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 there's a number that's been stuck in my head this week: in Japan, the number of children under fifteen dropped to around fourteen million in 2025. That's the forty-fourth straight year of decline. And it got me thinking about an industry that has to be feeling that squeeze more than almost any other: toys. Luna: Yeah, I saw that statistic too. It's stark. And you'd think toy companies would just be in trouble, but some of the big players are actually thriving. How? Lucas: Right, and that's the twist. The story isn't about decline, it's about reinvention. The industry is essentially pivoting from children to adults. And the clearest example is Bandai Namco, the company behind Gundam and Tamagotchi. They've been repositioning their entire portfolio toward adult hobbyists and collectors. Luna: And that's working? I mean, adults buying toys for themselves, not just for their kids? Lucas: It's working remarkably well. Bandai Namco reported that their toys and hobbies segment saw revenue growth in recent quarters, driven heavily by adult collectors. Their Gundam model kits, which are these intricate plastic models that require assembly, have become a global phenomenon. And a lot of that demand is from adults in their thirties and forties who grew up with the franchise. Luna: So it's nostalgia, but it's also the appeal of the craft itself. Building a Gundam model is a hobby, not just a toy. Lucas: Exactly. And that's a crucial distinction. These aren't toys in the traditional sense. They're collectibles, display pieces, even status symbols. And the profit margins are often higher because adult collectors are willing to spend more on premium products. We're talking about kits that can range from twenty dollars to hundreds of dollars for limited editions. Luna: And then there's Tamagotchi. I remember those from the nineties. They've brought them back, right? Lucas: They have, but not as a kids' toy. The new Tamagotchi devices are marketed as nostalgia items for adults, with higher price points and more sophisticated features. Some versions sell for over a hundred dollars. And they're flying off the shelves. It's a smart play: instead of trying to convince a shrinking number of kids to buy a digital pet, they're selling a memory to the adults who loved them the first time around. Luna: So the strategy is basically to follow the demographic curve. As the population ages, the toy companies age with them. But is this sustainable? At some point, those nostalgic adults are going to age out too. Lucas: That's the big question. And it's why you're seeing companies like Bandai Namco diversify beyond nostalgia. They're investing in new intellectual property, expanding into digital content, even theme parks. The idea is to create ecosystems that can evolve with their audience. But there's a limit to how long you can milk nostalgia for the same franchises. Luna: Right. And it's not just Japan. Other countries with falling birth rates, like South Korea and Italy, are facing similar trends. Are we seeing the same pivot there? Lucas: We're starting to. In South Korea, the toy market has also been declining, and companies are looking at adult collectors as a growth area. But it's Japan that's leading the way because they've had a head start. Their birth rate has been falling for decades, so they've had to adapt sooner. And that adaptation has created a playbook that other countries might follow. Luna: It's almost like the toy industry is becoming a test case for how any consumer industry can survive a demographic shift. If you can't sell to kids, sell to the adults who used to be kids. Lucas: And that's the broader lesson. It's about following the money, or rather, following the people. As the population pyramid flips, every industry has to ask: who is my customer going to be in twenty years? And the toy industry is showing that the answer can be a lot more nuanced than just 'the same people, but older.' Luna: You know, this reminds me of something I read about how the adult toy market is also being driven by the rise of 'kidult' culture, where adults embrace activities associated with childhood, like coloring books or LEGO sets. LEGO has been doing well with adults too, right? Lucas: Absolutely. LEGO is another great example. They've launched sets targeting adults, like the LEGO Ideas line and botanical collections. And they've been very successful. In fact, LEGO has said that a significant portion of their sales now come from adults buying for themselves. It's not just about nostalgia; it's about the therapeutic, mindful aspect of building something with your hands. Luna: And that's a different value proposition than a child's toy. It's about relaxation, creativity, even stress relief. That's a much more durable market in an aging society. Lucas: Exactly. And it's not just the big players. Smaller companies and startups are getting in on the action too, creating niche products for adult hobbyists, from detailed model trains to collectible art toys. The whole ecosystem is