During the 2016 holiday season, Hatchimal toys were sold out everywhere, prompting parents to write "sorry it's late" letters from Santas to their kids as they waited for the little robotic creatures that "hatch" from an egg. In 2017, it was Fingerlings, tiny toy robotic monkeys that cling to your finger; retailers had to limit the number shoppers could buy per trip and still couldn't keep up with demand. And last year it was Poopsie Slime Surprise Unicorn, who sits on her own potty and poops glitter slime.
For 2019, it could be the Nerf Fortnite AR-L Elite Dart Blaster or the Baby Shark Official Song Puppet. Experts also predict the toy makers that won with Hatchimals and Fingerlings could repeat their success: Lucky Fortune by WowWee and Hatchimals Wow by Spin Master are set to be two of the hottest toys of the holiday shopping season.
So how do these brands manufacture viral hits? It's equal parts formula and instinct, according to top executives at WowWee and Spin Master.
WowWee's Lucky Fortune, which retails for $3.99, is a toy fortune cookie with a paper fortune and a charm bracelet inside. The toys have four levels of "rarity" (lucky, very lucky, very very lucky, and ultra lucky), five categories of fortunes (happiness, friendship, love, success, and adventure) and 100 bracelet charms to be collected.
The Ultra Lucky real gold-dipped four-leaf clover is the bracelet to be "coveted," says the company.
The Lucky Fortune toy from WowWee is predicted to be one of the most popular toys of the holiday season. Image credit: WowWee.
Hatchimals Wow is an interactive re-hatchable pink or purple egg with a creature called a "Llalacorn" inside. The fuzzy pink or purple creature has a small gold horn, a neck that grows, a "personality" with "moods" and it can make over 250 sounds like giggling or snoring sounds.
And for both companies, it all starts with an idea, which can come from anywhere.
"Our approach is we are open to ideas from wherever they come," James Martin, an executive in Spin Master's robotics division, tells CNBC Make It. "Everyone ideates" and everyone gives and gets feedback. Ideas even come from independent inventors who pitch the company.
Hatchimals in particular (of which Hatchimals Wow is an iteration) was born from a desire to build on a previous success.
"The way that Hatchimals came about was that we had an item called Zoomer, it was a robot dog," Martin says. The dog came out a couple years before Hatchimals and had "a speed and a feeling of realness that people really connected with."
"It was a top item that year and the team sat down and they challenged themselves by saying, 'What is the most alive thing that we could make? What's the most real think we could create?' And somebody at the table threw out, 'What if we made something that hatched out of an egg?'" Martin says. Though the technological innovation too make it happen seemed impossible, the technology team at Spin Master took on the challenge.
A concept drawing from the early days of the Hatchimal toy development. Courtesy: Spin Master.
"It really came from this crazy, blue sky challenge. We just challenged ourselves and they created this prototype, this bread board model that we could see huge potential in," Martin says.
At WowWee, which has 120 employees globally, an average of seven or eight employees from different departments (like research and development, the technical department, brand management and a company founder) — will go through a list of as many as 150 ideas to reach a collective opinion on each one. This "think tank," as the company calls it, can last two days, says WowWee chief technology officer Davin Sufer.
Spin Master, which has more than 1,800, has a similar process.
The resulting Venn diagram of opinions will generally point to some consensus, both executives say.
In whittling the list down of toy ideas, both Spin Master and WowWee executives consider market analytics, retail experts (from the likes of Amazon, Walmart and Target) and feedback from kids who try out early iterations of toys. But they also use gut instinct.
"So many times we try to make objective rules that help guide our decisions and then the rules are broken and someone has a massive success. It's really really gut driven and that's what is wonderful, but incredibly challenging about our business," Sufer tells CNBC Make It.
"It wasn't obvious to bring a little monkey to life and make it a monkey that lives on your finger," he says of the original Fingerlings. "These things aren't obvious. There's no set of rules you can look at."
The same is true at Spin Master. "Gut is definitely a big part of it, something you look at something and you know it is going to be great," Martin tells CNBC Make It.
Whether propelled by analytics or instinct, once an idea has been approved, it goes into research and development team for prototyping.
The R and D team at WowWee includes artists, technical designers and mechanical engineers, and the lab uses 3-D printers to facilitate the prototyping process. Spin Master does most of its prototyping internally, but on occasion, they use external companies to help them test an idea quickly, Martin says.
Marketing and sales departments are, in various points, part of a product's development too.
With Fingerlings, for example, the marketing tagline "friendship at your fingertips," "really drove many decisions on how we developed the item and what Fingerlings meant to kids," Sufer tells CNBC Make It. The sales team, meanwhile, determines the price, sales forecasts and the budget for the product launch, among other things.
But the key to the prototyping phase is speed. "We like to think that our strength is our ability to prototype and test those ideas very very fast," Sufer tells CNBC Make It. If an idea won't work, the creative team needs to move on ASAP.
Once the toy concept is deemed doable and sellable, the prototype is translated to something that can be made at scale. Changes that the manufacturing team suggests won't be necessarily visible to the human eye, but are critical to the final product's feasibility.
Once the design is perfected, the toy is manufactured for mass distribution. (WowWee manufactures in China as does Spin Master, which also works with factories in Vietnam, Mexico and France.)
Once a product is innovated, prototyped and manufactured, it has to be ready for distribution in time for holiday shopping.
It can take two months for products to ship by boat from Asia to a retailers in the United States.
From ideation to product on the shelf was 10 or 11 months for WowWee's Fingerlings, Sufer says, whereas Spin Masters likes to have 18 to 24 months to go from idea to retail, Martin says.
Once the product hits shelves, there's always a bit of uncertainty. You can't know exactly how a toy will do. Spin Master was a bit taken aback by Hatchimals viral sensation in 2016.
"We knew we had a good item on our hands, we had no idea at how well it would be received. It was phenomenon that ... it's not something you can plan for, not something you can ever expect" Martin tells CNBC Make It. The appeal for Hatchimal caught on beyond the Hatchimal 6 year old to 9 year old target age. "We were very surprised, pleasantly, of course, but very surprised that it went to that level."
It's a tough act to follow.
"You don't ever expect to catch lightning again" Martin says.
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