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Battle heats up for Barbie's throne Add to ...

On a recent Sunday, Anton Rabie, co-founder of Toronto toy company Spin Master, received an e-mail from a customer. Not just any customer, though - it was from Jerry Storch, the chief executive officer of Toys "R" Us Inc.

Mr. Storch was in one of his company's stores in Minneapolis, Minn., serving a shopper who wanted to buy Spin Master's new fashion doll, called Liv. And his message to Mr. Rabie got right to the point.

"We need more," it said.

For Mr. Rabie, whose Toronto-based firm had launched Liv just three months earlier, it was confirmation of a good decision - and of a potential problem. Liv was so popular that the world's top toy specialty chain could barely keep it in stock, a sign of a hot product in the crucial holiday season. But empty shelves also mean missed sales, which can play havoc with the bottom line.

"Over all, the market place is short a little bit," says Mr. Rabie, 38, smiling broadly.

Fifteen years ago, Mr. Rabie and two guy pals from university started Spin Master and rapidly built a major presence in the global toy market by focusing on boy toys such as Air Hogs (model planes) and Bakugan (action figures). Now, as the three amigos look for an even bigger play, they're chasing the other half of the customer base - girls - and doing it in a big way by taking on Barbie, the reigning doll queen.

"Nobody has knocked Barbie off in 50 years," says Jim Silver, a toy analyst and editor-in-chief of TimetoPlayMag.com in New York.

"It's tough to become a $1-billion [U.S.]brand. But I'm hearing from retailers that Liv will do approximately $35-million of sales this year. That's a very good launch. … Sometimes being No. 2 in a category can be very profitable."

The catfight in the toy aisles is getting fierce. Mattel Inc., the titan in the sector, recently shipped the new Barbie Fashionista to stores, while another heavyweight U.S. rival introduced the Moxie Girlz fashion doll. Moxie's sales are so brisk that by next week inventory will start to get scarce, predicts Isaac Larian, CEO of MGA Entertainment, which makes the Moxie doll. How does he feel? "Happy that we have a hit; not happy that we cannot fill all the customer orders," he says.

Liv is a gamble for Spin Master. With more than $650-million in sales last year, the privately held company has continued to make gains even in the recession, a company spokesman says. But it has chosen a risky time to move into new girl territory. Consumers remain tight-fisted. In 2008, U.S. toy sales fell 3 per cent to $21.7-billion and, so far this year, slipped 1 per cent, according to researcher NPD.

Fashion doll sales fared even worse last year, tumbling 9 per cent to $1.56-billion. Many girls have turned instead to iPods, video games and the Web.

Amid the grim doll data of the past few years, the Spin Master boys saw a silver lining. Barbie, still at the top of the doll heap, was losing ground quickly. In response, Spin Master scrambled to move up its Liv launch by one year. "All of a sudden, you have this opening and you see this moment to pounce," Mr. Rabie says.

Liv and Moxie cater to a slightly older girl, aged six to 10, than Barbie's usual three- to six-year-olds, although Barbie Fashionista is skewed older too. Conceived for tight times, the new dolls have a more modest take on life, sporting leggings rather than gowns. Spin Master's dolls feature different skin tones and personalities. They have glass-like eyes, designed to give them an upscale, collector's quality, and costs about $25 (Canadian) compared with $14 for Fashionista and between $15 and $35 for Moxie.

Gerrick Johnson, toy analyst at BMO Nesbitt Burns in New York, says the two upstarts appear to be stealing sales from Barbie, and could each generate between $50-million (U.S.) and $75-million wholesale this season.

Still, retailers, cautious in a fragile economy, probably refrained from over-ordering the new lines for the holiday period, he says. "We believe shipments of Liv and Moxie serve merely as a taste of much bigger things for next year."

Meanwhile, Mattel CEO Bob Eckert says Barbie is picking up market share. "We're feeling as good about Barbie today as we have felt in a long, long time," he told analysts recently. Mattel continues to pour megadollars into Barbie; it recently signed a deal with Universal to take her to the big screen.

Girl toys aren't entirely new to Spin Master. Its lines such as Bella Dancerella have filled a niche. But the company took three years and a bevy of new staff, many of them women, to develop a doll. It hired a marketing specialist from Mattel, as well as former employees of MGA and other rivals. It set up its girls division office in Los Angeles, at the heart of the trend-setting fashion world.

Ben Varadi, Spin Master's chief creative officer, says the doll was one of his toughest assignments. His team spent hours with focus groups of girls, aged 5 to 10, as they played with dolls. He went through five sculptors to get the right shape. The most gruelling part was the design of Liv's lips. He ended up using a photo of his girlfriend as a model. "So they have Karen's lips."

Liv still faces hurdles. She's tied to the fickle fashion world, forcing the Spin Master team to scour H&M and Forever 21 stores and Teen Vogue for inspiration. Liv's online life at Livworld.com needs to be updated seasons in advance, but still has to resonate with girls' current interests. More challenges lie ahead: Mattel now has the rights to Bratz and is planning a relaunch next year.

Mr. Storch at Toys 'R' Us is betting on new life in the doll aisle. The chain recently got a fresh shipment of Liv, and he thinks the doll will be around for a long time. "It will be nip and tuck to see whether they will stay in stock all the way through to Christmas or not."

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  • Mattel Inc
  • Updated August 15 4:00 PM EDT. Delayed by at least 15 minutes.

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