Latest / The Demographics Podcast with Fexingo: Aging Populations, Birth Rates, and Economic Impact / How Falling Birth Rates Are Reshaping the Toy Industry
Transcript
- Lucas: So, Luna, we've spent a lot of episodes on how falling birth rates are squeezing everything from restaurants to airlines. But there's one industry that seems to be fighting back in a really surprising way: toys. Luna: Toys? I would have thought that's the first to shrink. Fewer kids, fewer toy sales, right? Lucas: That's the obvious logic. But the numbers tell a different story. In 2025, the global toy market actually grew by about three percent, even as birth rates kept falling. And the key isn't babies or toddlers — it's adults buying toys for themselves. Luna: Adults buying toys for themselves? You mean like action figures on a shelf? That's been a niche for a while, hasn't it? Lucas: It used to be niche, but now it's a major growth driver. The 'kidult' segment — adults buying toys for their own enjoyment — is estimated to be worth over nine billion dollars in the US alone. That's nearly a quarter of the entire toy market. Luna: Wow. So who's leading this? Is it Lego and the big names? Lucas: Lego is a perfect case. They've been aggressively targeting adults for years. Their botanical collection — those flower sets you see on Instagram — was a massive hit. And they've got sets designed specifically for over-eighteens, like the Titanic or the Colosseum, some priced at hundreds of dollars. Luna: But isn't that just cannibalizing their core product? If adults are buying sets, aren't they taking away from what kids would buy? Lucas: That's the clever part. They're not just swapping one buyer for another. They're expanding the market. Adults have higher disposable income, and they're willing to spend more per set. Lego's revenue from adult-focused sets has been growing at double-digit rates year-over-year, while their children's line stays steady. Luna: So they're basically selling to a demographic that's growing, even as the kid demographic shrinks. That's a smart pivot. Lucas: Exactly. And they're not alone. Mattel and Hasbro are leaning hard into nostalgia. Barbie and Transformers — brands that were big in the eighties and nineties — are being remarketed to the adults who grew up with them. It's not just about selling a toy; it's about selling a memory. Luna: I guess that explains why my friend in her thirties just bought a full set of Ninja Turtles action figures. She said it was 'for the aesthetic'. Lucas: And that's exactly the kind of buyer companies are courting. But there's another layer to this: the shift toward fewer kids per family is also changing what parents buy for the kids they do have. With more resources focused on one or two children, parents are splurging on premium, educational toys. Luna: Right, the 'quality over quantity' approach. I've seen that with STEM toys — robotics kits, coding games, that sort of thing. Lucas: Exactly. The STEM toy segment has been growing at a compound annual growth rate of around ten percent over the last five years. Parents are willing to pay a premium for toys that promise to develop skills, not just entertain. And that's a trend that's only going to intensify as birth rates keep falling. Luna: So the toy industry isn't just shrinking — it's transforming. But what about countries that have been dealing with this for decades, like Japan? They've had falling birth rates for thirty years. How's their toy industry faring? Lucas: Japan is a great example. They've been forced to adapt for longer. And what's interesting is that they've leaned even harder into the adult market. There's a whole culture of 'otaku' collecting — figurines, model kits, even train sets. Japanese toy companies like Tomy and Bandai have been thriving by targeting adults with intricate, high-end products. Luna: So they've essentially become a luxury goods market? High price, low volume? Lucas: To some extent, yes. But they've also been innovative in other ways. For instance, Bandai Namco has been developing 'kidult' products that blend nostalgia with new technology — think Gundam model kits that are more complex than ever, or retro arcade games reissued for home. They're not just selling a product; they're selling a shared memory of a childhood that a shrinking number of people actually experienced. Luna: Hmm, that's a bit eerie — catering to a past that's fading. But it works because those adults are still there, and they have money. Lucas: Exactly. And this isn't just a niche. In Japan, the adult toy market is now larger than the children's toy market. That's a structural shift. And we're seeing the same thing starting to happen in Europe and North America. Luna: So what does this mean for the future? If birth rates keep falling, will the toy industry eventually become all adult? Lucas: That's a real