Thursday March 9, 2017
The Lee & Pearl Toy Fair 2017 Report PART ONE
Lee & Pearl got together at Toy Fair this year for the first time in several years. Though “Lee” attends the Fair every year, “Pearl” is usually too busy with the annual subscriber pattern to leave the workroom. But this year, changes in the industry and specifically, changes with Mattel and American Girl® more than justified the trip to New York City.
We spent three full days on the floor, studying product and talking to vendors, and we needed all three days. This was the BIGGEST Toy Fair either of us have ever attended. Toys filled the usual Javits Center main floor and downstairs and spilled out into the hallways and public areas. There were many new displays, and many established toy sellers had increased the size of their booths.
There was so much to see and talk about that we’re going to need TWO newsletters to cover everything that needs to be covered. This week, we will be tackling the elephant in the playroom Mattel and offering our thoughts on the future of our favorite 18-inch doll, American Girl®.
Mattel had a big booth on the floor this year, as well as their usual display off the main floor in the exclusive River Pavilion. Not surprisingly, we did not get into either (though the guard at the River Pavilion was very nice, and clearly excited about the presentations inside).
However plenty of people on the floor were discussing Mattel in general, and the American Girl® dolls in particular. In addition, transcripts of the presentations made by Mattel corporate brass behind those exclusive walls are available online, and are well worth studying. (You can find the transcripts and slide decks, along with other investor information, HERE.)
What follows is entirely our opinion, based on our own observations, the things people said to us, the presentation transcripts, our understanding of the challenges Mattel and American Girl® are facing, and the choices they have made and appear to be making.
No question, American Girl® dolls are changing more rapidly than we could have imagined a year ago. In the last few weeks, we have seen both sneak peeks and actual releases of a staggering number of new dolls and new doll features, including the first new mold since 2011 on upcoming Nanea Mitchell™, a new eye color on the re-released Felicity™, a new hand mold and freckle pattern on Contemporary Character Tenney Grant™, and of course, a new boy doll the first! in Logan Everett™.
We are also seeing smaller collections, a possible re-shuffling of the named doll categories, and changes to the design and quality of the dolls themselves all added to last year’s eyebrow-raising expansion into mass-market retail with the Toys-R-Us, Kohls and Amazon deals.
Some of these changes are welcome, while others appear to make no sense. In early February, images surfaced on the web of an American Girl® sales associate manual page that mentioned a new design feature panties that are permanently attached to the dolls.
If you care at all about these dolls, and were anywhere near the internet in the weeks that followed, you have likely heard all about this, and about the increasingly strange revelations that followed: shaping darts replaced with straight seams leading to bizarrely mis-shapen rear ends, inferior new fabric on some dolls and “squishy vinyl” heads and arms on others. You have also likely heard about the unfortunately confrontational response of the American Girl® social media team to the brouhaha that followed.
Why would American Girl® and Mattel risk such changes? Can the amount of money saved by eliminating darts and leaving squishy heads on the assembly line really outweigh the potential loss in customer goodwill? The whole thing was so weird that, “I’m baffled” became the most common phrase in the discussions between Lee and Pearl in the days that followed.
So we took a step back.
Taking a longer view looking at all the changes together and not individually a coherent picture begins to emerge. It isn’t, to be honest, always a good picture. But we hope that this picture will help you understand what Mattel is up against, why they are making these changes, and if any of those changes are worth supporting in the days to come.
First, Mattel is in trouble. This is what is driving most of what we see, and don’t like, in changes to the American Girl® dolls.
Overall, Mattel has had a tough 21st century, and the last year was the worst. Mattel’s core brands, like Barbie and Fisher Price, have suffered declining sales for years. Last year was Mattel’s first full year after losing one of the most valuable franchises in all of toys the Disney Princesses. And last Christmas was a very poor Christmas all around for toys, especially for toys that were not sold online.
Just a few years ago, American Girl® was riding high, posting impressive annual growth gains while other Mattel brands suffered. Recently that rate of growth has softened even tumbled. But American Girl® dolls are still selling at a profit. The brand is still headquartered in Wisconsin, far from Mattel HQ in Southern California, and the brand sales only account for about 15% of total Mattel sales. Why can’t American Girl® dolls weather the Mattel storm on their own?
The first problem is that maintaining the quality of American Girl® products will be a challenge, as Mattel is desperately trying to save money by squeezing all their supply chains. We’ll get back to this in a bit.
