Asia’s Fast-Growing Economies To Drive Long Term Growth In The Toy Business

Asia’s Fast-Growing Economies To Drive Long Term Growth In The Toy Business

For the last 2 centuries or more the economic powerhouses in the world have been Western, Europe first, followed by the might of the USA. Looking further ahead into this century though, it is clear to see that future economic growth on this planet is going to grow most rapidly in Asia. Asian countries once viewed as 3rd world are now coming to the fore.

There are various data sources supporting the evident economic growth ahead in Asia, the one we will refer to in this article is Price Waterhouse Coopers ‘The World In 2050’ published report. That report shows clearly that the largest 5 economies in the world by 2050 will be (in order of size): China, India, USA, Indonesia & Brazil. Much has been written about China’s economic miracle since Deng Xiaoping’s ‘Opening up’ of China’s economy, but far less has been written about the massive economic growth prospects of India and Indonesia.

India is still today a country with many problems to resolve including massive infrastructure investment needed, terrible poverty for hundreds of millions of people and issues with public health which would be viewed as catastrophic elsewhere, but in India are just viewed as normality. At the same time though, India’s massive population is still set to grow further, unlike China’s current population trajectory. Additionally, having contributed so much to major global tech companies away from India, that trend is now reversing with India’s tech scene gathering pace. In terms of consumerism, India has a growing middle class of several hundred million people who are now finding they have disposable income and want to give their children more affluent upbringings than they may have had. The massive growth of Hamleys in India shows that India is no longer just a low quality, super low price point market, there is a growing appetite for ‘international’ standard toys.

Indonesia has around 275million people and is expected to rise above 300million sometime between now and 2050. Today Indonesia’s economy is the 15th biggest in the world – around the size of the Netherlands – just above $1 trillion USD. Yet by 2050 it will hit 4th biggest economy in the world. With economic growth typically comes an accompanying growth in consumerism.

Whereas Asia was once viewed by Western toy companies as difficult to access, difficult to scale up and therefore were often a lesser priority, this view can no longer be allowed to prevail. Lego’s massive store opening program in China (targeting 300 stores by end 2021) is just one example of a significant shift in focus for Western toy brands.

Over the next few decades, the economic fulcrum of the world is going to shift dramatically towards Asia, and alongside that will come increased sales opportunities for toy companies in the West, alongside a growth in Asian toy companies seeking to sell their toy lines into the West. Interesting times are ahead!

Do you need help to grow sales for your toy company? We help people from all around the world to sell more toys, both in their home markets and into export markets. For more information on how we do this, check out our services here: www.KidsBrandInsight.com/services

Have you listened to our Playing At Business podcast? We talk about selling toys & games, interview successful people from across the toy business & we look at key trends in the toy & game business: https://playingatbusiness.libsyn.com/

How To Create & Build Brands In The Toy & Game Business

How To Create & Build Brands In The Toy & Game Business

There can be no doubt that the big money in the toy and games business comes from building and selling brands. Growing by acquisition is a proven formula for successful growth in this industry. Brands which get into retail each and every year also provide stability and security in a turbulent marketplace with massive annual product churn. It isn’t easy though to build a blockbuster toy or game brand, but here’s some thoughts on how to do it:

• Focus on building your own brands – this seems painfully obvious, but often companies get distracted by chasing easy win sales on licensed products or on jumping on saturated trends which will come and go leaving no ongoing legacy for the company. We need to do some of these things no doubt, because we need to generate revenue and pay our overhead, but while doing all this we also need to think about and ensure organisational focus on creating something ownable with longevity.

• Take a longer perspective – so often companies focus on the next annual selling cycle or even next quarter, but brand building takes tenacity and above all time. Some brands are flyaway successes from the start, but most take time to build. A good solid brand may take 5 years to build to maturity, so we might need to avoid heaping massive year 1 sales pressure on our own I.P. products. By focusing more on organic growth we can build brands and branded products with an upwards sales trajectory which will stick in market. If we follow the standard toy launch model of dump and run i.e. ship in as much stock as possible to retail and hope it sells through, then we are far more likely to kill our brands.

• Create compelling products with timeless appeal – there is a reason why certain things keep making a comeback i.e. Yo-Yos, fidget toys, slime/goo. That’s because the reasons why those toys were appealing in the past still apply. There are very few major brands in toys and games which don’t have really good products with proven play patterns.

