Step2 Discovery and Simplay3 Co. know toys.
And mailboxes. And home goods.
The two Streetsboro-based companies may evoke images of plastic play kitchens and sandboxes, but both have been growing in non-toy sectors in recent years, as well.
Both were started by Tom Murdough, who also founded Little Tikes. Both use rotational molding to make their products in the U.S. It's that process that has allowed them to expand beyond the toy space.
"While it's not unheard of, it's not very common," Adrienne Appell, spokesperson for The Toy Association Inc. in New York, said of toymakers expanding into other product areas.
While U.S. toy sales saw a 4 percent dip last year, it's still big business. Toys are a $27 billion industry in the U.S., Appell noted. Deciding to diversify usually depends on a company's manufacturing process and its existing supply chain. It's a matter of "what abilities exist in-house," she said.
That's certainly been the case at rotomolders Step2 and Simplay3.
Step2 makes plastic toys, like play kitchens or climbers and slides, as well as children's furniture and home and garden products. Though started by Murdough, Step2 is now part of a larger family of companies called Step2 Discovery, which is owned by private equity firm Aterian Investment Partners. Step2 Discovery also includes Backyard Discovery, which makes pergolas, pavilions and other outdoor products, and assembly company Go Configure. Step2 Discovery has more than 1,200 employees.
Both Step2 and Backyard Discovery have a history of creating new categories of products and then dominating in those markets, said Step2 Discovery CEO Anthony Ciepiel. That strength is actually why Step2 Discovery is looking to grow into other markets.
"What I found when I joined the company two years ago is that we were No. 1 in each of the categories we already played in," Ciepiel said. "It's very hard when you're No. 1 to grow that category. You have to invent new categories."
Step2 Discovery has plans to expand in such areas as package delivery, home decor and pet products, Ciepiel said. The company is also growing its contract manufacturing business.
In recent years, the company added more designers and engineers, engaged in a lot of research and development and started using new forms of compounded resin, Ciepiel said. That's allowed it to create products with a more sophisticated look that could help it expand further in the home decor space. For example, using a new compounded resin, the company has created a mailbox that looks more like wood.
A diverse product mix was always the goal at Simplay3, which started with an intentional focus on both toy products and home and garden products due to Murdough's experience at Step2. But a shakeup in the toy industry put that need into sharper focus.
Shortly after the company launched less than four years ago, it got a large initial order from Toys "R" Us, said Brian McDonald, vice president for sales and marketing. But just as Simplay3 started shipping, the toy store chain filed for bankruptcy and began closing stores.
"That really made us take a hard look at, 'OK, where is the market going? Where can we have some success?' " McDonald said.
Simplay3 started hunting for other ways to use its design skills and rotational molding manufacturing process, outside of its two initial areas of focus. The company has about 55 employees.
Toy products can quickly become commodities as similar products are released, McDonald noted. That means the market is cost-competitive, and it can be tough for a new company to find its footing. Non-toy products may face less competition.
The prevalence of online sales — more than half of Simplay3's sales take place online, McDonald said — has made it easier for the company to create and sell products that might fall in between categories in a traditional retail setting. For example, Simplay3's "Toddler Tower" is a stool with sides and an adjustable step. The product is designed for children, but it's not a toy. Retailers might struggle with how to categorize it, but sales have been strong online, McDonald said.
Another product in this space for Simplay3 is its "Sharing Library," an easily installed, weatherproof product designed for initiatives like Little Free Libraries, where people take and leave books. There are kits that let people make these types of structures, but Simplay3 didn't see an actual product on the market, McDonald said.
"It's a product that we saw an opportunity where we could use our process to improve what was out in the marketplace right now," he said.
Toys are still the primary driver of sales for both Simplay3 and Step2. McDonald said about 70 percent of Simplay3's business is currently in toys, a mix he expects to remain steady going forward. At Step2 Discovery, toys make up about 75 percent of sales. Ciepiel said he expects the non-toy share to grow to 35 percent to 40 percent in the future. Both companies declined to share annual revenue.
One of the challenges of being a toymaker with a more diverse product mix is marketing. Simplay3's name is a combination of simple and play, McDonald pointed out. One way the company combats possible confusion is by using different taglines for the different product lines. On the toy side, the tagline is "It's simple, play!" On the home and garden side, the company uses "Experience simple living."
At Step2 Discovery, the company employs different brands to differentiate between its product offerings in diverse market segments. For example, the company's Kingsley Park brand offers higher-end products like its soon-to-be-launched smart package delivery box, Ciepiel said.
The box, a partnership between Step2 Discovery and Yale Home, can be locked and unlocked using an app, protecting a customer's deliveries while they're away. Marketing that product under the toy-focused Step2 brand wouldn't be a good fit.
Imagination and creativity are at the heart of Step2 and Simplay3's toys. But it's clear the companies employ those traits in other ways, too, using them to tackle challenges as they grow in new markets.
Step2 was acquired by private equity group Aterian Investment Partners in October 2016. It was ranked No. 3 in a recent Plastics News ranking with $175 million in fiscal sales. Simplay3 Co. was No. 56 with sales listed at $9 million.