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At Melissa & Doug Toy Company, Thriving on the Basics

ESTHER BERNSTEIN, 6 years old with long blond hair, pulled on a pair of blue slippers with a gray tassel over the toe. She grinned.

“Look, Mom! I like these princess slippers!”

“Would you wear them to play dress-up?” her mother asked.

“Yes.”

Esther’s 9-year-old sister, Sydelle, grimaced and freely offered that she would not.

“Well, Sydelle, you’re too old for this toy,” her mother said. “You’re not the target market.”

It was a Sunday night, after dinner, at the informal in-home testing lab of Melissa and Doug Bernstein, better known as Melissa & Doug, the toy company and the signature that adorns all their products. This August, their company will turn 25, celebrating a quarter-century of anachronism. In a time when major corporations dominate the industry, making toys with all manner of batteries, digital gimmicks or movie tie-ins, the Bernsteins keep making money in wooden puzzles, coloring pads, blocks, trains and simple costumes (the police officer, the princess, the pirate). They hatch many of their ideas by watching children at play — often among their own brood of six.

From left are Sydelle, 9, Nate, 5, and Esther, 6.

They do little public relations and don’t advertise in magazines, or on radio and television. They don’t put coupons in Sunday newspaper inserts. They don’t rely on big hits, industry analysts say, just a steady stream of variations on classic toys mostly for children up to the age of 5. Nonetheless, their business has grown by double digits every year, to an estimated $325 million in revenue this year from $100 million in 2008 (and to 650 employees from 200), according to a toy company executive familiar with the company’s operations. Such figures make theirs a midsize toy business, of which analysts say there are fewer and fewer these days. In this industry, three huge players — Mattel, Hasbro and Lego — account for around $14 billion in sales, or about a third of global toy company revenue.

The Bernsteins have come a long way from the days when they drove a Chevrolet Malibu, owned by Mr. Bernstein’s father, to deliver products. Growing up in Westport, Conn., an affluent community, Mr. Bernstein, now 50, thought himself the poorest kid, living in a 900-square-foot house. Now their home is 36,000 square feet, one of the biggest in the same township, with hand-chiseled stone and antique ceiling beams — not to mention a bowling alley, an indoor full-court gym and a video arcade.

But they are, as Mrs. Bernstein, 47, puts it, restless, very restless — and challenges are upon them in an industry that, like so many others, is being rewritten in the technology age. Overall toy sales have slumped. Some specialty retailers have closed. Low-cost manufacturing has commoditized many items. But Internet sales have soared, meaning that the Bernsteins are having to adapt to online sales and marketing after years of building relationships with specialty stores.

Crucially, the rise of high-tech entertainment has changed how children play. Apps and video games have soared in popularity; on Amazon, you can even buy an iPod stand to accompany a potty trainer. The phenomenon can provoke conflicting feelings in parents. Should they give in to children’s yearnings for a phone app or video game? Or limit the screen time and offer up something simpler and more nostalgic, reminiscent of a childhood real or imagined?

The topic of traditional versus high-technology toys is one that particularly piques Mrs. Bernstein. “When you’re using a computer or an app, it’s giving you all the information you need,” she said. “It’s a completely reactive experience.” But she thinks she knows why that is so appealing. “Parents are so scared of having their kids say, ‘I’m bored.’ It’s synonymous with, ‘I’m a bad parent,’ and so they never allow kids to feel boredom, which equals frustration, and so kids don’t get to the point where they have to dig deeper and figure out what to do.”

Plenty of toy companies have joined Melissa & Doug in this niche, competitors whose simple offerings aim to entertain — but not too much. Companies like Haba, which makes blocks and wooden toys from sustainable woods, or Alex, which makes arts and crafts for “active fun.” But few companies can reach the size of the Melissa & Doug operation without facing a tough decision: Do you keep trying to expand on your own, pushing into larger retailers, or do you sell to a major toy maker?

On Instagram, a Thriving Bazaar Taps a Big Market

These entrepreneurs have realized that they can piggyback on the popularity of Instagram, which has more than 100 million users, and create their own businesses, some of which have turned out to be quite profitable. They join a long line of innovators who have found creative ways to build new services on top of existing sites and platforms.

Services like Printstagram, for example, let people turn their Instagram images into prints, wall calendars and stickers. A group of designers are building a digital picture frame for Instagram photos. Some early users of the service are leveraging their expertise and sizable followings and starting consulting agencies, advising big-name brands on how best to use Instagram themselves.

And others have simply realized that the app is a great place to post photos of things they are trying to sell. Jenn Nguyen, 26, who lives in Irvine, Calif., has 8,300 followers on Instagram, where she posts images of lavishly made-up women who are wearing her brand of false eyelashes.

“When we post a new picture of someone wearing our lashes, we instantly see sales,” she said.

Ms. Nguyen is part of a wave of entrepreneurial Instagrammers who have transformed their feeds into virtual shop windows, full of handmade jewelry, retro eyewear, high-end sneakers, cute baking accessories, vintage clothing and custom artwork.

Those who want to sell things on Instagram have to resort to surprisingly low-tech tactics. Instagram does not allow users to add links to their photo posts, so merchants have to list a phone number for placing orders, or hope their followers will type the Web address of their store into a browser.

Shoppers seem willing to put up with that hassle. Ms. Nguyen said that during a recent holiday sale, she offered Instagram followers a coupon for 35 percent off their orders. That day, she said, she netted 100 orders, about $4,000 in sales, up from her usual $500. In her photo captions she mentions her online store and highlights products that are new or soon to be sold out.

