{"id":6226,"date":"2018-01-31T21:51:01","date_gmt":"2018-02-01T02:51:01","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-digit\/submission\/mattel-toy-manufacturers-need-to-grow-up\/"},"modified":"2018-01-31T21:55:57","modified_gmt":"2018-02-01T02:55:57","slug":"mattel-toy-manufacturers-need-to-grow-up","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/mattel-toy-manufacturers-need-to-grow-up\/","title":{"rendered":"Mattel: Toy manufacturers need to grow up"},"content":{"rendered":"<p><a href=\"https:\/\/d3.harvard.edu\/platform-digit\/wp-content\/uploads\/sites\/2\/2018\/01\/Toystory-photo.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-6228\" src=\"https:\/\/d3.harvard.edu\/platform-digit\/wp-content\/uploads\/sites\/2\/2018\/01\/Toystory-photo-300x170.jpg\" alt=\"\" width=\"528\" height=\"299\" srcset=\"https:\/\/d3.harvard.edu\/platform-digit\/wp-content\/uploads\/sites\/2\/2018\/01\/Toystory-photo-300x170.jpg 300w, https:\/\/d3.harvard.edu\/platform-digit\/wp-content\/uploads\/sites\/2\/2018\/01\/Toystory-photo-768x434.jpg 768w, https:\/\/d3.harvard.edu\/platform-digit\/wp-content\/uploads\/sites\/2\/2018\/01\/Toystory-photo-1024x579.jpg 1024w, https:\/\/d3.harvard.edu\/platform-digit\/wp-content\/uploads\/sites\/2\/2018\/01\/Toystory-photo-600x339.jpg 600w, https:\/\/d3.harvard.edu\/platform-digit\/wp-content\/uploads\/sites\/2\/2018\/01\/Toystory-photo.jpg 1202w\" sizes=\"auto, (max-width: 528px) 100vw, 528px\" \/><\/a><\/p>\n<p>If you learned the noise cows make from Fisher Price\u2019s \u201cThe Farmer Says\u201d wheel or ever had the misfortune of accidentally stepping on a Hot Wheel car, you\u2019ve got Mattel to thank for that. For generations, Mattel\u2019s products have been fixtures of our most formative years and have fueled imaginations while also serving an important didactic function. Such staying power, though certainly desirable, can also make a Company complacent, and slow to adapt to the latest innovative trends.<\/p>\n<p><em>\u201cThe Business is no longer a simple process of producing an item, advertising on TV, and pushing it into stores.\u201d\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 &#8211; Dean Scarborough, Mattel Board Member (1)<\/em><\/p>\n<p>By the early 2000s, Mattel was the largest toy manufacturer in the world. It achieved this through a mix of a large manufacturing scale to drive down unit costs, a healthy marketing budget and partnerships with major retailers to distribute its products (close to 40% of the company\u2019s sales are to the Brick and Mortar retailers Walmart, Toys R\u2019 US and Target) (2). However, within the last few years, Mattel was overtaken by its more agile and digitally adept competitors \u2013 Lego and Hasbro \u2013 which have done a better job of responding to structural changes in the children\u2019s toys market, including:<\/p>\n<ul>\n<li><strong>Technology driven age compression<\/strong>: Listed as a key industry trend in Mattel\u2019s 10-k, toy manufacturers are facing a phenomenon of \u201cchildren getting older younger\u201d and thus outgrowing toys at a younger age (3). A study by the University of Iowa found that half of toddlers can use an iPad when they are just one, with 90 per cent mastering the gadget by their second birthday (4). More time on Netflix and on an iPad means less time spent playing with a Mattel figurine.<\/li>\n<li><strong>Digital marketing:<\/strong> Until recently, nearly all of Mattel\u2019s advertising spend was invested in television, and the company was late in using social media to create sticky audiences on popular platforms such as Facebook, Instagram, Twitter and Youtube (1). Furthermore, competitors are gaining an edge through techniques such as data targeting, which are breathing new life into traditional merchandising tricks. For example, Hasbro drives incremental sales by working with Criteo, an ad tech player, to push products towards the end of the purchase path on major retailers\u2019 sites (5).<\/li>\n<li><strong>Brand building:<\/strong> As Hasbro has stated, \u201cstorytelling across media is becoming an increasingly important factor for driving brand awareness and successfully building brand.\u201d (6) Along with fresh product reintroductions, brand management now entails creating digital content such as Youtube channels and online games, which can produce valuable customer insights. The latter has been a major growth engine for Hasbro in recent years.