29 May 2019
Traditional Toys Trump Robots in the Battle for Consumer Affection
With Anki the latest digital brand to come off worse to all things analogue in the war to win over kids, the world's most discriminating demographic, is it high-time high-tech manufacturers reassessed their strategies and price points?
It turns out tech may not save us after all. Reported global sales of 6.5 million units weren't enough to save Anki, the San Francisco-headquartered manufacturer of smartphone-controlled robotic toys, from closing its doors last month, with the unfortunate loss of 200 jobs, not to mention an awful lot of units rendered obsolete overnight.
In a subsequent statement, the company said: "A significant financial deal, at a late stage fell through with a strategic investor and we were not able to reach an agreement."
Since its launch in 2010, Anki, though, did manage to raise more than US$200 million in venture capital, with many of its products – including Anki Racing, Cozmo and Vector – appearing to be widely in demand. Yet it still wasn't enough. Before its demise, the company explored many options in order to fund the future development of its products, with Microsoft, Amazon and Comcast all said to have expressed an interest at one time or another.
While not a toy company per se, the AI / robotics pioneer had chosen to focus on products most consumers would probably classify as toys. Without wishing to seem wise after the event, the company's closure nevertheless reinforces the belief that there is, indeed, quite a considerable disconnect between the world of toys and the world of tech.
Indeed, if you look at the hottest toys across the globe in recent years – L.O.L. Surprise!, slime, putty, fidget spinners and most collectibles – they are all resolutely devoid of tech. That can, in part at least, be put down to the fact that tech toys rarely come cheap. But is there more to it than that?
Those who have spent time in the mainstream toy community will be aware that we have been here before. About five or six years ago, the first wave of 'app toys' appeared on the market, with toy companies racing to be the first to successfully harness the latest wave of technological developments. Kids were becoming increasingly fascinated by screens, so incorporating toys into this arena seemed a logical step. What could possibly go wrong? As it turned out, just about everything.
No sooner had products reached the market than reports started to circulate suggesting extreme consumer indifference. High prices, confusion about play patterns and even how the tech itself worked, together with a degree of parental resistance to increasing their child's screen time, led to such products sitting on shelves rather than flying off them. The first wave of AR and VR-enhanced products fared little better, largely for the same reasons.
Of course, there are still some fantastic opportunities in the tech category, as such companies as VTech, WowWee, Spin Master, Character Options and many others have more than proved. To this day, however, connected play remains a minefield, and a tough category to get right. Accordingly, it is no real surprise that the aforementioned successful players are all established toy companies that have integrated the latest tech into their product-development plans, rather than tech companies trying to develop toys.
Crucially, toy companies understand the critical relationship between price points and features. Anki's Cozmo may have been feature-rich, but – at £170 ($215) – was it really worth five times more than such rival products as Boxer or Really Rad Robots? Even if it was, how many parents were willing to invest that sum of money in a luxury purchase that could turn out to be little more than a fleeting novelty or a one-trick pony?
One of the key elements of a successful toy is its ability to spark a child's imagination and creativity. Too many tech toys revolve around a child pushing a button or a controller and then watching it do something. With that in mind, it's mildly ironic that the industry has often referred to these items as 'interactive', when the one crucial element that they lack is any form of genuine toy-child interaction whatsoever.
When we're dealing with a younger child, there is at least the compensation that the child learns through such an experience. When my daughter was around nine-months-old, for instance, my wife took her to a local playgroup, one that had an old-fashioned wooden baby walker among its toy collection. At home, though, my daughter had access to a fully electronic VTech baby walker, with a shape-sorting facility that played tunes and shapes that 'spoke' when pressed, telling the user what the shape was, along with the colour and the number written on it. My daughter was inevitably transfixed, and spent many hours pressing the shapes and hearing them speak to her.
Naturally, she assumed the wooden baby walker at the playgroup could do the same thing. To her surprise and confusion, when she pressed the shapes there was no sound and no music. She turned to look at my wife with a quizzical look, as if to say: "What's the matter with this? Is it broken?"
Like many children of their generation, my daughters grew up as digital natives, with interacting with technology second nature to them. Despite this, the toys that gave them the most pleasure were often more analogue, traditional and classic in nature – dolls, art and craft products, dress-up costumes and role-play items. It is not that they weren't proficient when faced with an electronic toy – far from it. Their interest, though, was often fleeting and their engagement relatively superficial. They played with electronic toys, but rarely spent hours lost in their own world with them as they did with some other toys.
To me, this is the crux of the challenge for tech toys – designing them so they are every bit as engaging and immersive as toys that utilise traditional, classic play patterns, many of which have endured for decades. Centuries even.
It is not just the products themselves that need to align with the toy market – it helps if the companies behind them also understand the way the toy world works. Over recent years, Anki – for one – seemed to increasingly relish its outsider status, shunning traditional toy marketing and communication channels such as toy fairs and the trade press. In short, its focus wasn't really on putting down roots within the toy community.
Furthermore, a large percentage of Anki's sales went through Amazon – which clearly weren't sufficient to keep it afloat. Make of that what you will. Finally, although Anki sold countless units, its products never gave retailers a huge margin. To be fair, this isn't unique to Anki, but rather a challenge for the tech category as a whole. While toy retailers still place great store by percentage margins, tech companies tend to argue that because their products command a higher price, retailers should focus on the cash generated by each sale rather than getting hung up on percentages.
Although there may be some truth in this, toy retailers are also looking at the amount of money tied up in stock, aware of the repercussions of being left with large numbers of high-ticket items. With most tech items being sold over the festive period – due to their higher price points – that short window of opportunity increases the risk factor.
It is always sad when a company fails and Anki certainly made waves during its brief moment in the sun. Ultimately, though, its closure serves to emphasise the importance of having a long-term sustainable business model. It doesn't matter how much money you initially raise if you burn through it without establishing a solid foundation (and let's not beat around the bush – Anki blew through $200 million in double-quick time). It is all very well being a disruptor with a huge paper valuation, but the old adage 'turnover is vanity, profit is sanity' just never seems to go out of fashion.
John Baulch is the Publisher of Toy World,
the UK's leading toys and games trade publication