It’s not all fun and games for the American toy market.
The last year saw major US retailers jockeying for toy sales after the once-dominant Toys R Us closed its doors in 2018. But those efforts haven’t panned out; toy sales actually declined 4% between 2018 and 2019 to $20.9 billion, according to the retail research firm NPD Group. It’s a sharp contrast to the 3.6% gain the broad retail industry had over the past year.
It’s the latest setback for the industry; sales and profits had fallen for years even before Toys R Us went under. Experts say this type of steady decline shows why business leaders need to become more agile and adapt quicker when business starts to slump, says Denise Kramp, a Korn Ferry senior client partner and leader of the North American Retail Sector practice. “Retailers are getting stuck with ‘How do I replace x with x?’ instead of x with y,” Kramp says. “There’s that part of experimentation that needs to be reinvented.”
Play is not what it used to be. Thanks to the proliferation of smart devices, children are increasingly spending time in the digital world than playing with physical toys. A 2017 report from Common Sense Media found that 42% of US children eight years old and younger have their own tablet and spend an average of 48 minutes per day on their gadgets.
While some toy categories have held up, the industry as a whole has not, and experts say the sales slump should push leaders to start looking outside the toy box. “CEOs and leadership teams of toy companies need to innovate their business models,” says Evelyn Orr, vice president and chief operating officer of the Korn Ferry Institute. “They have an opportunity to think differently about how people are engaging with toys and play.”
Traditionally, many companies, whether in the toy business or elsewhere, innovated by incrementally improving or re-creating what’s already on the market. But to succeed in the disruptive modern era, leaders will need to take a broader view of the megatrends affecting their businesses and take bold action based on those trends. “The only way you can reinvent is if you take risks,” Kramp says.
Planning and executing bold moves takes high levels of agility on the part of leaders. Indeed, 64% of CEOs, board members, and futurists interviewed for a global Korn Ferry Institute study said Agility and Openness to Change will be important for future leaders in order to create opportunities and markets—not just respond to them. “CEOs have to expand their mindset, not assume who are their competitors, and engage in thinking” about their industry and their consumer, Orr says.