Latest / The Demographics Podcast with Fexingo: Aging Populations, Birth Rates, and Economic Impact / How Falling Birth Rates Reshape the Toy Industry
Transcript
- Lucas: If you've walked through a toy store lately — or, honestly, the toy aisle of any big-box retailer — you might have noticed something. The shelves look different than they did ten years ago. Luna: Yeah, I've seen way more building sets, science kits, and 'STEM' labels. And way fewer of those plastic action figures that used to take up half the aisle. Lucas: Exactly. And that shift is not just a trend — it's a direct response to a demographic reality. Birth rates have been falling across most developed economies, and in many emerging ones too. The toy industry, which is built on the idea that there will always be a new crop of toddlers, is having to reinvent itself. Luna: So how does an industry that relies on kids adapt when there are fewer kids? Lucas: That's the question. And the answers are fascinating. One number that stuck with me: global toy sales in 2025 were down about 3.2 percent year-over-year, according to Circana. That's not a crash, but it's a persistent trend. Meanwhile, the number of children under five in major markets like the U.S., China, and Japan is shrinking. Luna: But not every toy company is struggling. LEGO, for example, seems to be doing incredibly well. Lucas: LEGO is the perfect case study. In 2025, LEGO reported revenue of about $9.8 billion, up 5 percent from the year before. How do they grow when the kid population is shrinking? Simple: they sell to adults. Luna: The 'kidult' market. I've seen that term pop up more and more. Lucas: Right. LEGO has entire product lines aimed at adults — the botanical collection, the architecture series, the massive Star Wars Ultimate Collector Series sets that cost hundreds of dollars. These aren't toys for children. They're collectibles for grown-ups with disposable income. And the numbers bear it out: adult buyers now account for roughly 20 percent of LEGO's revenue, and that share is growing. Luna: So the demographic shift is actually pushing toy companies to think about age differently. Instead of just chasing the next toddler, they're chasing the adult who never really stopped playing. Lucas: Exactly. And it's not just LEGO. Hasbro has its 'Hasbro Pulse' line for adult collectors. Mattel has 'Mattel Creations' — premium versions of Masters of the Universe and other nostalgia brands. There's a whole ecosystem now of direct to consumer, limited-edition products aimed at people in their thirties and forties who grew up with these toys. Luna: But what about the traditional toy aisle? The stuff for actual little kids. How is that changing? Lucas: That's where you see the pivot toward educational and developmental toys. Brands like Melissa & Doug, which focuses on wooden puzzles, pretend play, and open-ended toys, have seen steady growth. Their revenue was around $650 million in 2025, up about 4 percent. Parents with fewer children — and often more income per child — are willing to spend more on higher-quality, longer-lasting toys. Luna: Quality over quantity makes sense when you're having two kids instead of three. Lucas: Exactly. And there's a sustainability angle too. Fewer kids means parents are more conscious about the environmental impact of the toys they buy. Plastic tat that breaks in a week is out. Wooden toys that can be passed down are in. That's a structural shift. Luna: And what about the subscription model? I've seen a lot of toy subscription boxes pop up. Lucas: That's another adaptation. Companies like KiwiCo and Lovevery have built entire businesses around monthly deliveries of age-appropriate, educational toys and projects. KiwiCo, which started in 2011, now has over 2 million subscribers globally. The model works because it reduces the burden on parents to constantly research and buy new toys — and it creates a recurring revenue stream for the company. Luna: It also aligns with the trend of parents wanting toys that are actually developmental, not just distracting. Lucas: Right. But there's a tension here. The toy industry is also competing with screens. Tablets and phones are often the default 'toy' for many kids. And that's a challenge that demography amplifies: fewer kids means each one is more valuable, so the fight for their attention is fiercer. Luna: So how do traditional toy companies compete with a $300 iPad? Lucas: Some are leaning into the digital-physical hybrid. LEGO has its 'LEGO Super Mario' sets that use Bluetooth to interact with the game. Hasbro has 'FurReal' toys that respond to voice. But honestly, the most successful strategy might be the simplest: make toys that screens can't replicate. Building, crafting, imaginative play — things that require physical interaction. Luna: And that's where the 'kidult' trend and the kids' trend converge. Adults want a tactile experience too. Lucas: Exactly. There's a reason adult coloring books became a phenomenon a few years ago, and why jigsaw puzzle sales surged during the pandemic. People crave analog activities. The toy industry is banking on that being a long-term shift, not a fad. Luna: It reminds me of the restaurant industry we talked about a few episodes ago. Both are having to figure out how to serve a smaller, more discerning customer base. Lucas: That's a great comparison. And honestly, if walking through the economy with us has made something click for you today, we'd love it if you considered supporting the show. It's completely ad-free, and listener support is what keeps it that way. If today's episode was worth a coffee to you, that's the link: buy me a coffee dot com slash fexingo. Luna: Yeah, it's a small gesture that makes a big difference for us. And we really appreciate everyone who does. Lucas: So back to the toy industry: one more adaptation worth noting is the rise of 'multi-generational' toys. Games and puzzles that are designed for grandparents and grandchildren to play together. With aging populations, that's a growing market. Luna: That's smart. The same demographic trend — fewer kids, more seniors — can actually create new product opportunities. Lucas: Exactly. Ravensburger, the German puzzle company, has been marketing its 'Family Puzzles' with images that appeal to both older and younger players. And board games in general have seen a renaissance. The global board game market was worth about $13 billion in 2025, growing at around 5 percent annually. Luna: So the industry is not dying. It's just changing. Lucas: It's definitely not dying. But it's having to be more creative. The days of just cranking out licensed plastic junk for the holiday season are fading. Companies that figure out how to serve a smaller, more demanding, more diverse customer base — kids and adults alike — are the ones that will thrive. Luna: And for listeners who are investors or entrepreneurs, what's the takeaway? Lucas: I'd say look for companies that have successfully pivoted to the 'kidult' market, that have strong direct to consumer subscription models, or that are focusing on educational and sustainable products. LEGO is the obvious winner, but smaller players like Lovevery and KiwiCo are worth watching. Also, keep an eye on any company that relies heavily on infant and toddler sales — those are the most vulnerable to further birth rate declines. Luna: And for parents, maybe the takeaway is that the toy industry is finally making better stuff. Lucas: I think that's true. The silver lining of a smaller kid population is that each kid gets more attention — and better-designed toys. So if you're raising kids today, you're actually living through a golden age of thoughtful playthings. Luna: I like that framing. It's not all doom and gloom. Lucas: Not at all. Demographics create challenges, but they also create opportunities. The toy industry is a perfect example of that in real time.