If You Can’t Beat ‘Em, Join ‘Em: How Toy Makers Survive In The Digital Age

Playing with toys used to be the predominant way kids kept themselves entertained. With a bit of imagination, children could play with Lego and Barbies for hours, completely immersed in their own fantasy world. Nowadays, they would rather be tapping away at animated characters on iPads. Technology has changed the way kids play and toy makers are now using technology to win them back.

Image: Mattel at Dreamforce.

Digital entertainment and electronics have edged their way into our lives and fundamentally altered playtime for kids. From video games to 3D animated kids shows, parents are now inundated with options to keep their kids entertained and physical toys have waned in popularity.

So how do toy makers cope with the changing times? They roll with it. One of those companies is Mattel, a global corporation that owns a swathe of toy brands including Fisher-Price, Barbie, Hot Wheels and a whole bunch of board games. Founded in 1945 in the US, Mattel has had to make drastic changes to stay relevant in an age where children have limitless distractions at their fingertips.

The company has copped a beating as sales slide for six straight quarters. This has prompted Mattel to rethink its business.

A year ago, Mattel embarked on a journey to take advantage of digital technologies to further its physical toy manufacturing business. It started to create complementary apps for the toys it was making. One of these apps is for its Hot Wheels collection. When a child gets a Hot Wheels mini car, they can actually use a Mattel tablet app to race it in a game. By doing so, Mattel is bridging the gap between the physical and digital worlds for kids, creating a richer experience children can have with its products.

Activision has gone through a similar route as Mattel, except in reverse. The video games maker launched Skylanders back in 2011 which is a series of digital games that incorporate real toys through near-field communication (NFC) technology. The figurines are scanned into the game and kids can interact with the characters on screen and in the real world. This platform has proven extremely successful and has since been copied by Nintendo through its amiibo line.

This direction seems to be working in bringing some life back to the toy industry, most evidently in the US, which has seen a four per cent growth in sales in 2014. Global toy sales remain a bit flat but at least it’s not going backwards.

Toy companies aren’t just using technology to make their toys more immersive through digital means. They want to improve the way they interact with their customers. Mattel has traditionally sold its toys through distributors and had no direct relationship with customers. Through the apps it is creating, the company now has a more intimate link with the kids that play their toys and keeping its brands at the front of mind for these young consumers.

Mattel has also gone through a major IT overhaul in order to market better to parents. According to Neil Gogate from Mattel, the company has consolidated the data of all its different toy brands and is using data analytics to learn more about its customers and make product recommendations based on the information.

“If you have a child that is turning two or three years old and they have been playing with Fisher-Price toys for a while, perhaps it’s time to introduce them to Barbie, Hot Wheels or even Thomas The Tank Engine,” Gogate told Lifehacker at Dreamforce in the US.

“We are trying to extend that Mattel awareness and we have a number of brands that can take kids from cradle to college. They may even grow up to become collectors of our toys.”

Mattel is working to ensure it has a steady stream of data about its customers for more targeted marketing efforts but it has stopped short of collecting data from the toys themselves. While it is something that is something Mattel is interested in, it wants to do it right.

“We want to make sure we fit in with regulations on data collection and we want to make sure we can do it in a safe manner so we’re not breaking any rules,” Gogate said.

But there is definitely potential in gathering data from toys and in an age where many consumer goods are connected to the internet and sending out information, a future where companies can learn how kids are playing with their toys directly through the products themselves doesn’t seem too far off.

As toy makers continue to modernise their businesses, no doubt we’ll be seeing even more innovation coming out of the toys industry. Perhaps the next big thing will be integrating physical toys with virtual reality. The possibilities for play are endless.

Spandas Lui is in San Francisco as a guest of Salesforce.