• Create a clear, distinctive and ownable visual identity – to make brands ownable, you need distinctive visual identifiers i.e. logo, design style, fonts and all that good stuff. There are plenty of brands in the toy & game business which you would recognise just from a logo, design pattern or font.

• Use partnerships to level up your brands – for those trying to bootstrap their way up, partnerships can be really effective. A successful cross-promotional partnership benefits both sides and works best where there is an obvious fit between the products. For example, you can find Monopoly branded scratch cards in retail, which is an obvious fit with the classic Monopoly game brand being all about accumulating money. Needless to say, if you have a small hardly established brand you may not get a massive global deal, but with some ingenuity and persuasiveness you may be surprised what kind of partnerships you can create.

• Help your retailers build a point of differentiation – there are many retailers who hate having to sell the same products as the major mass market retailers who trash the price on everything and make it hard to maintain profitability. Can you find some exclusive iterations or brand extensions of your core products to help ensure retail support with smaller retailers who will better nurture your up and coming brand versus the mass market box shifters?

We run a Consultancy business helping toy & games companies get ahead. For more information, check out www.KidsBrandInsight.com/services

We also run a Strategic Sourcing Consultancy advising toy & game companies around the world on their Sourcing strategies, reviewing their vendor base & suggesting improvements. To date our Sourcing services have saved our clients $tens of millions. For more information on how we can help, just go to: www.ToyTeamAsia.com

CHINA’S BIRTH RATE DROPS TO A 61 YEAR LOW – IMPLICATIONS FOR THE TOY BUSINESS

CHINA’S BIRTH RATE DROPS TO A 61 YEAR LOW – IMPLICATIONS FOR THE TOY BUSINESS

The world’s 2nd largest toy market is going to have less children needing toys based on a recently reported drop in birth rate which sees this critical indicator for the toy trade drop to the lowest rate in 6 decades. The reasons for China’s ongoing issues with lowering birth rate and aging population are well reported, but in summary:

1. The legacy of China’s one child policy lives on, with young adults in China today increasingly seeing the benefits of not having children.

2. Cost of raising children has increased significantly in time, making it less likely that parents would choose to have multiple children.

3. The demographic structural effects of the one child policy lead to many families preferring to have male children, this has left far fewer marriage age/child-bearing women versus available men.

China’s government has and is taking steps to address the issue of birth rate decline, with a strong push on reducing education and other child related costs, but nevertheless a serious demographic imbalance threatens to derail China’s unparalleled economic growth and rise in living standards.

More specifically from the toy industry perspective there are two key implications of this:

Firstly, the next generation of toy users (i.e. children!) will be a somewhat smaller group versus previous generations. Although this shouldn’t necessarily be seen as a catastrophe for the toy business, because there were still 10.62 million births in 2021, compared with a rough average of 3.5m to 4m each year in the USA. China then still has way more new children every year than the world’s number one toy market. Moreover, at the same time as we have seen a decline in birth rates, we have also seen a massive increase in standard of living – to put the demographic data in context, average wages in China have more than doubled in the last decade. In other words, we have a slightly smaller potential consumer base, but massively more money which could be spent on toys & games. Economic advancement is likely to continue for China’s people, and it seems likely that the Chinese government’s programs are likely to eventually curtail the dropping birth rate.

The second key implication for the toy business relates to toy manufacturing – as I have written extensively, one of the key trends in toy manufacturing is a gradual shift of some toy manufacturing away from China. What the current growth rate highlights is that the potential workforce will be smaller in 20 years time than it is now, while at the same time living standards and wage expectations are likely to continue to grow. This means that we are looking at a long-term situation whereby labour-intensive toy manufacturing will have a smaller pool of workers to access, and those workers are less likely to find lower paying factory work viable. Over that same 20-year period of course humanity is expecting yet another tech revolution caused by artificial intelligence and an accompanying increase in the capabilities and flexibilities of robotisation. So, in terms of toy manufacturing, it appears to be the case that China’s demographic situation will discourage toy manufacturing in China over time, unless AI & more advanced robots can plug the gap.

We run a Consultancy business helping toy & games companies get ahead. For more information, check out www.KidsBrandInsight.com/services

We also run a Strategic Sourcing Consultancy advising toy & game companies around the world on their Sourcing strategies, reviewing their vendor base & suggesting improvements. To date our Sourcing services have saved our clients $tens of millions. For more information on how we can help, just go to: www.ToyTeamAsia.com