Finding success in toy business is not a game

Hands On Toys remains committed to creativity

Seeking to escape the dullness of jobs in pharmaceuticals and marketing communications, Andrew Farrar and Rustam Booz decided to start a toy company.

What could be more fun?

Joining forces with local artist Arthur Ganson, a nationally renowned kinetic sculptor, the two longtime friends launched Hands On Toys Inc. with a product called Toobers & Zots. It was a new take on classic construction toys like Legos and Lincoln Logs made with long foam tubes that can be twisted and bent, decorated and punctuated with flat pieces of foam to create almost any shape a child could imagine.

Fifteen years later, with somewhat rueful chuckles, they describe the toy business as "a real roller coaster ride," in Farrar's words. The Lawrence-based company is about the same size it was when it started, and still struggling to get its products into toy chests around the world. They have seen hot products ripped off by others; not-so-hot products dropped by big distributors; new ideas summarily rejected by big toy companies like Mattel; thousands of toy retailers go out of business; and the incredible rise of video games and electronic toys. Also, one of their products killed a dog.

Success in the toy biz, says Booz, "is not an easy equation. It's very tough."

One of their advisers and board members, strategy consultant David Wright, says he occasionally asks the founders, "Guys, do you still want to be doing this? But they are two of the stubbornest people I know - and I mean that in the best way possible."

The animating concept behind Hands On Toys was that the best toys tap into a child's creativity, offering the opportunity to create things without a pattern or set of instructions, and to play with them in scenarios of the child's own devising.

"The best toy ever invented, we think, is an old cardboard refrigerator box," Farrar says.

To make Toobers & Zots, they set up a factory in Woburn. In 1995, they sold $4 million worth of the $29.95 construction kits, and in 1996, through a partnership with Hasbro and a new production facility, sales hit $12 million. Steveanne Auerbach, an authority on educational toys, started championing the product.

"I think Toobers is one of those classic toys, a really unique product that engages a child's imagination," Auerbach says. She put it on her list of "100 Best Toys," and showed up on television wearing a hat made from the foamy tubes.

Though the company's first product was indisputably a hit, Hands On - which quickly grew to 60 employees - didn't make a profit from it. "We spent a lot on ramping up production in the first year," Farrar says. "And then in the second year, we over-produced, and we had to liquidate a lot of inventory." Hasbro dissolved the partnership in 1997, in part over disagreements about the best way to market the product.

These days, retailers still express interest in carrying Toobers, which is no longer being made. Hands On is having a hard time finding a manufacturer that can comply with new regulations about the lead content of toys, without cranking out vast quantities. Rick Henry, owner of Stellabella Toys in Cambridge, said he has two different Toobers & Zots kits on order, but hasn't received them yet. And he won't get them, Farrar told me, until Hands On can figure out a way to make small quantities of the product that comply with rules from the Consumer Product Safety Commission that take effect next year.

A second hit product, introduced in 1998, was a ball called Wiggly Giggly, which made swoopy sounds as it rolled. Instead of relying on batteries and electronics, the sound came from air tubes and sliding weights hidden inside the ball. Booz and Farrar envisioned it as a toy for infants, but it really took off as a dog toy.

"Dogs like for their prey to make sound while they're hunting it down," Farrar says. "And the nice thing about a dog toy is that when the dog chews it apart, the dog owner buys two more. If a child's toy wears out, the parent calls you to complain and they want a free replacement."

Before long, they were selling two million Wiggly Giggly balls a year, through a licensing partnership with a New Jersey company called Multipet International. There was an offer on the table to buy the product from Hands On - just the product, not the entire company - for $10 million.

But then a dog in New York tore apart one of the balls and swallowed one of the zinc weights inside. The metal caused zinc toxicosis, killing the dog. (The same thing can happen if a dog ingests pennies.) Word spread through pet owner forums on the Internet, and sales sank to about 100,000 a year. The acquisition offer vaporized.

Though Hands On kept coming up with new products, it decided to get out of the business of making and distributing toys. It shrank from 60 employees to just a handful.

Now, Hands On just comes up with new product ideas, and works with others to get them into the market. The bread-and-butter product over the past few years has been Floam, a gooey Styrofoam-based substance for sculpting. (Exposed to air, it eventually hardens.) Hands On didn't develop Floam, but it obtained the rights and transformed it from a Play-doh-type toy product into a product for arts and crafts. Thanks to Floam, in 2006, the company had one of its best years ever, with profits exceeding $1.5 million.

This year, hoping to keep Floam revenue growing, the company is introducing Floam kits that provide guidance and accessories for making things like Floam robots or Floam insects. The products are mostly sold via TV infomercials, rather than on store shelves.

Over Hands On's history, the company has seen thousands of toy stores focused on educational and creative toys go out of business, like World of Science, Noodle Kidoodle, and Learningsmith. Big box stores like Wal-Mart and Target have taken over the bulk of toy sales in the United States. (For a time, Farrar says, Wal-Mart opted to produce its own version of a Toobers & Zots-like toy, rather than selling the original.)

"The industry changes have been phenomenal," says Wright, the Hands On board member. "On every dimension, it just seems to have gotten harder to succeed." The industry has always been hungry to find and promote hit toys, but that hunger has intensified recently, says Wright. "It has become very binary - you either break out with a big hit, or you sell a very minor amount of product. There's hardly anything in the middle."

Booz and Farrar are cultivating a bunch of new product concepts for 2009 and beyond, such as Starbloks, a set of colored crystal blocks they think will appeal to adults.

What keeps them at it? "About once every five years, we have a significant product," Farrar says. "We always believe our next product is going to match those, or be better."

"And we really like what we do. We like toys, we like play."

Scott Kirsner can be reached at kirsner@pobox.com.