Preschool Segment Most Important to Toy Market

By Heide B. Malhotra, Epoch Times
October 22, 2013 Updated: November 15, 2013

Toys, which are an important factor in the cognitive, social, tactile, and motor skill development of youngsters, are a multimillion dollar industry. 

However, toy industry market statistics are hard to come by, with very few companies providing data for prior years and not much for 2013.

According to Statista, also called Statistics Portal, people spent $84 billion globally and $20 billion in the United States on toys in 2012. 

“The direct economic impact of the U.S. toy industry is at about 29 billion U.S. dollars, supporting approximately 250 thousand jobs,” a Statista report states. 

Three of the five leading toy manufacturers are U.S.-based: Hasbro Inc., Mattel Inc., and JAKKS Pacific Inc. Additionally, there is the Denmark-based LEGO Group and Namco Bandai Games Inc. based in Japan. 

However, the majority of toys are not produced in the United States. Mattel states in its 2012 Annual Report that most of its manufacturing facilities are located in China, Indonesia, Malaysia, Mexico, and Thailand. Hasbro’s and JAKKS Pacific’s production facilities are primarily in China. 

Competition among toy manufacturers “is intensifying due to recent trends towards shorter life cycles for individual toy products and an increasing use of high technology in toys, states Mattel in its 2012 Annual Report. According to Mattel, there is a phenomenon of “children getting older younger,” so they outgrow their toys earlier.

The Preschool Toy Market

The preschool market competition includes Mattel and its wholly owned subsidiary Fisher Price, LeapFrog Enterprises Inc., Hong Kong-based VTech Holdings Ltd., Hasbro, Melissa & Doug LLC, and MGA Entertainment.

Toys fall primarily into three age categories: baby, preschool, and tweens. Teenagers are no longer considered to be a major factor in toys, given they are increasingly leaning toward consumer electronics. 

According to a recent article by Klosters Trading Corp. owner Lutz Muller on the Seeking Alpha website, “The preschool toy segment has been more stable than the toy biz overall, not only in the U.S. but worldwide.” 

The reasoning is that preschoolers are less interested in electronic devices, such as smartphones. 

However, the preschool market is facing a major realignment given the low birth rate in the United States and Europe. The Asian, African, and Latin American markets are just the opposite with high preschool population growth.

At this time, the total U.S. preschool toy market amounts to $3.3 billion out of a $22.1 billion global market. 

Among all preschool toys produced, Mattel and its subsidiary Fisher Price has sold by far the most toys in the United States. It has cornered 50 percent of the U.S. preschool toy market and 12.7 percent of the global market. 

Mattel’s closest competitor is LeapFrog with 13 percent of total U.S. preschool toy sales. 

Despite the competition, Mattel might increase its market share. It acquired the British media company HIT Entertainment for $680 million in 2011 and with it the preschool brands Thomas and Friends, Bob the Builder, Fireman Sam, and others. 

There are a great number of HIT product licenses outstanding that will expire in the near future. According to Muller, Mattel won’t extend these licenses, but will keep them and include these products in its own sales efforts.

The preschool toy market is still a major moneymaker for toy companies such as Mattel and its subsidiary Fisher Price. However, with the European and U.S. preschool populations decreasing, many Western toy companies have to break into the Asian, African, and South American markets and garner market share to remain financially viable.