad of play occasions and motivations. Children learn through play. They develop through play. And they play to have fun. This has not changed, and it won’t. If anything right now kids are playing a lot more than normal due to not being in school. Of course parents are constantly fighting screen time addiction, but either way kids do want to play, and if they consume content, some of that content creates interest in characters which normally leads to toy sales.
Parents still want the best for their kids – parents haven’t stopped wanting to be good parents, and haven’t stopped being concerned about their child’s development and fulfilment. In fact, all those categories of toys which are parent prompted primarily i.e. board games, puzzles, art & craft kits, science kits and such items are all flying out of retail despite lockdown as parents both positively seek to educate and gainfully occupy their kids as well as negatively in some cases are just seeking a bit of respite or peace and quiet!
Parents still get pestered by their kids for cool stuff – children do tend to sense when things are difficult for parents, but that won’t necessarily stop them asking for stuff they really want. And in some ways, parents are more likely to indulge their kids during tough times because they don’t want their children to be unhappy. As we come out of the current situation though, kids will feel less and less guilt about pestering for the stuff they want – and maybe they will be ‘into’ 3 or 4 new brands since they have been consuming so much content while not attending school.
The playground effect will return – this is one of the most powerful drivers of toy sales and toy consumption, and has been for a very long time. Kids love to show off the latest cool new stuff they are playing with and small items like collectable toys sit in their pockets, bags and pencil cases just waiting for the chance to come and play with friends at break time. Children are also (very thankfully) seemingly less likely to suffer from serious health issues related to COVID-19, so hopefully can go back to school sooner rather than later both for their sakes and for their parents!
Movies will return – lockdown has lead to a massive acceleration of growth trends for video on demand consumption from adults and kids as they seek to utilise the most accessible home entertainment in the current situation. But the typical movie release model will return for a number of reasons. Bigger companies in good financial shape have financial resources and balance sheets to call upon in times of crisis, of course they will seek all outside help they can from governments, employees and customers, but in the end they can usually access the necessary funds to get through even a long crisis. Therefore those mighty movie making behemoths will come through this less profitable in the short term but largely ready to go when things pick up again. Which means the entire model including big budget production with A list stars and the resulting marketing onslaught will return. The only thing is we may get a bit of a lag as nothing much is getting produced right now in most locations, but after the lag, the classic movie model will return. Some cinema chains may change hands, the physical cinemas might end up being operated by a different entity, but they haven’t disappeared, cinemas are great for one thing alone – showing movies, so someone will operate them somehow. Movies are a perennial driver of toy sales and this pivotal part of the toy business will return, while in the meantime on demand viewing will have broadened and deepened brand and character affinity.
Retail will evolve – retail is always a tough business to be in, but now things are worse than ever. Some retail businesses will not make it through this time, but many others will and they will be stronger due to having to work hard at diversifying their operating models. Either way though where there is consumer demand there will be retail of some sort, in some format and consumer demand will return mid term, if not before.
Global population is growing – the global population is growing fairly rapidly, which means there are more people to buy everything. In some countries the birth rate is not growing or is even diminishing slightly. Some analysis suggests that the population growth is at least partly due to people living longer, but don’t forget grandparents are a major secondary purchaser of toys after parents, so if we have more grandparents around for longer even if we don’t end up with many more kids we should still see sales increases.
Asian economies are set for major growth over the mid to long term – at the time of writing there are 2 potentially massive growth markets for toy sales. Firstly China, which is now the world’s 2nd biggest toy market after the U.S.A. is going to grow massively – because of China’s huge economic progress, people in China will be far more affluent over the next few decades than ever before in history, and as a result toy sales will soar. Secondly, India is also seeing significant economic growth which is set to continue throughout this century, and with nearly the same number of people as China, and with a culture which cherishes children we expect to see considerable growth in the Indian toy market over the mid to long term albeit from a small base.
So while we are all going through tough times, and need to fight our way through the current situation, and will then need to fight our way to recovery, as the song says ‘The sun’ll come out tomorrow’!
PS For toy and game companies looking to grow their businesses, we offer an ‘all-in’ Consultancy package. The Toy Co Growth Booster is open to a maximum of 3 clients at any time, and offers both strategic planning and commercial insights alongside practical help to grow your business and make it more profitable, even during these tough times. For more info: http://www.kidsbrandinsight.com/blog/toy-co-growth-booster-program/