China market no child's play for foreign toymakers

Local brands, global majors slug it out as sales are expected to rise in the wake of the end of the one-child policy

The end of China's one-child policy and rising demand for quality toys are expected to boost sales of children's play products like toys and games.

Sales are projected to climb to 97.52 billion yuan ($14.98 billion) by 2019 in China, according to industry data.

According to Euromonitor International, toy sales reached 58.03 billion yuan in 2014 and 63.4 billion yuan in 2015, and are likely to net 69.82 billion yuan this year.

Clover Wei, senior associate at EI, said sales of traditional toys and games in 2014 and 2013 grew but at slower rates of 9 percent and 9.7 percent, respectively.

That's because sales of products for kids, like action figures, accessories, arts, crafts, dolls, dressing-up and role-play kits, games, puzzles and plush toys, witnessed slower growth in 2014 due to economic slowdown and rising popularity of video games.

On the other hand, products that encourage children to participate in outdoor activities sold well in 2014. Outdoor activity products and sports toys, radios, remote control toys and ride-on vehicles benefited from the trend, according to Wei.

"Parents are increasingly aware of the academic workload their children bear, and they believe products that require children to play outdoor can effectively relieve their stress," she said.

Moreover, teamwork and team spirit are possible through outdoor activity, sports toys, radios and remote control toys, she said.

Domesic toy brands have dominant market positions. Guangdong Alpha Animation & Culture Co Ltd took the biggest retail market share of 5.5 percent in 2014, followed by Shanghai Yaoji Playing Cards Co Ltd with 3.1 percent.

Guangdong Alpha competes in multiple segments of the children's products market, including toys, games, animations and cartoon series.

The company also owns a television channel called Jia Jia Cartoon, which broadcasts user-directed cartoon series such as Battle of King II and Blazing Teens VI.

Its strong presence in traditional toys and games is a result of the extensive product portfolio it has built up over the years, covering both non-animated and animated traditional toys across 12 categories, including action figures, construction toys, dressing-up and role-play kits, games and puzzles.

The company positioned itself in the mid-market niche. Its extensive distribution channels and the comparatively lower prices gave it an edge over competitors.

In animated toy products, sales of the Battle of King spinning top and the Blazing Teens yo-yo rose in 2014, thanks to the launch of animated cartoon series, the Battle of King II and Blazing Teens VI and increasing popularity of outdoor toys, said Wei.

The cartoon videos gave Guangdong Alpha's outdoor toys a competitive edge in the market.

Lego Group from Denmark has outpaced other international brands in China. It ranked No 3 with a 2.3 percent market share in 2014, thanks to its focus on Asia.

Lego is building its first factory in Jiaxing in East China's Zhejiang province to serve the increasing demand for its products across Asia. The facility already has more than 230 employees. Their number is expected to grow to 600 by the end of this year. The factory will become fully operational in 2017.

"We consider Asia, particularly China, to be a very important region for future growth. The factory in Jiaxing is a testament to that belief. It will enable us to better react to consumer demand across the region as well as China," said Lego in an e-mail to China Daily.

Lego Group's turnover was DKK14.14 billion ($2.11 billion) in the first half of 2015, driven by double-digit growth across all geographical regions and strong product innovation on themes, according to its financial report.

"While all our regions experienced double-digit growth, it is particularly satisfactory that Asia saw the highest growth rate, given the considerable investments we are making there to further the company's globalization," said Loren Shuster, Lego's executive vice-president and chief commercial officer .

Despite Chinese children's liking for video gaming, Lego construction toys retained their appeal even though they are costlier than local brands such as BanBao and Cogo, said Wei of Euromonitor.

Better quality, safer brick materials and clearly printed construction instructions resulted in their rising sales to Chinese consumers.

Lego has integrated Chinese elements into its construction toys and undertaken continual research and development efforts to design exclusive products for Chinese consumers, according to Wei.

Despite reports that two of the world's leading toymakers, Mattel Inc and Hasbro Inc, may merge, the two have made no comments on the subject so far.

Mattel's brands include the iconic Barbie dolls, Hot Wheels and Matchbox cars, Fisher-Price toys and American Girl Brands products. Hasbro makes toy figures like Transformers and G.I. Joe, and Littlest Pet Shop, Nerf and Play-Dohs, and games such as Monopoly, Scrabble and Twister.

According to Euromonitor International, in 2014, Mattel, ranked No 4, had only a 1.3 percent share of the China market, while Hasbro, ranked No 7, had a 1 percent share.

So, any Mattel-Hasbro merger will likely have implications for the toys market in China.

But, many top international toymakers have not focused intensively on China. Those that have found their global success strategies didn't always work in China.

For instance, Mattel's first Barbie flagship store, called Barbie Shanghai, opened in 2009. The six-story store held the world's largest and most comprehensive collection of Barbie dolls and licensed Barbie products.

However, in 2011, Mattel shut the Shanghai store because it, contrary to expectations, failed to arouse a rapid and strong demand from children, said Wei.

Market consensus was that Barbie had not blended well with Chinese culture.

In China, Barbie was just a new doll to most Chinese children. Few children really knew or cared what Barbie stood for. Worse, Barbie's appearance looked foreign, Wei said.

Yet, in 2014, Barbie remained the leading brand in dolls and accessories worldwide. But it continued to lose market share to local brands in China, Wei said.

Second-ranked Kurhn and third-ranked Lelia were the more adaptive brands, not only because of their Chinese heritage but because they were affordable.

Globally, Mattel and Hasbro's dominance has been challenged by rising new brands such as Lego. The former's iconic products failed to attract new consumers.

In its 2015 financial report released on Feb 1, Mattel said its worldwide sales were up 1 percent but Barbie sales fell 1 percent. Hasbro's net revenue in 2015 rose by 4 percent to $4.45 billion.

wangzhuoqiong@chinadaily.com.cn