Most of the people taking this sales approach are small-scale entrepreneurs and artists, looking for another way to find customers for their consignment shops and jewelry businesses. Hundreds of larger companies and big-name brands have accounts on Instagram, but only a few have taken steps toward actually selling there. Bergdorf Goodman, the luxury retailer, has posted photographs of women’s shoes and jewelry alongside telephone numbers for the store.

Instagram is a compelling medium “because a photo translates to any language,” said Liz Eswein, one of the founders of the Mobile Media Lab, a digital agency focused entirely on helping companies figure out their Instagram strategies. “It’s easier to get lost in the shuffle on other networks” like Facebook and Twitter, she added.

Ms. Eswein, Brian DiFeo and Anthony Danielle formed the company in March after realizing that their collective Instagram followers — nearly 850,000 — and understanding of the service could be valuable to companies like Nike, Delta, Samsung and Marc Jacobs who were hoping to reach fans of their brands. Now Mobile Media Lab runs promotions and special campaigns for those clients and others.

“We aren’t saying ‘Click here and buy this product’ — it’s more about putting the image in their head and introducing them to a product within the service,” said Ms. Eswein. In that way, it’s closer to traditional advertising, Mr. DiFeo said: “It’s classic marketing. You see an ad on a billboard, or on a bus as it goes by, on TV and now, in an Instagram post. It sticks.”

The mini-industries cropping up on and around Instagram are fueled by the service’s explosive growth. In April, Instagram had 25 million users. Eight months later it has quadrupled that figure and amassed more than five billion photos. In October, the mobile service had 7.8 million daily active visitors, according to comScore, more than Twitter’s 6.6 million.

Both Facebook and Instagram declined to talk about how Instagram might make money directly. But analysts suspect that Facebook will try to weave advertising into the Instagram app at some point, much as it has with its own app.

On Instagram, a Thriving Bazaar Taps a Big Market

These entrepreneurs have realized that they can piggyback on the popularity of Instagram, which has more than 100 million users, and create their own businesses, some of which have turned out to be quite profitable. They join a long line of innovators who have found creative ways to build new services on top of existing sites and platforms.

Services like Printstagram, for example, let people turn their Instagram images into prints, wall calendars and stickers. A group of designers are building a digital picture frame for Instagram photos. Some early users of the service are leveraging their expertise and sizable followings and starting consulting agencies, advising big-name brands on how best to use Instagram themselves.

And others have simply realized that the app is a great place to post photos of things they are trying to sell. Jenn Nguyen, 26, who lives in Irvine, Calif., has 8,300 followers on Instagram, where she posts images of lavishly made-up women who are wearing her brand of false eyelashes.

“When we post a new picture of someone wearing our lashes, we instantly see sales,” she said.

Ms. Nguyen is part of a wave of entrepreneurial Instagrammers who have transformed their feeds into virtual shop windows, full of handmade jewelry, retro eyewear, high-end sneakers, cute baking accessories, vintage clothing and custom artwork.

Those who want to sell things on Instagram have to resort to surprisingly low-tech tactics. Instagram does not allow users to add links to their photo posts, so merchants have to list a phone number for placing orders, or hope their followers will type the Web address of their store into a browser.

Shoppers seem willing to put up with that hassle. Ms. Nguyen said that during a recent holiday sale, she offered Instagram followers a coupon for 35 percent off their orders. That day, she said, she netted 100 orders, about $4,000 in sales, up from her usual $500. In her photo captions she mentions her online store and highlights products that are new or soon to be sold out.

Most of the people taking this sales approach are small-scale entrepreneurs and artists, looking for another way to find customers for their consignment shops and jewelry businesses. Hundreds of larger companies and big-name brands have accounts on Instagram, but only a few have taken steps toward actually selling there. Bergdorf Goodman, the luxury retailer, has posted photographs of women’s shoes and jewelry alongside telephone numbers for the store.

Instagram is a compelling medium “because a photo translates to any language,” said Liz Eswein, one of the founders of the Mobile Media Lab, a digital agency focused entirely on helping companies figure out their Instagram strategies. “It’s easier to get lost in the shuffle on other networks” like Facebook and Twitter, she added.

Ms. Eswein, Brian DiFeo and Anthony Danielle formed the company in March after realizing that their collective Instagram followers — nearly 850,000 — and understanding of the service could be valuable to companies like Nike, Delta, Samsung and Marc Jacobs who were hoping to reach fans of their brands. Now Mobile Media Lab runs promotions and special campaigns for those clients and others.

“We aren’t saying ‘Click here and buy this product’ — it’s more about putting the image in their head and introducing them to a product within the service,” said Ms. Eswein. In that way, it’s closer to traditional advertising, Mr. DiFeo said: “It’s classic marketing. You see an ad on a billboard, or on a bus as it goes by, on TV and now, in an Instagram post. It sticks.”

The mini-industries cropping up on and around Instagram are fueled by the service’s explosive growth. In April, Instagram had 25 million users. Eight months later it has quadrupled that figure and amassed more than five billion photos. In October, the mobile service had 7.8 million daily active visitors, according to comScore, more than Twitter’s 6.6 million.

Both Facebook and Instagram declined to talk about how Instagram might make money directly. But analysts suspect that Facebook will try to weave advertising into the Instagram app at some point, much as it has with its own app.