<\/li>\n<li><strong>Online shopping:<\/strong> E-commerce continuing to take a bite out of B&amp;M retailing is trouble for suppliers that heavily rely on the channel to distribute products. Toys R\u2019 Us\u2019 bankruptcy in September 2017 caused Mattel\u2019s sales to decline by 22% in its third fiscal quarter and according to the bankruptcy filing, Toys R\u2019 Us owed $135mm to Mattel, double the amount it owed to Hasbro (7).<\/li>\n<li><strong>License deals<\/strong>: Toy manufacturers generate significant revenue through license rights to produce the toys of major franchises such as Start Wars and Marvel. In 2017, the movie theatre industry saw attendance at its lowest level in the last 25 years (8). With streaming services such as Netflix, Amazon and HBOGo competing with the traditional moviegoing experience, toy manufacturers need to think of new alternatives to replace this historical demand booster.<\/li>\n<\/ul>\n<p>For failing to respond adequately to these changes, Mattel\u2019s performance has suffered on an absolute and relative basis. In its last reported FY (2016), sales and operating income were $5.5bn and $519mm, which represent 15% and 49% declines from 2012 figures. During that same period, Lego\u2019s and Hasbro\u2019s sales grew by 62% and 23% respectively. The markets haven\u2019t been kind to Mattel either. After reaching a high of $46.17 in September 2013, its stock was trading below $16 as of January 31, 2018.<\/p>\n<p>In early 2017, Mattel hired a former Google Executive, Margo Georgiadis, as new CEO to usher in a digitally focused strategy. Part of the strategy calls for the introduction of interactive toys, games and live content for the company\u2019s core brands, efforts which the Company has already launched with preliminary success. Georgiadis\u2019 success in marrying Mattel\u2019s analog past with a digital future will determine what role if any the company will have in the next generation\u2019s world of play.<\/p>\n<p>&nbsp;<\/p>\n<p>References<\/p>\n<ol>\n<li>Lev-Ram Michael, \u201cCan a Tech Makeoever Save the Toy Industry?,\u201d <em>Fortune, <\/em>September 22, 2017, <a href=\"http:\/\/fortune.com\/2017\/09\/22\/mattel-ceo-most-powerful-women\/\">http:\/\/fortune.com\/2017\/09\/22\/mattel-ceo-most-powerful-women\/<\/a> , accessed January 30, 2018<\/li>\n<li>Stephanie Wissink, \u201cMattel, Inc.: Initiating at Hold; Getting All Dolled Up But It\u2019s Complicated,\u201d Jeffries, June 8, 2017<\/li>\n<li>Mattel, Inc. 2016 20-F (filed February 23, 2017), via EDGAR, accessed January 2018<\/li>\n<li>The University of Iowa, \u201cHow Toddlers Use Tablets,\u201d <a href=\"https:\/\/now.uiowa.edu\/2015\/06\/how-do-toddlers-use-tablets\">https:\/\/now.uiowa.edu\/2015\/06\/how-do-toddlers-use-tablets<\/a><\/li>\n<li>Heine Christopher, Hasbro\u2019s Digital Transformation Into a Modern Toymaker and Advertiser\u201d Adweek, June 4 2017, <a href=\"http:\/\/www.adweek.com\/brand-marketing\/inside-hasbros-digital-transformation-into-a-modern-toymaker-and-advertiser\/\">http:\/\/www.adweek.com\/brand-marketing\/inside-hasbros-digital-transformation-into-a-modern-toymaker-and-advertiser\/<\/a>, accessed January 30, 2018<\/li>\n<li>Hasbro, Inc. 2016 20-F (filed February 22, 2017), via EDGAR, accessed January 2018<\/li>\n<li>CBS News, \u201cBankrupt Toys R\u2019 Us Spreads Gloom in Toyland,\u201d <a href=\"https:\/\/www.cbsnews.com\/news\/bankrupt-toys-r-us-spreads-gloom-in-toyland\/\">https:\/\/www.cbsnews.com\/news\/bankrupt-toys-r-us-spreads-gloom-in-toyland\/<\/a>, accessed January 31, 2018<\/li>\n<li>The Verge, \u201cDomestic Movie Theatre Attendance Hit a 25-year Low in 2017,\u201d <a href=\"https:\/\/www.theverge.com\/2018\/1\/3\/16844662\/movie-theater-attendance-2017-low-netflix-streaming\">https:\/\/www.theverge.com\/2018\/1\/3\/16844662\/movie-theater-attendance-2017-low-netflix-streaming<\/a>, accessed January 31, 2018<\/li>\n<\/ol>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Why Barbie and Hot Wheels need digital makeovers to keep pace with their increasingly tech savvy users.<\/p>\n","protected":false},"author":2447,"featured_media":0,"comment_status":"open","ping_status":"closed","template":"","categories":[207,676],"class_list":["post-6226","hck-submission","type-hck-submission","status-publish","hentry","category-losers","category-toy-industry","hck-taxonomy-organization-mattel","hck-taxonomy-industry-consumer-products","hck-taxonomy-country-united-states"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-digit\/assignment\/digital-winners-losers-2018\/","yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - 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