Latest / The Demographics Podcast with Fexingo: Aging Populations, Birth Rates, and Economic Impact / How Falling Birth Rates Reshape the Toy Industry
Transcript
- Lucas: So when we talk about falling birth rates reshaping industries, the toy aisle might seem like the most obvious place to look — and in some ways it is, but the story is more interesting than just 'fewer kids, fewer toys sold.' Luna: Right, because if you look at the numbers, global toy sales actually held up pretty well post-pandemic. But the underlying demographic pressure is real and getting stronger. Lucas: Exactly. The global toy market was worth about ninety billion dollars last year, and projections show it growing at around one point three percent compound annual growth rate over the next five years. That's half the rate it grew at in the 2010s. Luna: And the biggest driver of that slowdown? The core customer base — kids aged zero to fourteen — is shrinking in most developed markets and even in some developing ones like China and Brazil. Lucas: China is a fascinating case. It had the world's second-largest toy market, but its birth rate fell to about six point four per thousand people last year, down from over twelve in 2014. That's a massive shift in less than a decade. Luna: So toy companies can't just rely on more babies being born. They have to sell to different customers or get existing customers to spend more per child. Lucas: And they're doing both. The 'premiumization' trend — parents spending more on fewer kids — is real. In the US, average annual spending per child on toys hit about three hundred and fifty dollars last year, up from two hundred and seventy in 2015. Luna: But that only goes so far. The real growth is coming from adults buying toys for themselves. The so-called 'kidult' market. Lucas: Yeah, and this is where the numbers get striking. According to the NPD Group, adults buying toys for themselves now account for about twenty-five percent of total toy sales in the US. That's up from fifteen percent a decade ago. Luna: LEGO is the poster child for this. They've been systematically targeting adults for years — the LEGO Botanical Collection, the NASA sets, the massive Star Wars Ultimate Collector Series. Lucas: And it's working. LEGO's revenue grew seventeen percent last year, and they explicitly credited 'adult fans of LEGO' — they call them AFOLs internally — as a key growth driver. Their adult-targeted sets now account for about thirty percent of their portfolio. Luna: Mattel, too, with their 'Mattel Creations' line — high-end collectible Hot Wheels, Masters of the Universe figures aimed at nostalgic thirty- and forty-somethings. Lucas: But there's a risk here. If every toy company chases the kidult dollar, the market could get crowded. And these are typically higher-margin but lower-volume products. You need a different supply chain and marketing approach than you do for mass-market toddler toys. Luna: So what about the companies that don't have a nostalgia brand to lean on? The ones making baby rattles and bath toys? Lucas: They're diversifying into educational and STEM toys for older children — say, ages eight to fourteen — because that age group is actually growing as a share of the child population in many countries. Parents who have fewer kids tend to invest more in their development. Luna: Right. So the toy itself changes — from a simple plastic shape to a coding kit or a chemistry set. That requires different R&D, different pricing, different retail partnerships. Lucas: And there's another shift: digital play. Roblox, for example, isn't a toy company in the traditional sense, but it's capturing hours of playtime that used to go to physical toys. Toy companies are responding by making their toys 'phygital' — a LEGO set that unlocks digital content, or a Hot Wheels track that interacts with an app. Luna: It's interesting to think about the retail side too. Toy stores like Toys R Us collapsed partly because of demographic shifts, but specialty stores like Bricks & Minifigs — a LEGO resale franchise — are thriving. They're selling to AFOLs. Lucas: Exactly. And the secondary market for collectible toys is now worth billions. A sealed first-edition Transformers Optimus Prime from 1984 can sell for over ten thousand dollars. That market didn't exist twenty years ago. Luna: So the toy industry isn't dying — it's just changing who it sells to and what it sells. But the transition is painful for some companies. Lucas: Yeah, and I think the biggest question going forward is whether the kidult trend has staying power. Is it a demographic bridge while birth rates are low, or a permanent shift in how we define 'play'? Luna: Quick honest thing — a handful of listeners chip in monthly through buy me a coffee dot com slash fexingo, and that's literally what funds making episodes like this one. If walking through the economy with us has made something click, that's a way to keep it ad-free. Lucas: Yeah, it's a small group that keeps the lights on — no big sponsors, no ads, just people who find value in the conversation. Appreciate every single one. Luna: So back to that question — is kidult here to stay? Lucas: I think yes, but the mix will evolve. Right now, a lot of the nostalgia is for the 1980s and 90s — Transformers, My Little Pony, Pokémon. As younger generations age, their nostalgia will be for different things. Fortnite. Minecraft. Maybe even Roblox. Luna: Which means toy companies have to keep investing in intellectual property that can span generations. That's a huge advantage for Disney, with its characters, or Nintendo, with Mario. Lucas: And that's one reason we've seen so many mergers and acquisitions in toys lately. Hasbro bought Entertainment One for four billion dollars to get Peppa Pig and PJ Masks. Mattel is constantly searching for the next franchise. Luna: The irony is that falling birth rates might actually make the toy industry more creative. When you can't just sell a plastic truck to every new baby, you have to make something people truly want. Lucas: Yeah, and that pressure is leading to some genuinely innovative products — like LEGO's Braille Bricks for visually impaired children, or sustainable toys made from plant-based plastics. Necessity is the mother of invention. Luna: So if you're an investor looking at the toy space, what are the signals to watch? Lucas: I'd watch three things. One: the ratio of adult to child sales at major companies. That tells you how well they're adapting. Two: their digital integration strategy — because physical-only is a shrinking niche. Three: their IP pipeline. The companies that own or license characters with multi-generational appeal will weather the demographic storm best. Luna: And for the rest of us — just consumers — it means the toy aisle is going to look very different in ten years. More collectibles, more tech, and probably a lot more stuff aimed at people who can drive to the store themselves. Lucas: Exactly. The toy of the future might not be for a child at all — it might be for the child you used to be.