Colorful, interlocking plastic bricks are the only thing keeping the toy sector afloat as its yearly sales are on the verge of declining for the second year in a row.
Lego is expanding quickly at a time when toy companies are finding it difficult to match the enormous increases of pandemic-era sales. In the first half of the year, the Danish company’s revenue increased by 13%, and it is still gaining market share.
According to Eric Handler, managing director at Roth MKM, Lego has been the primary driver of the industry’s growth this year when it comes to toy sales.
Lego has restructured its operations and broadened its clientele since nearly going bankrupt in the early 2000s, which has helped it increase sales despite inflationary market conditions.
Over the last six years, Lego has shown positive annual revenue growth.
Its approach has included exploring the licensing market, appealing to both adults and children, leveraging the digital game industry, collaborating with studios and streamers to make Lego content accessible to customers, and constructing production facilities near distribution centers to streamline the supply chain.
Newly highlighted passion points, packages that appeal to a broad range of customers, from those who are enamored with franchises like Star Wars and Harry Potter to automotive fans and animal lovers, are recent highlights amid its tried-and-true portfolio.
According to James Zahn, editor in chief of The Toy Book, Lego has continuously defied the trend in recent years. When other businesses fail, Lego usually succeeds.
“Being ahead of the curve has allowed Lego to be more nimble during inflationary times as consumers tighten their purse strings, navigate disruptions in the theatrical entertainment industry, and even deal with impending tariff increases,” Zahn said.
According to Zahn, the main theme of this situation may be that they appear to be two or three steps ahead of everyone else.
License for fun
Lego has used pop culture to bring beloved stories to life in brick form, from tiny replicas of Emerald City from Wicked to a recreation of Wednesday and Enid’s dorm room in the Jenna Ortega-led Wednesday.
For many years, licensing has been a crucial tactic for toy manufacturers. Using current and forthcoming film and television intellectual property enables companies like Lego to provide a loyal and active customer base.
In 1999, Lego entered into its first licensing relationship with Lucasfilm to make Star Wars sets available to the general public. While some of these kits commemorated vehicles and characters from the first three films, others were linked to the debut of Star Wars: Episode I: The Phantom Menace.
“Length before we started saying kidults, Lego embraced adults, and they’ve managed to continue that in new ways,” Zahn added.
In order to turn popular properties like Harry Potter, Lord of the Rings, Ghostbusters, Marvel, DC, Jurassic Park, and Pixar into building bricks, Lego has collaborated with hundreds of different partners over the last 20 years.
In recent years, the company has released kits like the Hocus Pocus Sanderson sisters’ home and even a Jaws set that shows the famous shark destroying Quint’s boat.
“We’ve seen tremendous years of growth for the Lego brand,” stated Julia Goldin, the company’s chief product and marketing officer. We took the very conscious choice to double down on our existing audiences, unleash our potential with a large number of new audiences, and make sure we are highly linked.
Finding new brick builders
Lego is expanding beyond sets based on franchises.
According to Zahn, the business has made an effort to provide a variety of sets that appeal to new markets that might not have otherwise purchased or constructed a Lego set. This comprises brick replicas of well-known paintings like Leonardo da Vinci’s Mona Lisa and Vincent van Gogh’s Starry Night, cityscape sets including skylines from London to New York, and a line of botanicals.
Goldin pointed out that Lego is making investments to expand its product line and attract new customers.
For this reason, Lego has teamed up with Formula 1 to produce a collection of pieces inspired by the sport, ranging from adult collectible sets to preschool-aged Duplo kits. The toy company will be present at upcoming Formula One motor racing events, and the cooperation will also extend to Lego’s digital channels.
According to Goldin, prior automobile products—such as a McLaren Lego set—performed well in stores, giving Lego the confidence to expand into the motor racing market.
She clarified, “We always start with the audience.” We’re constantly examining what interests children. And we observed that Formula One was one of the top-growing fandoms among younger children. It was also expanding internationally and drawing a lot of new viewers, particularly women and families.
Lego has been able to increase revenue and offset downturn in the theater industry by attracting new customers.
Hollywood production’s broken pipeline is largely to blame for the toy industry’s present sales problems. Tinsel Town had fewer new releases that may have been the foundation for hit toys because of a worldwide pandemic and labor disruptions.
Toy manufacturers were creating less new action figures, roleplay accessories, and other movie tie-ins as a result of the dearth of children’s films in particular.
However, Lego’s 780 goods in 2023 were comparable to those in previous years, with about half of them being new.
Delving into digital
Lego has grown beyond its retail shelf space at the same time.
The company has released a number of its own theatrical productions, collaborated with streaming services like Disney+ to deliver Marvel and Star Wars material to tiny screens, and even established a vertical within the well-known Fortnite game from Epic Games.
Lego has remained at the top of consumers’ minds thanks to its growing portfolio, which has also offered them more ways to interact with the brand and increased retail sales.
“We must keep in mind that children grow up,” Goldin remarked. Thus, a new generation is constantly emerging. In my opinion, the many experiences we may build will become even more digitalized and interactive over the course of the next five years.
According to Goldin, the business wanted to build an experience with Fortnite rather than just sets. Players may create digital Lego structures, fight against animals, personalize their online mini figure, and interact with other Lego enthusiasts in the Fortnite game’s Lego-based environment.
Lego CEO Niels Christiansen has frequently emphasized the value of meeting children where they are, pointing out in prior financial reports that the company is vying for youngsters’ attention and time. Sales of actual Lego kits have increased as a result of being pertinent to them and in areas that they already inhabit.
Lego used a similar tactic when collaborating with Disney+ on a number of Star Wars and Marvel animated series, as well as when releasing Piece by Piece, a full-length animated documentary on Pharrell Williams, in theaters recently.
According to Jill Wilfert, Lego’s head of global entertainment partners and content, “We felt [Piece by Piece] was really something that was super original.”
Wilfert continued, “We want to draw in a wider audience that will be interested in the brand.” We therefore believed that this would assist us in getting there. And when we do entertainment for ourselves, it’s really about doing those things that help us communicate the brand’s values in a very current and fun way, but it’s also something that friends, family, and other people can do together.
According to Wilfert, Lego is working on a number of theatrical projects that might be released in the upcoming years.
The business intends to keep producing shorts and episodes related to current shows that air on YouTube, Nickelodeon, and Netflix in the interim.
More from CNBC
-
Dow falls more than 200 points at the start of a holiday-shortened week
-
Nordstrom to go private in $6.25 billion deal with founding family, Mexican retailer
-
Honda and Nissan officially begin merger talks to create world s third-largest automaker
Note: Every piece of content is rigorously reviewed by our team of experienced writers and editors to ensure its accuracy. Our writers use credible sources and adhere to strict fact-checking protocols to verify all claims and data before publication. If an error is identified, we promptly correct it and strive for transparency in all updates, feel free to reach out to us via email. We appreciate your trust and support!