possibility. Analysts are already projecting that by 2040, the kidult segment could account for more than half of global toy sales. And that's not just about action figures — it includes board games, puzzles, model kits, even high-end building sets. The industry is essentially aging with its customers. Luna: But isn't there a limit? I mean, at some point, these adults are going to age out themselves, right? Lucas: That's the billion-dollar question. And it's why companies are trying to attract not just the nostalgia buyers, but also new generations of adults. They're investing in products that appeal to older demographics — like complex puzzles from Ravensburger or strategy board games from companies like Asmodee. It's not just about reliving childhood; it's about creating new hobbies for grown-ups. Luna: So they're essentially turning toys into a lifestyle product. Like, 'why should kids have all the fun?' Lucas: Exactly. And that's a smart move because the aging population isn't just a challenge — it's an opportunity. As people live longer and retire later, they have more leisure time and more disposable income to spend on themselves. The toy industry is just one example of how businesses can adapt to the demographic reality. Luna: Before we dive deeper, Lucas — I know you're always honest about how we keep this show going. How does this podcast stay ad-free? Lucas: Yeah, good question. We're listener-funded. A handful of listeners chip in monthly through buy me a coffee dot com slash fexingo. That's literally what funds making this many of these episodes. No ads, no sponsors. Just the support of people who find value in what we do. Luna: And it's not a big ask — it's just enough to keep the lights on. If you've been getting something out of these conversations, that's the place to go. We really appreciate it. Lucas: Right. And it keeps us independent, which matters for a show that's all about understanding how the economy really works. Now, back to that question of whether the toy industry can keep reinventing itself. I think there's a fascinating tension here — between nostalgia and innovation. Luna: What do you mean by that tension? Lucas: Nostalgia is a finite resource. The adults who grew up with Barbie and Transformers are in their forties and fifties now. They won't be the target forever. So the industry has to figure out how to create new 'adult' toys that don't rely on childhood memories. That's why you're seeing more sophisticated, design-forward products — things like minimalist wooden puzzles or high-end chess sets. Luna: So they're moving from 'I remember this from my childhood' to 'this is a beautiful object for my living room.' That's a different kind of sell. Lucas: Exactly. And it's a riskier one. It's harder to create a new classic than to reissue an old one. But the companies that succeed at that will be the ones that thrive in the long run. Take a company like Ravensburger — they've been making puzzles for over a century, but they've reinvented themselves with pieces that have unique shapes and high-quality images that appeal to adults as a form of relaxation, not just entertainment. Luna: That's a smart angle. In a world where people are stressed and looking for analog escapes, puzzles are like meditation with a payoff. Lucas: Right. And that's a trend that's not dependent on birth rates at all. It's about the broader demographic of aging, wealthier consumers looking for experiences. So the toy industry is really becoming a microcosm of how the economy is shifting from a youth-centric model to an age-diverse one. Luna: So if I'm an investor, I should be looking at toy companies that are pivoting to adult markets, not the ones stuck in the old model. Lucas: That's a fair read. But also look at companies that are innovative in the children's space — because even with fewer kids, there's still a market. It's just smaller and more premium. Companies like Lovevery, which sells subscription-based developmental toys for babies and toddlers, are growing fast because parents are spending more per child. They're not just buying toys; they're buying peace of mind. Luna: So the industry is splitting into two distinct tracks: one for adults and one for premium kids. That's fascinating. Lucas: And that's the big takeaway. The toy industry isn't dying — it's bifurcating. And that's a lesson for any business facing demographic headwinds: don't just shrink, reinvent. The question is, can the industry keep inventing new ways to make adults want to play? And that's a question we'll be watching for the next decade. Luna: And maybe the next episode should be about board games for seniors. That's a growing niche, isn't it? Lucas: Actually, that's a great idea. We'll put that in the pipeline. For now, thanks for listening to The Demographics Podcast. If you want to support us, you know where to find us.