With digital engagement reshaping consumer expectations, physical toy store experiences have become more immersive, and interactive, captivating both nostalgic adults and tech-savvy kids. As the global toy market races toward $440 billion, brands are reimagining the toy store experience to merge physical play with digital innovation, creating phygital experiences that redefine the way we shop for—and interact with—toys.
Gamification Bridges Digital and Physical Play
Parents are no longer grabbing toys off the shelf at a department store. Instead, specialized brand experiences from popular toy companies focus on creating a play experience inside the store, engaging shoppers with digital entertainment in an experiential environment.
Gamification has proven to be a powerful tool, not only for engaging adults, but also for captivating a younger audience. The integration of game elements into various products and experiences has transformed how companies connect with their youngest consumers. From interactive apps that turn learning into play, to immersive in-store experiences that spark creativity, gamification has emerged as a strategic approach to attract and enchant kids.
The result is happy consumers who walk away with physical toys that extend the experience they have inside the store. Legacy brands are leading the way, leveraging nostalgia combined with modern entertainment to capture an enthusiastic market.
Legacy Brands Navigating Digital Transformation
Legacy brands are leveraging digital transformation to reinvigorate their market positions amid shifting consumer demands. For instance, Hasbro turned a 20% slump in physical sales into a 20% gain in its Wizards of the Coast and Digital Gaming segment by prioritizing digital assets and strategic partnerships. To manage costs and stay agile, the company outsourced portions of manufacturing to smaller firms, boosting profitability. Hasbro also collaborated with LEGO to launch a Transformers toy—a first for both brands—targeting nostalgic Millennials who remember the original series.
Meanwhile, Mattel has undertaken a complete transformation since Ynon Kreiz became CEO in 2018. Under Kreiz’s leadership, Mattel evolved from a toy manufacturer to a multi-platform entertainment company with a deeply engaged fan base. “The real change in our DNA was to view customers not just as consumers, but as fans,” Kreiz notes. This shift has not only reinvigorated Mattel’s portfolio but also generated a 27% spike in Barbie doll sales following the brand’s recent movie release, which contributed to a 9% overall sales boost between July and September 2023.
Lessons from LEGO’s Transformation
LEGO exemplifies how brand reinvention can blend digital and physical experiences without compromising core values. LEGO has embraced digital transformation through over 90 licensed games, a successful film universe, and an exclusive augmented reality experience that integrates with physical play. LEGO’s strategy centers on meeting kids where they play, rather than altering their preferences, reinforcing their focus on customer-centricity.
LEGO’s success showcases the power of brand consistency and adaptability, as they continue to evolve while staying true to their creative, play-oriented identity. By enhancing the physical play experience, LEGO offers an alternative to pure digital entertainment, creating a space where nostalgia and innovation intersect. This approach allows LEGO to maintain its appeal across generations, from young children to adults.
Why Physical Toys Find New Life with Adult Markets
Did the pandemic create a need to reach back to a safer time? Are adults trying to make up for what they didn’t have in childhood? Whatever the reason, 43% of adults purchased toys this year for themselves. Coined “kidults,” this segment of the toy market has been the fastest growing since 2022. By the first quarter of 2024, adults beat out preschoolers as the highest revenue group, spending $1.5 billion.
The result? Major toy companies are pivoting to entice adult toy buyers. The LEGO website has a tab that says, “adults welcome.” JellyCat might be made for kids of all ages, but they’re seeing a huge surge adult consumers. And Toys R Us is making a comeback – welcome news to every Millennial who spent most of their childhood making wish lists inspired by Geoffrey.
Toys R Us Modernizes their Approach
Toys R Us is partnering with Macy’s to open within their stores that will include interactive play areas, events, and exclusive toy lines, emphasizing a more immersive shopping experience. In addition, they’re adopting an omnichannel strategy that will integrate physical locations with enhanced online shopping experiences to reach a broader customer base.
Build-A-Bear Workshop: More Than A Bear
Build-A-Bear has embraced the evolving phygital landscape by engaging their customers in a hybrid world of play and personalization. This shift is particularly evident in their expansion into online exclusive offerings, such as the “Bear Cave” section, where fans can find adult collections, often inspired by popular licenses. Additionally, Build-A-Bear is looking to make a splash in the metaverse, where fans buy products like their “OctoBEAR” collection, a set of highly collectible, limited-edition plushies, which cater to both traditional collectors and digital natives and blur the lines between physical and virtual ownership.
JellyCat Focuses on Exclusive Brand Experiences
From launching a fish and chips shop in London that featured exclusive products to a patisserie in Paris where customers could purchase limited edition characters that came in a patisserie box, they are wholly focused on the experience.
JellyCat’s New York diner offers more than just a shopping experience; it’s an immersive world for customers. Visitors can explore a retro-themed diner where they interact with Jellycat plush toys while dining on whimsical, themed treats. This unique space combines a toy store with a playful, experiential environment, allowing guests to engage with the brand beyond just purchasing products. It’s a blend of retail and entertainment that positions Jellycat as a destination, not just a toy brand.
Today’s toy stores are nothing like what many of us remember from our childhoods. But all it takes it stepping inside a LEGO store to see how kids and adults are embracing this new hands-on, immersive shopping experience.
Competition from Big-Box Retailers
While specialized toy brands innovate with immersive, digital-first experiences, they are still contending with the pressure of large retailers like Walmart, Target, and Amazon, which dominate the toy retail market. Big-box stores have the advantage of scale and convenience, offering an extensive range of products, competitive pricing, and fast delivery. In recent years, these retailers have increasingly adopted technology-driven solutions, such as AI-driven recommendation engines and streamlined checkout processes, to enhance the customer experience.
However, traditional retailers are often unable to replicate the personalized, experiential shopping environments created by niche brands. As a result, the shift toward phygital experiences presents a critical opportunity for toy companies to differentiate themselves from the transactional nature of big-box retailers. By focusing on creating memorable, interactive, and emotionally engaging brand experiences—both in-store and online—smaller, specialized toy companies can attract consumers seeking more than just a product—they are seeking an experience that connects them with the brand on a deeper, more personal level.
Customer Experience is the Key
As toy brands reimagine the shopping experience, they are setting a new benchmark for retail engagement. By integrating digital elements into traditional retail spaces, brands are not just meeting consumer expectations; they are actively shaping them, transforming stores into destinations where immersive, phygital interactions can redefine brand loyalty. The innovations led by the toy industry point to a broader retail revolution, where experiences—not just products—will become the core of consumer engagement strategies.
