Fisher-Price pursues toy sales in developing markets

In developing a line of talking toys aimed at children in China, engineers at Fisher-Price had to struggle to perfect the Mandarin "Sh" sound, which involves a soft hiss that was difficult to encode on sound-data chips embedded in the toys.

Developers finally solved the problem of recording the phrase "It's learning time!" in Mandarin, but new challenges are ahead. The company will soon be examining the LCD screens on learning toys to determine whether Chinese characters can be displayed clearly.

Getting such details right is increasingly important as Fisher-Price and its parent company, Mattel Inc., try to attract more customers overseas.

In the past five years, Fisher-Price's sales in developing markets have more than doubled, and its sales of baby swings and infant rockers in those markets have soared tenfold. Meanwhile, Mattel reported its first quarterly loss in more than three years, in part because Fisher-Price sales fell 13 percent in the U.S., where electronics have increasingly cut into the market for toys. Though Fisher-Price's international sales were down 7 percent in the quarter ended March 31, its overseas results have grown rapidly in many previous quarters.

Aiming Fisher-Price toys at preschoolers overseas is also important to Mattel because it helps lay the groundwork for the company's other brands as toddlers graduate from stacking plastic rings to collecting toys like Barbie and Hot Wheels. "Fisher-Price is the tip of the spear for Mattel into these developing markets," says Kevin Curran, Fisher-Price's senior vice president and general manager.

Fisher-Price is in particularly hot pursuit of markets -- Brazil, Russia and Poland, for example -- where brand-name American toys for toddlers are just beginning to appear and are thus perceived as novelties. Another draw: The countries have fast-growing middle classes with new disposable cash and children they want to pamper, the company says.

To capture consumers, however, the company must distinguish itself from entrenched local toy makers. At the same time, it must keep costs down, to make the products affordable enough to sell in developing countries.

Hitting the mark on products for these markets has presented some unexpected hurdles, like the problem recording Mandarin. Earlier, Fisher-Price ran into trouble with a reading toy called "Storybook Rhymes" that featured a traditional Turkish poem paired with an illustration of a pig. "We realized this wasn't appropriate for a Muslim country," says Kelly Chapman, who heads product design, referring to cultural restrictions on pork. In development, the company replaced the pig with pictures of cats.

Taking an international tack has been quite a stretch for Fisher-Price, which was founded in 1930 and family-run until the retirement of founder Irving Fisher in the late 1960s. Mattel acquired the company in 1993, but Fisher-Price still has its headquarters in the upstate hamlet of East Aurora, N.Y., and still uses photos of local toddlers on its packaging, including on toys sold overseas. Neighborhood children also test products in Fisher-Price's only research lab, which is on the company's small campus.

But the game is changing. "In many discussions (at headquarters), the U.S. is getting treated just as any other country," says Mr. Curran, because "international has been and is the fastest part of what's growing."

Market researchers like Shelly Glick Gryfe have been trotting the globe, scouting out the next big market for preschoolers. Glick Gryfe, who holds a degree in child psychology, says she began studying families in India more than a decade ago, but for most of that time the lack of a large middle class made a big retail presence difficult for Fisher-Price, whose toy prices range from $3 to $30 -- far above those of local competitors. Many Indian mothers weren't willing to make the investment in the company's educational toys because, research showed, they didn't perceive the playthings as potential learning tools.

But when new data came in about two years ago, Glick Gryfe found more Indian parents had begun taking American toys home. "We were seeing a shift in attitude," she says. And Fisher-Price reacted fast. This year the company is offering more than a dozen lines in India.

Fisher-Price is also pursuing the Chinese market, which offers sheer size and big seasonal gift-giving events like Chinese New Year. While the "one child" policy has slowed the country's birth rate, Glick Gryfe says Fisher-Price can target the large number of adults -- including both parents and grandparents -- doting on each child.

But expanding a company's international business isn't without risk. John Taylor, a toy analyst at Arcadia Investment Corp. in Portland, Ore., says the presence of cheaper locally made toys means that Fisher-Price's success will depend on the growth of brand consciousness among consumers in new markets. "Chinese kids have been growing for 5,000 years without the benefit of Fisher-Price," he notes.