Transforming Sales of Traditional Toys to Generate New Revenue Streams

Sales of traditional toys are projected to increase by a CAGR of just 1% in real terms over the 2023-2028 period. Toy companies must innovate and adapt to the changing landscape in order to capture new revenue streams. Embracing digitalisation, experiential play and new business models are critical strategies to generate new revenue streams.

Digitalisation of Play: A New Era of Interactive Toys

As consumers spend more time online, demand for interactive and engaging toys has surged. The digitalisation of toys is ushering in a new era of play, transforming toys from mere physical objects into interactive companions. Toy companies must integrate technology into their products to cater to digitally entrenched consumers. For instance, the use of apps and cloud computing can enhance the functionality of smart toys, making them more appealing and cost-effective.

Sales of educational toys, which promote critical thinking and creativity, are projected to grow by 13% in real terms over 2023-2028

^{Source: Euromonitor International}

Experiential Play: Creating Memorable Experiences

Toy companies are increasingly focusing on creating immersive and innovative experiences for consumers. This shift is driven by the growing preference for experiential consumption, where consumers value engaging encounters over material goods. Subscription services, for example, offer a personalised shopping experience for the consumers, while providing a predictable revenue stream for companies. These services can help toy companies offset seasonal demand spikes and foster stronger customer relationships. Hamleys has transformed retailing by offering immersive experiences that engage customers, featuring interactive play areas, themed events and live demonstrations.

New Business Models: Exploiting Intellectual Properties

Toy companies are exploring new business models to extract more value from their intellectual properties (IPs). Licensing and collaboration with non-toy-related industries can amplify brand visibility and engage new consumer demographics. Disney’s success in licensing its IPs, such as Marvel and Star Wars, to generate additional revenue streams is a prime example. Toy companies like Hasbro and Mattel have ample growth opportunities to exploit their IPs, which are not yet significant revenue contributors. Licensing presents a valuable opportunity for toy companies to expand beyond toys without costly investments in new industries.

Catering to Diverse Consumer Demographics

Kidults (adults buying toys for themselves) have emerged as an important driver for sales of toys and games, driven by nostalgia. Older consumers typically enjoy higher disposable incomes and are increasingly embracing video games and interactive toys.

Toy companies can create products tailored to older consumers, improving their social and emotional wellbeing and fostering a more inclusive society. Additionally, the rise of “kidults” represents a significant market opportunity for both traditional toy manufacturers and video game companies. Marvel’s partnership with Myprotein targets kidults by combining superhero-themed products with fitness supplements. Myprotein’s market share in protein supplements in the UK grew from 3.4% in 2019 to 8.6% in 2024.

Embracing Innovation for Sustainable Growth

Toy companies must leverage digital transformation, create engaging experiences and exploit their IPs to unlock new revenue streams. By catering to diverse consumer demographics and adapting to changing preferences, toy companies can position themselves for long-term success. These strategies not only enhance the play experience but also create lasting connections with consumers.

Read our report, Play Reimagined: New Revenue Streams for Toy Companies, to discover how digitalisation, experiential play, and innovative business models are shaping the future of play.