How to Invest in Toys

Investing in toys and games

Toying with the idea of investing in toys and games? The toys industry is as diverse as the children (and adults) who play with them. Traditional board games and classic toys like Legos resonate with nostalgic millennials. Children build skills and self-esteem with imaginative hands-on toys, while mobile gaming puts entertainment at every generation’s fingertips. With so many options, investors can have fun while getting down to the business of investing.

What is the toy and games industry?

What toys are parents buying to keep their kids (and themselves) busy? Piled up in shopping carts, real or online, are puzzles, dolls and action figures, plush toys, sports equipment, building sets, and preschool toys. Collectively, the value of the global toys and games market was $291.72 billion in 2021. Dominating that market were electronic games, with a 63.87% revenue share, but gains were seen across the sector (1).

Playtime is more than fun. Whether competitive, cooperative, or one-player, games and toys help us connect, de-stress, and build mental, emotional, and physical skills. Amidst the stresses of the pandemic, conventional toys and video games sales surged. Even now, intergenerational games bond family and friends as well as engage children’s imaginations. Nearly everyone who holds a smartphone is tapping into mobile gaming. Younger, nostalgic generations are keeping it old school, with millennials playing their share of traditional games to stay connected at social gatherings.

The toys market is anticipated to grow at a 4.7% rate every year (CAGR 2022–2030) (2). COVID-19 may have boosted sales, but clearly the love of toys and games is never-ending.

Why invest in toys and games

Toys and games will be entertaining people for a long time to come. Total sales across toys and games are expected to grow to $492 billion by 2026 (3). And why shouldn’t it? Almost every parent whose child benefited from toys and games during the pandemic is planning to purchase more, from construction sets to puzzles, from dolls to plush toys, and from board games to video games (4).

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Investors interested in the toys and games industry notice the gains from e-commerce, which in large part has driven the surge in the toys and games market. Consumer preferences—even among older generations who tend to be slower to adopt new technologies—has shifted from face-to-face to online. Online sales have now outpaced brick-and-mortar stores (5). Toy and game companies are looking for ways to support their online presence and improve their bottom line, impacted by disruptions like supply chain delays.

Consumer spending on video content is on the rise, in part thanks to virtual reality (VR) products, mobile gaming, and a rise in competition. Classic brands like Hot Wheels continue to drive solid performances, while crossover toys and games with popular movie franchises like Disney and Marvel are superpowering revenues. For investors looking for the next trend, social media platforms like YouTube or TikTok are places to watch. Meanwhile companies with robust multiple platforms, such as Hasbro—with face-to-face, tabletop, and digital gaming—could be in play for years to come (6).

Another trend for investors to unpack is the rise in toy subscriptions services for kids. From educational toys to project-based crafts, more boxes of curated toy-products are arriving monthly via the mail for children. Many subscription-based toys (as will all toys) are increasingly personalized and STEM (science, technology, engineering, and math) oriented. Along with the cognitive benefits of toys and games, parents are more aware of the health and environmental benefits of “green” toys. This has impacted even packaging, with a greater demand for reduced waste.

Investors whose values lead their investing take note of how toys and games are becoming more geared towards encouraging inclusion, from Crayola’s “Colors of the World” that reflect the diversity of skin tones around the world to a group of Barbie dolls that include a Barbie with a prosthetic limb and one with vitiligo. More than two-thirds of US parents are seeking out toys that celebrate difference, rather than ignore them (7).

How to invest in toys and games

The numbers show that there is something for everyone in the toys and games industry. You can invest in brands that you loved playing as a kid, or the digital games your children or grandchildren enjoy. You can explore investing in games that have connections to TV shows or movies. And you can look for ways to profit from growing trends, from STEM to virtual reality (VR) to diversity. On Magnifi, try searching for:

References:

“Toys And Games Market Size, Share & Trends Analysis Report By Product (Preschool Toys, Dolls), By Application (0-8 Years, 15 Years & Above), By Distribution Channel (Offline, Online), By Region, And Segment Forecasts, 2022 - 2030,” accessed November 18, 2022, https://www.grandviewresearch.com/industry-analysis/toys-games-market
“Toys And Games Market Size, Share & Trends Analysis Report.”
Ballard, John, “Why Investors Should Buy Mattel After Hasbro’s Disappointing Numbers,” April 23, 2022, The Motley Fool, https://www.fool.com/investing/2022/04/23/why-buy-mattel-after-hasbros-disappointing-numbers/.
“Toy & Play Trends: 2022 Toy Trends Briefing,” accessed November 18, 2022, The Toy Association, https://www.toyassociation.org/toys/research-and-data/reports/trend-spotting.aspx?WebsiteKey=9627b778-d394-4eb1-93ca-b0ecde8e3359&F
Young, Jessica, “US ecommerce grows 7.3% in Q2 2022,” August 19, 2022, Digital Commerce 360, https://www.digitalcommerce360.com/article/quarterly-online-sales/
Young, “US ecommerce grows 7.3% in Q2 2022.”
“Toy & Play Trends: 2022 Toy Trends Briefing.”