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October 19, 2010

Effects of age compression on traditional toys and games

Analyst Insight by Utku Tansel.

As children are getting older younger, age compression is changing the dynamics of toys and games. Many girls are interested in music, clothes, make-up, television talent shows and celebrities, whereas boys are moving to computer games at an ever younger age.

The “drop off” after the age of seven is much faster among girls as all of these dynamics compete for girls' attention and spending. On the other hand, the girl market is less volatile than that of boys, with products having a longer lifecycle as girls tend to hold on to their favourite characters.

As a result of age compression, there is a clear shift from traditional toys and games to video games. In response to this trend, major traditional toys and games manufacturers have been looking into expanding their operations and product lines towards video games.

In this regard, Mattel acquired Radica Games. However, more interestingly, Hasbro chose to join video game manufacturers by setting up a strategic partnership with EA Games rather than competing against it as the company sees age compression as a business opportunity rather than a threat.

While Hasbro's iPhone apps are already proving to be popular, in an interview with Euromonitor International, Hasbro stated that “Kids who are playing Monopoly at home on the Wii will be more likely to play the games in a board format”. Additionally, Hasbro linked up with a Chinese developer to make a massively multiplayer online (MMO) Transformers game in 2010.

Video Games vs Traditional Toys and Games Sales

Source: Trade associations, trade press, company research, trade interviews, Euromonitor estimates.

Even Playmobil, a company which has persistently rejected batteries for 35 years, is feeling the pressure. Following in LEGO's footsteps, the company launched two adventure games on Wii and DS/DSi - Playmobil Circus and Playmobil Pirates - at the end of 2009/beginning of 2010. Inspired by the success of the Circus Playmobil play sets, Playmobil Circus enables the whole family to become performers in a virtual circus.

Playmobil Pirates for Nintendo DS and DSi, in which action and adventure are the main genres, was inspired by the success of the pirates Playmobil play sets. The well-established manufacturer is also planning to launch a remote control car with video camera in 2011.

However, it is important to recognise that the whole age compression issue is playing out in more than just gaming. Ten years ago Action Man was aimed at children over the age of five, but now it is being bought for children as young as two. On the other hand, plush toys are extending beyond younger age groups and are now increasingly being bought by/for tweenagers, showing a nurturing trend.

Retailing is quick to respond

In the UK, Hamleys opened a Hair & Nail Bar in its flagship store in Regent Street, London, in 2009. According to the company, it is the UK's first dedicated hair salon for children, and when Euromonitor International visited the store on a relatively quiet weekday morning in June 2010, it was already busy with young children who were trying to catch up with the latest fashions.

According to the company, the salon has been enjoying growing popularity, especially among girls aged 7- 8.

Hair and Nail Bar - Hamleys London

In the US, some hair and beauty salons now have a special “kid menu”, aimed at children under 10 years of age, and providing services from hair cuts to manicures and pedicures. The famous Bobbe Joy Makeup Studio offers teen make-up lessons.

Over in China, the world's largest Barbie store opened in 2009 in Shanghai and is more than just a toy shop. In addition to over 1,600 Barbie products spread over six floors, girls can also make use of the full-service day spa, get their hair cut and their nails done, as well as buying accessories and clothes modelled on Barbie's fashion tastes.

Adapt or fight?

Innovation may not be sufficient to sustain interest in traditional toys and games. What is fundamental is the need to develop and sustain efficient communication with parents, emphasising how traditional toys and games play a significant role in children's learning of how the world works. For instance, Monopoly could potentially lay the foundations for good economic skills, while construction blocks teach children the basics of physics and how to build.

Including supporting statistics and recommendations from experts about the benefits of certain traditional toys and games on children's development in marketing campaigns would also provide a competitive advantage, while benefiting the category as a whole.

Without doubt, the main challenge for traditional toys and games manufacturers is to produce good quality merchandise that children of all ages can relate to. Getting older children to play with toys for longer is the key to success, so these players should have different product offerings for different age groups.

As refining market segmentation becomes increasingly important, the latest trends and developments in demographics should be followed evermore closely so as to make sure that the products target the right age groups.


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