Hasbro Plays Nice With Tweens
By William C. Symonds
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Toymakers haven't had much luck with tweens -- kids aged 8 to 12 -- in recent years. Once upon a time, children were fascinated with toys until they were 12 or 13. But these days, kids are getting older younger, as the toymakers say. By the time they're 12, just 12% of girls secretly yearn to play with dolls, and just 39% of boys hanker for toys like Legos and remote-controlled vehicles, according to WonderGroup, a Cincinnati-based marketing agency that literally wrote the book on marketing to tweens: The Great Tween Buying Machine).
Disaffected tweens are a key reason toy sales have been But Hasbro (HAS ), the No. 2 U.S. toymaker, may have come up with a successful strategy for luring back the tween crowd. This holiday season, it has an innovative new line of electronic toys that ape the cool stuff kids see teens and their parents using. These tween toys are selling so well that they should help Hasbro outperform the industry as a whole, according to analysts.
Take the ChatNow Communicator. A walkie-talkie on steroids, it looks like a cell phone and lets tweens send text messages, take digital pictures, and call friends -- as long as they're within the ChatNow's two-mile range. ChatNow has been flying off the shelves. As of Dec. 9, it was out of stock at both Walmart.com (WMT ) and Amazon.com (AMZN ), the online outlet for Toys 'R' Us. The shortages have sparked hundreds of auctions for ChatNow on eBay (EBAY ), where one set recently sold for $170, plus $8 for shipping -- more than twice the $75 suggested retail price.
ChatNow is just one of Hasbro's new hits. There's also VCam, an $80 portable video camera that can be used to shoot 7-minute films, and iDog, a cute plastic puppy that assumes a personality when an Apple (AAPL ) iPod or other MP3 player is plugged into it. The iDog, which has become one of this season's most desirable items, is currently unavailable at Amazon, as well as many stores.
Then there's VideoNow XP, an updated version of the portable video player that was named "Toy of the Year" by Toy Wishes magazine in 2004. "[Hasbro is] creating a lot of excitement by offering products for kids that are well-known to adults, but at very affordable prices," says John Sullivan, a senior vice-president of Toys 'R' Us who oversees consumer electronics.
Hasbro is capitalizing on one of the hottest trends in the otherwise-stagnant toy business. Sales of youth-oriented electronic toys last year surged 36%, to nearly $700 million, according to market researcher NPD Group, even as overall toy sales slipped 3%.
And other toymakers are jumping in. Oregon Scientific is scoring with its $99 ATC-1000 Action Camera, which tweens can strap on to film their exploits on a snowboard, bike, or surfboard. Chicago-based Zizzle has Iz, a $40 interactive toy that, like iDog, grooves to the iPod. Both products are doing extremely well, says Reyne Rice, toy trend specialist with the Toy Industry Assn.
And Mattel (MAT ), the biggest U.S. toymaker, is scoring with its Vidster digital video camera. Like VCam, the Vidster allows kids to shoot their own short videos.
Still, Hasbro is the clear leader. Several years ago, it formed a Big Kids division, charged with developing toys that would lure tweens back to the toy aisle. After talking with hundreds of tweens, Hasbro realized that they're fascinated with the "toys" adults use -- cell phones, video cameras, portable DVD players, etc.
Problem is, parents are often unwilling to spring for the real thing -- and not just because of cost. Many worry tweens aren't mature enough to use a cell phone responsibly. Some are concerned that their kids could easily lose or break real consumer electronics, which tend to be more fragile than the toy equivalents. "So we try to empower [tweens], but in a safe way" that's acceptable to their parents, says Sharon John, general manager of the Big Kids division. Consider the ChatNow walkie-talkies. "[In our research], we found tweens want a cell phone more than anything else," says John. But tweens are painfully aware that their parents usually have objections. So Hasbro is marketing ChatNow as the perfect compromise. And many Santas are sold.
"A cell phone gives [kids] more freedom than they need at this age," says Kerry Richard of Amesbury, Mass., who picked up a ChatNow set for her 11-year-old twins for Christmas. "I think my girls will love it," she predicts, adding that she knows many of her daughters' friends will also find a ChatNow under the tree.
BUMPY ROAD AHEAD?
Hasbro's new strategy has some big business benefits. ChatNow, VCam, and their kin move Hasbro into a far-higher price point than its traditional toys, 80% of which retail for $20 or less. In contrast, Hasbro's new line runs from $30 for the iDog, all the way up to $300 for its Zoombox projector, which is being sold only in the New York market this year, with full rollout planned for 2006.
Moreover, "Products like iDog are getting Hasbro into retailers like Best Buy (BBY ) and Circuit City (CC )," which tweens find far more appealing than toy stores, says Jim Silver, editor of Toy Wishes.
Still, skeptics warn, this new strategy is likely to encounter some tough challenges over time. "The further away you get from traditional toys and toward electronics, the more you bump up against better-capitalized companies that can make similar products more cheaply," like consumer-electronics companies, points out Joseph Yurman, a Morgan Stanley toy analyst.
MATTEL'S "MIXED BAG."
Portable DVD players are a good example. Several years ago, they typically sold for over $500. "This year, Toys 'R' Us offered one for just $99 as a door-buster special," says Sean McGowan, a toy analyst at Harris Nesbitt. He worries that could undermine the popularity of Hasbro's portable VideoNow player, especially because the VideoNow requires special disks and can't play normal DVDs. Of course, Hasbro has developed a big library of the "personal video discs" required for VideoNow -- featuring everything from popular cartoons like SpongeBob SquarePants and Ed, Edd n Eddy, to music videos from tween heartthrobs like Hilary Duff and Jesse McCartney.
But in the hit-driven toy business, those are worries for another year. This year is shaping up as a merry Christmas for the No. 2 toymaker. "These toys could lead to a positive surprise for Hasbro," predicts McGowan. In contrast, he warns that industry leader Mattel "is really a mixed bag" this holiday season, largely because of slow sales of its longtime wonder doll, Barbie.
McGowan expects Hasbro's fourth-quarter sales to rise 4%, which would cap a year of strong performance. Indeed, its sales were up 4% in the first three quarters, even as the entire toy industry fell 5%. Hasbro's strong showing earlier in 2005 was driven by big sales of Star Wars-related merchandise. The return of the Jedi may have been good news for Hasbro, but going forward, the return of the tweens may be even better. moribund in recent years.
Symonds is BusinessWeek's Boston bureau chief
Edited by Patricia O'Connell