Educational toys ride healthy sales curve

DSN Retailing Today, Oct 24, 2005 by Doug Desjardins

Toy sales had another down year in 2004, falling nearly 3% to $20.1 billion, but that wasn't the case for learning and educational toys, which posted an unexpected and welcome resurgence. While retailers watched sales fall in most toy categories, sales of educational toys surged nearly 19%, helped in large part by products that target preschool kids.

According to research firm The NPD Group, the "learning and exploration" toy category rang up $510.4 million in sales last year compared to $421.2 million in 2003.That was the largest increase in any category, with the second largest coming in infant and preschool, with sales increasing 10% to $2.8 billion in 2004.

NPD Funworld analyst Anita Frazier attributed the increase in learning toy sales to an influx of strong new lines that clicked with kids and parents. "The resurgence of learning toys can be attributed to a number of well marketed and innovative new product introductions into the industry last year," said Frazier, citing popular new lines from industry leaders like LeapFrog, V-Tech and Fisher-Price.

The increase came at a time when the industry was worried about a big sales drop. Those fears were fueled by the closings of two of the country's largest learning toy specialists, Zany Brainy and Imaginarium, which led to the belief that a lack of shelf space would hurt sales. But a holiday slump for the learning sector never materialized and the bump in 2004 has retailers and manufacturers more optimistic as they enter the 2005 holiday season.

On the heels of last year's resurgence, toy makers are flooding the market with new products this fall designed to keep the revival going. Publications International Ltd. plans to release several new titles for its best-selling Story Reader, an electronic book that helps kids learn to read.

"We're bringing out a title based on the film 'Chicken Little' as well as a three-pack of books based on 'Chicken Little,' 'The Incredibles' and 'The Lion King,'" said Chris Campbell, senior vp of marketing for Chicago-based PIL. Since the launch of Story Reader in September 2003, the company has sold more than 1.5 million Story Reader units and 7.5 million individual books.

Story Reader is one product that pumped millions of dollars into the sector last year, particularly through non-traditional toy retailers such as Costco and Sam's Club, and did it with a simple approach.

"Story Reader is a great example of how a product can succeed by offering a great play experience without the high technology," said toy industry analyst Chris Byrne. "Kids are so accustomed to technology that they're not impressed by all the bells and whistles and that's why the play experience trumps technology every time. All the high-tech in the world isn't going to make a toy succeed if it isn't fun."

PIL will introduce an extension of the line in early 2006 when it launches My First Story Reader, which is designed for a younger audience. "My First Story Reader will be for kids [ages] 0 to 3 and will focus more on the read-to-me mode and on games," said Campbell.

Industry innovator LeapFrog didn't benefit from last year's learning toy revival--suffering a slight drop in revenue in 2004--but it's hoping a new line of well-received toys will help it rebound in the fourth quarter.

"This holiday season, we're excited to add to our preschool line a complete kindergarten readiness solution that will help prepare children for their first day of school and beyond," said Kathryn Olson, cmo for LeapFrog.

LeapFrog's new product line is led by the Leapster L-Max Learning Game System, designed for both preschoolers and elementary school kids. The system contains a number of preprogrammed educational games that can be plugged into a television to play on the big screen. Olson said the new system "combines handheld learning and TV learning for the ultimate in educational gaming."

The company also has high hopes for the Fly, a "pentop computer" that targets tweens and serves a variety of functions. Shaped like an electric toothbrush, the Fly can translate words, play games, keep schedules and actually sees what kids write through a tiny camera.

Warner Bros. Consumer Products is teaming up with several licensees that will introduce new learning toys this fall based on classic Warner Bros. characters like Batman. "It's a cool category because parents get to buy a toy that helps a child learn and kids get a toy based on a favorite character that just happens to be educational," said Kelly Gilmore, senior vp of global toys and themed entertainment for Warner Bros. Consumer Products.

The list includes V-Tech, which will have a Warner-licensed Scooby-Doo "smartridge" game for its V.Smile Learning System. "Scooby-Doo Funland Frenzy" is designed for kids ages 4 to 6 and teaches them logic, spelling and math as they explore the haunted happenings in an amusement park.

"It's a great product because it's a learning tool that simulates the experience of a handheld video game," said Gilmore. V-Tech is also rolling out its V.Smile Pocket, a smaller version of V.Smile that can connect to a TV and is compatible with all "smartridges." Oregon Scientific is targeting Batman fans with its new Batman Power Wing laptop computer for kids ages 5 and up. The laptop with the Batman-inspired design comes with 25 educational games that teach math skills, spelling and logic.