Latest / The Demographics Podcast with Fexingo: Aging Populations, Birth Rates, and Economic Impact / How Falling Birth Rates Reshape the Toy Industry
Transcript
- Lucas: So if you've walked into a Target toy aisle recently — and I have, because my niece turned four last month — you might have noticed something strange. Luna: Strange how? More Paw Patrol than you remember? Lucas: Actually, less. The baby and toddler section has shrunk. What's growing is the stuff aimed at adults. Lego flowers, Squishmallows the size of a beanbag, collectible figures in blind boxes. Luna: Right — the 'kidult' trend. I've read that nearly a quarter of toy sales now go to adults buying for themselves. Lucas: Exactly. And that's not a blip — it's a structural response to a demographic reality. Birth rates in the U.S. have fallen from about 2.1 births per woman in 2007 to around 1.6 today. That's about 3.6 million babies born last year versus 4.3 million in 2007. Luna: So roughly 700,000 fewer potential new toy customers each year. That's a lot of missing diaper and rattle demand. Lucas: It is. And the toy industry is massive — roughly $40 billion in the U.S. alone. But total sales have been flat to down over the past five years. NPD Group data shows a decline of about 8 percent since 2020, even adjusting for inflation. Luna: So how do Mattel and Hasbro keep growing when their traditional core customer — the parent of a newborn — is a shrinking demographic? Lucas: They pivot. And the most visible pivot is licensing nostalgia. Mattel's been relaunching brands like Monster High and Polly Pocket — not for today's kids, but for millennials who grew up with them. Those are now 'collector' lines with higher price points. Luna: I saw a Polly Pocket compact at Urban Outfitters for $40. When I was a kid, they were $10. Lucas: Exactly. And Hasbro is doing the same with Dungeons & Dragons and Magic: The Gathering — those are now major revenue drivers, not sidelines. Wizards of the Coast, the Hasbro subsidiary behind them, brought in over $1.6 billion last year. Luna: That's bigger than Monopoly and Play-Doh combined, I think. Lucas: It is. And Monopoly itself is being repositioned — not as a board game for family night, but as a lifestyle brand. They've got Monopoly-themed hotels, slot machines, even a Monopoly cruise. You can buy a Monopoly-branded wine opener. Luna: Okay, but that feels a bit stretched. Does the wine-opener buyer even think of it as a toy? Lucas: They don't have to. The point is the brand awareness. Hasbro is monetizing the emotional connection adults have to their childhood. That's a demographic hedge — you can't rely on new kids, so you rely on grown-ups who already know the brand. Luna: And Lego has been the master of this for years. Their botanical collection — the orchid, the succulent — those aren't for kids. They're for adults who want a mindful activity and a piece of decor. Lucas: Lego's adult sales now represent about 30 percent of their total revenue. And they've priced those sets accordingly — a Lego bouquet is $60, while a standard kid set is often under $30. Luna: So higher margins per unit, even if unit volume is lower. That's the playbook. Lucas: Right. But it's not just about nostalgia. There's also a push into subscription models. Mattel launched a Fisher-Price subscription box for babies — but they've also got a 'Masters of the Universe' collector club that ships quarterly exclusives to adult fans. Luna: And then there's the whole blind-box phenomenon — like Tokidoki or Sonny Angel. Those are tiny, cheap to produce, but the collectibility drives repeat purchases. Lucas: A single Sonny Angel figure costs about $12, but collectors will buy dozens to get a rare one. That's a $1.5 billion market globally now. And it's almost entirely adult women aged 20 to 35. Luna: So the customer profile has shifted from 'mom buying for toddler' to 'young adult buying for themselves.' And retailers are adjusting shelf space accordingly. Lucas: Target has been a leader there. They've created dedicated 'collectibles' sections in many stores, separate from the traditional toy aisle. And they've expanded their partnership with Lego — now carrying the adult botanical line in prime real estate near the front of the store. Luna: What about the 'traditional' toy companies that can't pivot? Like, what happens to companies that just make baby rattles and crib mobiles? Lucas: A lot of them have consolidated. Take Munchkin, the company behind those baby bath toys and sippy cups — they got acquired by a private equity group last year. The independent players either get bought or they reposition into adjacent categories like pet toys, because pet ownership is rising while birth rates fall. Luna: That's grimly logical. If you can't sell to babies, sell to dogs. Lucas: And the pet toy market is growing at about 5 percent annually, versus maybe 1 percent for traditional toys. So there is a hedge, but it's a small one — the average dog owner spends about $50 a year on toys, while the average parent spends $300. Luna: Still, the long-term picture is clear: the toy industry is shrinking at the baby end and growing at the adult end. What does that mean for the next decade? Lucas: I think we'll see more entertainment crossovers. Companies like Mattel are turning into IP factories — they don't just make toys, they license characters to movies, TV, even theme parks. The Barbie movie last year grossed $1.4 billion — that's not toy revenue, but it drives toy sales. Luna: And the toys from the movie — the 'Margot Robbie Barbie' — sold out instantly at $50 each. So the IP flywheel is real. Lucas: It is. And that's the strategy: don't depend on babies being born; depend on adults wanting to touch their childhood. That's a more stable demographic trend, because those adults are already here. Luna: You know, this episode reminds me why we do this show. We try to make sense of how demographic shifts ripple through industries you wouldn't expect. And honestly, if today's episode was worth a coffee to you, that's the link — buy me a coffee dot com slash fexingo. No pressure, just if it clicked. Lucas: Yeah, listener support is what keeps this show ad-free and independent. So if you found the toy-industry angle interesting, that's all we ask. Luna: Exactly. And speaking of ripples — one more thing I want to touch on: the international angle. Japan's toy market has been dealing with low birth rates for decades. What can we learn from them? Lucas: Great question. Japan's toy market actually grew 3 percent last year, despite having the world's lowest birth rate at 1.2. How? They leaned hard into adult collectibles, gacha machines, and high-end hobby models. Luna: Right — Bandai Namco's Gundam model kits are a huge business. Those are elaborate plastic models that cost $50 to $200 and are marketed to adult men. Lucas: And they host building competitions. So it's not just a product — it's a community. That's something Western companies are now copying. Mattel has a 'Hot Wheels Legends Tour' where adult collectors bring custom cars to compete. Luna: So the takeaway is: if birth rates keep falling, the successful toy companies will be the ones that treat adults as their primary customer, not an afterthought. Lucas: Exactly. And that's a relatively happy ending for an industry that could have been devastated by demographics. Instead of shrinking, it's transforming. Luna: I'll take that over a world with no toys at all. Lucas: Same here. Even if the toys are now mostly for us.