Latest / The Demographics Podcast with Fexingo: Aging Populations, Birth Rates, and Economic Impact / How Falling Birth Rates Are Reshaping the Toy Industry Again
Transcript
- Lucas: So, Luna, we've talked a lot about how falling birth rates are shrinking the market for diapers and baby food, but there's a quieter story happening in the toy aisle that I think flips the usual narrative on its head. Luna: You mean it's not just doom and gloom? Because that's the vibe I get from most demographic headlines. Lucas: Exactly. The toy industry is actually a fascinating case study in adaptation. The key number here is that 'kidults' — adults aged 18 and up who buy toys for themselves — now account for nearly a quarter of all toy sales in the United States. That's up from basically nothing a couple of decades ago. Luna: So the people who used to be kids are now buying the toys? That's kind of poetic in a way. Lucas: It is, and it's not just a blip. The toy industry's own trade association, the Toy Association, has been tracking this for years. In 2025, kidult sales hit about $9 billion in the U.S. alone. And that's not just action figures — it's building sets, collectibles, even board games with adult-oriented themes. Luna: Nine billion is not nothing. But how much of that is driven by nostalgia versus just a genuine shift in how adults play? Lucas: That's the million-dollar question. Nostalgia plays a role — think Star Wars or LEGO sets that recreate scenes from your childhood. But it's also about something called 'age compression,' where kids are increasingly shifting to digital screens at a younger age. So traditional toy makers are losing the core demographic they used to rely on. Luna: The kids are leaving the building, but the adults are coming back in. So it's almost like the industry is becoming a two-tier market: the shrinking kids' segment and the growing adult segment. Lucas: Exactly. And that's forcing companies to make some pretty strategic pivots. Take LEGO, for example. They've famously marketed to adults with their 18-plus sets — the botanical collection, the architecture series, even a NASA Apollo Saturn V rocket that's over a foot tall when assembled. Luna: I've seen those. My cousin has the orchid set on his desk, and honestly, it looks more like a piece of art than a toy. Lucas: Right. And LEGO's annual revenue has actually grown to over $10 billion, despite fewer children in key markets. A big chunk of that growth is from these adult-oriented sets, which often carry higher price points. A typical set for kids might be $30, but an 18-plus set can easily run $100 or more. Luna: So it's not just about volume, it's about value per customer. Adults have more disposable income than kids, obviously, but they're also more selective. What else are companies doing to adapt? Lucas: Beyond the kidult pivot, there's a push into educational and STEM toys. The logic is simple: if you have fewer kids, you'd better make the ones you have count. Parents in countries with historically low birth rates — like Japan, Italy, South Korea — are investing more in toys that promise cognitive development. Luna: Quality over quantity, right? It's the same logic behind the 'premiumization' trend in baby gear. Lucas: Yes, and the numbers back it up. The global educational toy market was valued at around $40 billion in 2025 and is projected to grow at a compound annual growth rate of about 9 percent through 2030. That's faster than the overall toy market, which is growing at maybe 3 percent. Luna: So the industry is essentially splitting into two tracks: one targeting adults with nostalgia and premium builds, and one targeting parents with educational promises. But what about the kids themselves? Are they just being ignored? Lucas: Not ignored, but their share is shrinking. The under-12 population in developed markets has been declining for years. In the U.S., the number of children under 5 dipped by about 2 percent between 2020 and 2025. So toy makers are having to fight for a smaller pie, which is why you see more aggressive licensing deals and tie-ins with movies and streaming shows. Luna: That explains why every other toy on the shelf seems to be from a franchise like Paw Patrol or Bluey. But let's talk about the broader economic impact here. How is this reshuffling affecting the labor market and manufacturing? Lucas: That's a good point. Toy manufacturing has traditionally been concentrated in China, but with tariffs and supply chain issues, plus the shift to adult products — which often require more intricate design and higher-quality materials — we're seeing some production move closer to key markets. For example, LEGO has invested over a billion dollars in new factories in the U.S. and Vietnam to serve both kid and adult demand. Luna: So the demographic shift isn't just changing what's on the shelves — it's changing where the shelves are made. Lucas: Exactly. And it's not just LEGO. Hasbro, which owns brands like Monopoly and Transformers, has been repositioning itself as a 'play and entertainment' company, leaning into digital gaming and licensing for adults. Their CEO has openly talked about the need to follow the demo, not fight it. Luna: What about the used toy market? I feel like with adults buying more collectible stuff, there's got to be an aftermarket boom. Lucas: Oh, absolutely. The secondary market for things like LEGO sets and vintage action figures is huge. Some retired LEGO sets appreciate in value faster than stocks — the UCS Millennium Falcon, for instance, has been known to double in price after retirement. That turns a toy purchase into an investment, which is a very different mindset from buying a toy for a child. Luna: That's wild. So we've gone from 'toys are for kids' to 'toys can be a store of value.' What's the long-term picture here? Is the adult market enough to offset the decline in children? Lucas: So far, yes — at least for the big players. The global toy market is expected to grow from about $130 billion in 2025 to $160 billion by 2030, and most of that growth is being driven by adult and educational segments. But it's not a universal safety net. Smaller toy makers that can't pivot risk getting squeezed out. Luna: So the industry is consolidating around companies that can adapt. It's a bit like what we've seen in other sectors — the strong get stronger. Lucas: Right. And there's a broader lesson here: demographics aren't destiny, but they do force you to innovate. The toy industry could have just complained about fewer kids, but instead, it found a new customer base in the very people who used to be kids. It's a clever bit of economic adaptation. Luna: That's genuinely encouraging to hear. And on that note, Lucas, I know we've been getting a lot of messages from listeners who say they appreciate the deep dives we do on these topics. Lucas: Yeah, and it means a lot to us. That kind of feedback is part of why we keep this podcast ad-free. It's listener-supported, and even a couple of dollars a month makes a real difference — if you've gotten something out of these episodes, you can help keep them going at buy me a coffee dot com slash fexingo. Luna: Yeah, every contribution goes straight into research and production. It's how we can spend the time to dig into stories like this one. Lucas: Exactly. And speaking of digging deeper — let's circle back to the educational toy boom, because there's a fascinating regional variation there. In South Korea, where the fertility rate hit a record low of 0.72 in 2023, the government has actually started investing in toy libraries and play-based learning centers to encourage social interaction among kids. Luna: So instead of just accepting the decline, they're using toys as a policy tool. That's kind of brilliant. Lucas: It is. And it shows that the toy industry isn't just a passive victim of demographics — it can also be part of the response. In Japan, some toy makers are partnering with nursing homes to create intergenerational play sessions, where seniors and kids play with the same toys. It's a way to build community and combat isolation, which is another demographic challenge. Luna: That's a beautiful image. So, in a way, the toy industry is becoming an agent of social resilience, not just a business responding to market pressures. Lucas: Exactly. And that's the takeaway for me: demographics will always change, but the companies that thrive are the ones that see the shift as an opening, not a closing. The toy industry is literally building bridges between generations. Luna: Well said. And I think our listeners will appreciate that angle. Thanks for bringing this story, Lucas. Lucas: Anytime, Luna. And for everyone out there, if this episode made you see the toy aisle a little differently, we've done our job.