If putting pen to interactive paper helps your little Einstein learn, LeapFrog Enterprises wants to spend some time with your pint-sized genius. The toy maker develops interactive reading systems, educational games, books, and learning toys in five languages, covering subjects from math to music. Its bestselling brands include LeapPad, Leapster, LeapBand, Learning Path, and Tag. Products are sold to retailers, distributors, and schools worldwide, as well as to consumers via the company's website. LeapFrog's target market is infants and children through age nine. Former vice chairman and CEO Michael Wood founded LeapFrog in 1995 because he felt the toy market offered nothing to help his 3-year-old learn phonics.
California-based LeapFrog Enterprises rings up 70% of its sales in the US. The company has sales and operations in Canada, China, France, and the UK.
Sales and Marketing
Wal-Mart is the company's largest customer, accounting for 25% of net sales. Toys "R" Us and Target are next, representing 15% and 10% of sales, respectively.
LeapFrog's sales have declined from their peak of $680 million in 2003, to $553.6 million a decade later. Indeed, sales declined 5% in 2013 versus 2012, on increased competition in the children's tablet market, a tough retail environment, and deep discounting during the holiday season, which led to lower shipments in the key fourth quarter of the year. Net income fell 3% to $84 million over the same period, on lower sales, increased operating expenses, and lower research and development expenses, which help steady at 6% of net sales.
Apparently even young children need mobile devices and wearable technolgoy and LeapFrog has developed products to cater to them. In 2014 the company introduced a wearable activity tracker for kids ages four to seven years old, called LeapBand. LeapBand -- an adjustable wrist strap that includes features such as a built-in accelerometer, high-resolution color screen, rechargable battery and water-resistant design -- encourages kids to move with 50 different challenges. The more kids move, the more they're rewarded with point to spend on a virtual pet. Mobile devices include a handheld mobile learning platform -- the Leapster Explorer -- that launched in 2010, along with several other products. Targeted at four- to nine-year-olds, the Leapster Explorer supports downloadable "Leaplet" learning applications, including e-books and videos, is Web connected and has a camera.
LeapFrog believes its outsourcing strategy enhances the scalability of the manufacturing process. As such, the company has no manufacturing plants of its own, but rather relies on contract manufacturers located in Asia -- primarily in China -- to make its finished products. LeapFrog's top three vendors supply about 80% of its products. One, in particular, WKK Technology Ltd., located in China, supplied 60% of LeapFrog's products in 2013.