Smart Toys Market - Growth, Trends, COVID-19 Impact, and Forecasts (2021 - 2026)

The smart toys market is expected to register a CAGR of 28% over the forecast period 2021 - 2026. The rapid adoption of the Internet of Things has spurred the growth of smart and connected devices for various applications. Smart toys use various technologies, such as IoT, Artificial Intelligence, Smart Devices, and many more, to enhance the experience of learning and fun for children.​

Key Highlights

• These toys provide a personalized play experience for children with embedded software that offers speech and image recognition, app integration, RFID functionality, and web searching functions. For instance, CogniToys' Dino utilizes Wi-Fi to stay connected and IBM Watson's natural language processing technology to tailor its responses as per the child's age group and skill level.​
• The adoption of STEM (Science, Technology, Engineering, and Math) toys for children's skills enhancement is one of the key factors driving the demand for the smart toys market. Smart toys enhance professional skills such as coding and engineering through smart interaction and behavioral learning. As parents always embrace products that can assist in their children's intellectual development, this will further boost the adoption of smart toys. Companies such as SmartGurlz toy teaches girls how to code.​
• Various factors such as direct and two-way communication, real-time tracking of children's activities, and the capability to store personal data, such as child's name, photos, and voice recordings, which helps in the personalization of toys, are some of the factors majorly driving the growth of smart toys. Companies such as Fisher-Price offers Smart Toy Bear that can be controlled by the smart toy app on a smartphone. Such innovations are expected to drive the market over the forecast period.​
• The advent of 5G technology is further expected to boost the adoption of smart devices and toys over the forecast period. According to the Ericsson Mobility Report, the estimated number of 5G smartphone subscriptions is expected to reach 2,451 million by 2025 as compared to 580 million by the end of 2021.​
• The Covid-19 pandemic has resulted in severe lockdowns in various parts of the world. The imposed lockdown has augmented work from home practices and also has shut down schools and other educational institutions as a safety measure.​ According to UNESCO's latest figures, some 1.3 billion learners around the world were not able to attend school as of March 23, 2020. Many schools, colleges, and universities are closed across the globe.​
• Such trends have increased the opportunities for the adoption of smart toys globally, as it promotes remote learning practices, and provides enriching and immersive experiences to children.​

Key Market Trends

Increasing Adoption of Technologies like AR, VR, Smart Homes, and Connected Mobile Devices​ are Driving the Market Growth

• The increasing disposable incomes of consumers worldwide, majorly in the developed economies, are propelling them to adopt advanced smart home devices and technologies. For instance, In 2020, Jio announced its plans of offering JioFiber free for 30 days. The broadband plans start at Rs 399 for a month with unlimited data and symmetric internet speed. However, Jio also aims to bring smart home ecosystem solutions to consumers with its JioFiber service. Such trends are expected to boost smart home devices' adoption, further instigating the adoption of smart toys.​
• Also, technologies such as augmented and virtual reality are helping the children build their imagination and enhance their thinking skills through real-world simulations. It also makes the learning process creative and increases their leadership skills. Augmented Reality (AR) games are used to enhance the kids' analytical and reasoning skills, further influencing the demand for smart toys.​
• In January 2020, PlayShifu, the leading augmented reality (AR) toy company, launched its newest products, including Shifu Tacto, three new gaming kits for Shifu Plugo, and a whole new one experience of its popular AR globe, Shifu Orboot, with two new planets to explore.
• App-Enabled smart toys are expected to hold a prominent share in the smart toys market due to the increasing deployment of mobile apps globally. For instance, according to a study by App Annie, the total number of mobile apps downloaded globally increased from 140.68 billion in 2016 to 218 billion in 2020.​
• Also, the increasing penetration of the internet worldwide has spurred the growth of smartphones and mobile apps, which further aid as a catalyst for smart toys' growth. According to ITU, the number of internet users globally increased from 2,478 million in 2012 to 4,660 million in 2020.​ Such instances are expected to drive the market over the forecast period.​

Europe to Hold Significant Market Share

• The European region has always remained at the forefront of technology adoption due to the rapid integration of technology in various products and offerings, catering to various end-user industries.​
• Certain factors, such as growing internet penetration, smartphone penetration, and connected devices growth, are majorly impacting smart devices' growth in the region. Also, the usage of the internet on smart devices is increasing substantially. For instance, in a Eurostat survey, the percentage of individuals using a mobile phone or a smartphone for internet access was approximately 89% in 2020 compared to 67% in 2018. Such trends are expected to be a major catalyst for the adoption of smart devices.​
• However, the increasing concerns over data and privacy issues due to the increase in smart toys' deployment are expected to hinder the market growth. Hence, several regulatory authorities are taking significant measures and steps to mitigate the risks involved in using these smart toys.​
• For instance, Finland became the first European country to certify safe, smart devices by mandating a new Cybersecurity label that helps consumers buy more reliable products. The Finnish Transport and Communications Agency Traficom launched the Cybersecurity label, which guarantees that the labeled devices have basic information security features. With the label, Traficom aims to raise consumer awareness of information security and the safe use of connected devices, such as smart TVs, smartphones, toys, etc.​
• Hence, similar government and regulatory initiatives, coupled with initiatives by smart toy providers, are expected to aid market growth.​

Competitive Landscape

The global smart toys market is fragmented and highly competitive due to the presence of a large number of players worldwide. The vendors are also increasingly adopting advanced technologies to develop innovative products and expand their product portfolio to enhance their global presence. Companies are also focusing on leveraging e-commerce portals and advanced technologies to extend their visibility and gain more consumers. Some of the recent developments in the market are:

• May 2021- The Kinder brand partnered with Gameloft and Oxford University to launch Applaydu. This new app brings Kinder Joy toys to life through augmented reality in a world of discovery and imagination. The application also offers games, stories, and opportunities for creativity and exploration.

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