The second problem is that right now, American Girl® needs investment in new dolls and new products and even a new focus for the company and parent company resources are not available right now for such risky work.
There is no denying that American Girl® has lost focus in the decades since Pleasant Company launched in 1986. Once it was easy to summarize the point of the dolls: they represented American girls who lived in different time periods, and their stories reflected the adventure of growing up in America over the past centuries.
Here’s the first line from the 1986 Pleasant Company catalog pictured above: “This collection is for you if you love to curl up with a good book.”
It is less easy to determine the central focus today. Apart from sharing molds and bodies, “BeForever” and “Truly Me” are completely different types of doll lines. One is still about stories, and good books. The other is about mimicking the lifestyle of an upper middle class, suburban American girl, replicating her world as closely as possible in pink plastic.
We suspect that this was never a plan. It is possible that the contemporary line just grew, without much overall planning, out of the demand for more dolls and more stuff. And snark aside, there is much to love in that contemporary line. Most especially, it made available a greater variety of dolls than the original historical stories ever could.
But it also left a company deeply divided in tone and focus. Perhaps it is time to refocus the brand, time to give the contemporary line the same level of creative thought that was first put into the historical dolls. And there is evidence that Mattel is trying to do that.
Now we don’t know exactly what Mattel is planning, partly because we suspect Mattel doesn’t know exactly either. They just hired a new CEO, so anything and everything could change. But there are significant clues as to what the current American Girl® brand managers are thinking about.
First off, they are using the word “character” a lot, in reference to both historical and modern dolls.
For much of last year, we heard rumors of a new “Contemporary Characters” line that has now launched with Tenney and Logan. At first, we assumed these dolls, who come with stories, books and a movie, would be introduced as replacements for the aging Girl of the Year line. That still seems likely, but there may be a bigger-picture goal behind the change.
Next, when the marketing blitz with which the company attempted to defuse the #permapanties unrest revealed six (!) new dolls both modern and historical the images (one of which is shown above) featured the tagline, “More characters and more stories to love.”
Finally, in Executive VP and Chief Brand Officer for Core Brands Juliana Chugg’s Toy Fair presentation, she uses the term “character” to describe our favorite 18” dolls EIGHT times. She only uses the term “doll” four times — and the term BeForever? Not once. Instead, she uses a term we’ve never seen before, “Historical Characters.” (And yes, whoever transcribed her speech chose to capitalize that term.)
All this suggests that the separate modern and historical doll lines are being gathered into one cohesive line of narrative-based, “character” dolls.
We are honestly excited about this. At a time when many American Girl® fans are dismayed by moves that seem to take the dolls away from the original vision of an heirloom quality plaything, it is nice to see a part of Pleasant Rowland’s vision expanded across all the lines, in a way it never has been before. One is reminded of Disney’s use of the term “cast member” to describe their various theme park employees. The term isn’t just a pleasant euphemism. Rather, it gives each employee a higher purpose, a position in the ongoing narrative that is the park.
It is also clear from the six (!) dolls to be released this year that Mattel wants to move more quickly, introducing more “character” dolls and themed collections, even if those collections are quite small.
Conversations on the floor at Toy Fair and in the New York American Girl® store suggest that some of these dolls will be “limited time only” increasing purchasing urgency while others will “pop up” on exclusive platforms (like Felicity, who is only available online and in the three flagship stores) increasing excitement.
There are positives and negatives to this approach. At best, this will boost sales, while freeing the designers to be more playful and creative.Look at all the great hit-and-run stuff produced by Battat for the Our Generation™ doll line: a biology set with an anatomy torso with removable organs, a chemistry set with beakers and a microscope, a luau set with a ukulele and shrimp skewers, a carnival set with a functional bean-bag toss game. Wouldn’t it be great to see that kind of imaginative work from American Girl®?
And we HAVE seen work like that recently. The latest “sports” releases for Kit and Rebecca, Julie’s bathroom, and Melody’s recording studio and working electric piano are quality issues aside some of the most original items the company has ever produced.
With the likely merging of the Contemporary and Historical Characters, what will become of the old Truly Me line?
One of the key words we heard in reference to Mattel’s plans for American Girl® on the Toy Fair floor (from a person who would know) was “tiering.” And one of the most intriguing lines from Juliana Chugg’s presentation was the following:
“Within the Truly Me segment we are providing girls with the opportunity to not just pick a doll that looks like them, but design and order dolls that take customization to a new level. A doll that you have personally designed will deliver a premium experience like no other.”
(The image above is from the slide deck that accompanied this presentation.)
