Toys & Pester Power - It's No Child's Play

When Ruth Handler, cofounder of Mattel, introduced Barbie to retailers at a Toy Fair, she wasn't satisfied by their enthusiasm. They treated it just like any other toy or doll. Then, she had an idea. Mattel advertised Barbie with the “Mickey Mouse Club” TV program in 1955, and became one of the first toy companies to broadcast commercials to children. Mickey Mouse was a big hit. And, so was Barbie. Children started demanding Barbie dolls from their parents. And, there weren't enough to go around. This is pester power i.e. the ability of children to pressurize their parents into buying them products, especially items advertised in the media.

I've been hearing the episodes on Hasbro vs Mattel on Business Wars. Highly recommend this listen about the story and wars of the two toy giants as they thrive, near collapse and recover across 7+ decades, navigating the fickle attention span of children.

The Macro View

The toy industry is a fascinating space - globally worth ~$91 bn (2019). India is ~1.3% of this, about $1.23 bn despite being home to nearly 20% of the world’s children. The Ken recently reported that the country’s per capita spending on toys is around Rs 150-200 (~$3). This is much lower than even the Asian average, which hovers around $34. 

Only 20% of India's demand is met by domestic demand while the 80% of this is imported. Unsurprisingly, about $600 mn worth of toys is imported annually from China, thanks to the cheap prices. Further, about 90% of India’s 4,000 toy manufacturers operate in the unorganised sector (TPCI). Hence, there's huge untapped opportunity for the formal sector, which can achieve scale and subsequently impact millions of children. The domestic toy demand has been forecasted to grow at 10%-15% against the global average of 5%, largely attributed to contributing trends such as a 2.5x increase in income per capita from 2016 to 2027 (Invest India).

This hasn't gone unnoticed by the government of India, who is hoping to heavily invest in toys manufacturing. In December 2020, India’s Department for Promotion of Industry and Internal Trade (DPIIT) came up with a detailed National Action Plan for Toys, laying out the ways and means for India to become a toy manufacturing hotspot. In February, 2021, the Prime Minister of India called upon start-up entrepreneurs to explore the toy sector. He urged industry players to support local toys and reduce reliance on foreign goods. The government has also approved eight toy manufacturing clusters at a cost of Rs 2,300 crores to boost India’s traditional toys industry. Earlier this year, we hosted the first ever India Toy Fair 2021.

Where's the opportunity?

Especially with Covid lockdowns with children being at home, there's a revised role in the importance of toys. R Jeswant, CEO of Funskool, one of the largest players in India believes that we have the capability. A number of world toy companies are already sourcing toys from us. But we do have some handicaps in design and development. For instance, our tooling cost is high vs the customer's propensity to spend and demand volumes.

In the formal sector, educational and culturally rooted toys are the fast growing segments. Funskool, established in 1987, is the biggest Indian player, known for its puzzles.  R Jeswant, CEO, Funskool, says, “There has been a 50% growth in overall business via e-commerce sales since last year.” Funskool has introduced traditional toys and board games such as Kho Kho, Kabbadi, Chaturanga and Gilli Danda this year.

Increasingly, a number of startups have ventured into the space such as Smartivity, Shumee, Skillmatics, PlayShifu, Einstein box. Playshifu, the Indian brand known for making tech-based education toys, is planning to boost manufacturing capacity in the country, doubling to 20,000 units per month, with a focus on in-house consumption and exports (Business Today). Even global brands like Hasbro have established a formal presence in the country. Since 2017, Hasbro launched its presence in India and has been steadily growing. It is investing in localisation, for instance with an Indian edition of the classic Monopoly. The brand has expanded its presence by partnering with retail outlets like Hamleys and by also doubling down on e-commerce platforms (Business Insider).

In line with the trends, Amazon has announced the launch of the 'Made in India toy store'. With this launch, sellers from 15 Indian states showcase over thousands of unique toys across 'toy-categories' like traditional toys, handmade toys and educational toys.

Supply Chain Hiccups

According to Ajay Agarwal, president of the Toy Association of India, we lack equipment to make electronic toys in India, which is a big gap given its attractiveness to children. For the equipment, we need to import machines from South Korea and Japan. But they're too expensive at about 34% import duties. Moreover, all factories producing toys in India are required to be certified by the Bureau of Indian Standards (BIS)and product testing has been made mandatory. This capability is still limited for most manufacturers. The new regulations set by BIS were implemented with effect from January 01, 2021.

However, due to the recent disruptions in the supply chains from China caused by the pandemic, a vast untapped potential has been realised within our domestic market.

The Marketing Debate : Pester Power

Now, here's the ethical issue in marketing toys. Pester power marketing tactics have been often frowned upon. The term "pester" can carry negative connotations such as the "nag factor" with unrelenting purchase requests to harassed parents. Many academic studies in this area have highlighted the disappointment and unhappiness that can arise when a parent refuses a child’s purchase request. According to a report published in June 2019 by the affiliated charities Action on Salt, Action on Sugar and the Children’s Food Campaign, the Peppa Pig brand is one of the worst offenders in the UK when it comes to marketing unhealthy foods to children. The analysis, which studied child-friendly food packaging in all major UK retailers, found that around half of all packaged foods featuring Peppa Pig were high in fat, salt and/or sugar.

“Children are much easier to reach with advertising. They pick up on it fast and quite often we can exploit that relationship and get them pestering their parents.” —Stephen Colegrave, then-director of marketing at Saatchi & Saatchi, speaking to the Guardian in 1999

However, it can definitely influence positive behaviours. Remember how Bournvita got kids interested in drinking milk? And, associated itself with cartoons like Dexter and Powerpuff girls. Children are more influential than ever in their parent’s purchase decisions. A recent global survey conducted by Synovate, a global marketing research agency concluded that 42% of kids in India influenced parents' decision to buy high-priced goods such as cars. There are already examples of positive marketing to children – In the UK, Sainsbury’s has created the Blue Parrot range of healthy kids’ food, children’s TV channel Nickelodeon promotes fresh fruit and vegetables on its stations and the massive marketing budgets behind the Harry Potter books are credited with encouraging children to read.

In India, boosting the toy industry will hinge on its efforts to market itself better to children. So, my point of view is - pester power works. However, brands need to sharpen their children-targeted advertising and err on the side of caution, leveraging the power to play a constructive role in advancing the interests of children.