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?