To us, it seems likely that the Truly Me line will disappear possibly slowly, possibly with a significant pit-stop as a lower end line sold only in big box retail outlets into this new “premium” customizable line. The Truly Me line was devolving into an awful lot of navel gazing as it is, with each doll a perfect miniature of her owner. Perhaps a premium line is the right place for such navel gazing.
Whether or not “premium” will also mean higher quality is another question. Unfortunately, whatever happens with the various lines, we are not going to be happy about what is likely to happen to overall doll quality.
Look everyone, it's "Lee" and some high-class ivy. Before she was a doll product designer, “Lee” was an academic economist. She has followed the ups and downs of the toy industry for years.
In the 1990s Mattel aggressively pursued a policy of squeezing costs out of their production chain. They closed down all U.S. manufacturing and switched over entirely to Asia, especially China. And they pushed their Chinese suppliers hard to bring down costs.
So Mattel has been squeezing their supply lines for decades. There can't be much left to squeeze without seriously damaging product quality. And yet here is the Mattel Chief Financial Officer's Toy Fair presentation, confidently predicting $240 million in supply chain savings across all Mattel product lines over the next two years.
We suspect that the #permapanties are part of a larger doll redesign that is meant to bring down the cost of the doll. Mattel may even have moved production to a new doll supplier. The quality of the cloth used for doll bodies has also declined. The new Felicity doll we examined at the New York store in February had a body sewn to the old pattern, but out of a fabric that was of much lower quality than previous dolls.
And we have all noticed that fewer outfits come with sleeves, expensive items like coats are increasingly scarce, and most accessories are cheaply made. The chair that comes with Tenney’s stage playset is as is usual of American Girl® chairs a marvelous design. But it is solid plastic, while two years ago, Grace’s bistro chair was metal.
The pressure on costs will only get worse as Mattel shifts to selling the dolls and collections through retail outlets outside of their own stores and website.
The old American Girl® model, with the dolls sold directly by Mattel, in company-owned stores and on-line, made the dolls a relatively low volume but high profit-margin product. When Mattel sold a doll to a customer, they got the full retail price.
But the stores are expensive, and their expenses remain fixed even when sales slump. The market that can access those stores is limited. And as we all know, the on-line American Girl® experience has yet to match Amazon and Amazon Prime free shipping. Mattel has undoubtedly lost sales, especially on impulse purchases, because the dolls were not in the big box retail locations, or on Amazon.
Now American Girl is available on those platforms. But retail is a two-edged sword. Sales numbers will be higher, but Mattel’s markup will be much lower as the wholesale price on a doll is generally about half the retail. Mattel will also lose control of discounting, and of the presentation of the dolls. These changes will decrease what Mattel can spend to manufacture the dolls and collections.
We may find that Mattel splits the market into a high volume, low margin, lower quality sector (available in big box stores) and a low volume, high margin, higher quality sector (available in American Girl® stores and on their website). The new Felicity doll, for example, is offered only in a select handful of American Girl® stores. Unfortunately, the poor quality of the Felicity doll that we looked at in one of those select stores suggests that exclusivity may not mean better quality.
So what do we, the fans of American Girl® dolls, do when faced with these possible changes and challenges? That’s a tough question.
Though we applaud the move to bring all the dolls together into one line of story-based “characters,” we’re also concerned what might happen if doll sales fail to grow as a result. The company has already jettisoned nearly all the older historical dolls. If the contemporary dolls are equally story-based, why not get rid of the rest of that pesky history? Or maybe consign it to limited run, exclusive releases like Felicity (who already feels more like a Special Edition Colonial Barbie, than the rich, textured doll and collection we used to know and love)?
For that reason, we’d like to see American Girl® do well in the next few years. But at the same time, we can’t recommend that people run out and purchase the latest dolls and collections just to prop up the company, either.
We went to the American Girl store in New York, intending to buy Felicity at least, and possibly Logan and Tenney as well. But we left with only one item from Felicity’s collection her charming straw hat and nothing more. Even with gorgeous, new green eyes, and without #permapanties, the quality of the new dolls wasn’t where we need it to be to justify the expense.
Though all is not lost we did recently buy a lovely Melody and her awesome piano. So our recommendation is to support what you love, and hope that the company takes the hint and can find enough resources to make more of whatever that is.
That’s all for this week. Next week we’ll be taking you through Toy Fair in earnest, with much discussion of non-Mattel doll lines old and new and lots of other lovely things!
See you next Thursday!