shifting. Luna: But what about the traditional toy retailers? Are they adapting? I can't imagine Toys 'R' Us, if it were still around, would be thriving in this environment. Lucas: That's a good point. The retail side is struggling. We've seen major toy retailers close stores in Japan, and the ones that survive are the ones that have embraced the adult collector market, with dedicated sections for hobby items and events like building workshops. E-commerce has also become crucial, because adult collectors are more willing to buy online than parents buying for young kids. Luna: So it's a complete transformation of the value chain. From product design to marketing to distribution, everything has to change. Lucas: And that's what makes this such a fascinating case study. It's not just about one company; it's about an entire industry rethinking its core assumptions. And it's a reminder that demographic change is not the end of growth, but a catalyst for innovation. Luna: Before we go further, Lucas, I want to circle back to something you said about following the money. It reminds me of how much we rely on our listeners to keep this podcast going. If walking through the economy with us has made something click, or if you enjoy these deep dives, you can support the show at buy me a coffee dot com slash fexingo. It's a small gesture that helps us stay ad-free and independent. Lucas: Absolutely. And we appreciate every bit of support. It truly makes a difference. Now, getting back to the toy industry, there's another angle I want to explore: the impact on employment and manufacturing. Luna: Oh, interesting. How so? Lucas: As toy companies shift toward adult collectors, they're often moving production to smaller batches with higher quality, which can mean more skilled labor. But at the same time, automation is becoming more prevalent to handle the complexity. And in Japan, which has an aging workforce, finding enough skilled workers is itself a challenge. Luna: So the demographic shift isn't just affecting the customer base; it's affecting the supply side too. Double whammy. Lucas: Exactly. And it's forcing companies to be creative with their hiring and training, sometimes recruiting older workers who have the craftsmanship skills, or investing in robotics to fill the gaps. It's a whole ripple effect that starts with birth rates and ends up in the factory. Luna: And I'd imagine that also affects pricing. If you're using more skilled labor and advanced automation, the cost per unit goes up, which is another reason why these adult-oriented products are priced higher. Lucas: Right. And that's a virtuous cycle in a way: higher prices justify the quality, and the quality attracts the adult buyers who can afford it. It's a different economic model than the race to the bottom that used to dominate the toy industry. Luna: So given all this, what's the long-term outlook for the toy industry? Are we going to see a future where toy stores are more like hobby shops? Lucas: I think that's already happening. The most successful toy retailers in Japan are the ones that look more like hobby and collectible stores, with display cases and community events. And I suspect that trend will spread to other countries as their demographics age. But it's not all doom and gloom for children's toys. There will always be a market for kids, it's just going to be smaller and more competitive. Luna: So the future is a two-tier market: premium adult collectibles and a leaner, more rationalized children's toy segment. Lucas: Exactly. And that's a healthy adaptation. It's like what we've seen in other industries, like newspapers or television. When the mass market shrinks, you either learn to serve the niche or you disappear. The toy industry is learning to serve the niche. Luna: And it's not just about surviving; it's about thriving. Bandai Namco's stock has been doing well, and that's a clear signal that the market believes in this strategy. Lucas: And that's the bottom line: demographic change is inevitable, but decline is not. The companies that adapt, that see the shift coming and respond with creativity, are the ones that will be around for the next generation. The toy industry is a great example of how to turn a demographic challenge into an opportunity for reinvention. Luna: And it makes you wonder, which industry is next? If the toy industry can do it, maybe there's hope for others facing similar headwinds. Lucas: That's the question we'll be exploring in future episodes. For now, I think the key takeaway is that falling birth rates don't have to mean falling fortunes. It's about understanding who your customers are, and being willing to change everything else to serve them. Luna: Well said. And on that note, we'll wrap up this episode. But before we go, I want to remind our listeners again about supporting the show. If you've found value in our discussions, consider buying us a coffee at buy me a coffee dot com slash fexingo. It helps us keep bringing you these insights without ads. Lucas: Thanks for listening, and we'll catch you in the next episode.