Tag Archives: china toy market

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

 

 

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/

 

China’s Delivery Robots & Online Gaming Limitations: Implications For The Toy Business

China’s Delivery Robots & Online Gaming Limitations: Implications For The Toy Business

Things affecting the toy business seem to keep on occurring in China with a frequency we don’t see in other countries. We’ve written at length about supply chain issues & the ridiculous price of container shipping right now. But this week there have been two more occurrences in China which may affect the toy business.

Chinese Tech Giant Alibaba Announces Increased Role In Delivery For Robots

Alibaba have announced that they will be rolling out 1,000 delivery robots in China to manage the final delivery of parcels bought via online shopping. This is important because China tends to be at or near the forefront of e-commerce and m-commerce. One of the primary drivers is the volume of Chinese people in China who are buying via e-commerce, with over 1 billion people shopping this way versus approximately 300 million people in India and c. 250m in the USA. Therefore, China is dealing with the largest challenges in terms of fulfilling a ridiculously high number of people ordering and needing delivery.

Bearing in mind how critical Amazon now is in major Western toy markets, what happens with e-commerce in China is likely to be adopted by Amazon in the West at some point if it proves to be successful. For sure there are many challenges of robots operating in urban environments and it can’t be easy to ensure hey drop off parcels in the right circumstances, but the future is here already as far as robot delivery is concerned.

When we think about some of the labour shortages affecting delivery services recently, robots could well offer part of the solution.

 

China Limits Online Gaming Time For Children

Big news coming out of China recently with reports that the government will limit online gaming time for under 18s to a maximum of three hours per week in a move aimed at reducing gaming addiction, poor eyesight and other social factors. This could be good news for the toy business, as those children who can’t spend time & money gaming as much as they would like may buy more toys or have more toys given to them. It I hard to estimate what positive impact this could have on toy sales, but it seems likely to offer a systemic boost going forward based on how long children will spend playing video games if left to their own devices!

 

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

Our Managing Director, Steve Reece, works with a limited number of companies as a non-executive director, independent board director and as a board advised. If you are interested in finding out more about this, check out the link to our service above.

China’s Decreasing Birth Rate: Less Of A Growth Restrictor Than Might Be Expected?

China’s Decreasing Birth Rate: Less Of A Growth Restrictor Than Might Be Expected?

China just released Census data from the work of 7 million census takers in late 2020. The major highlights of the data are two-fold: Firstly, the overall population growth rate reduced, although this was marginal – from 0.57% between 2000 to 2010 to 0.53% for the period from 2010 to 2020. This in itself is hardly news, because due to the long term one child per family policy which was only relatively recently rescinded, birth rates have been low. Which brings us to the second major finding – only 12 million babies were born in China in 2020, versus 18 million in 2016.

So, it looks clear from this data that China’s population maintains very modest growth primarily through increased life expectancy. Bearing in mind life expectancy in China was a shocking 45 years of age as recently as the 1960s, the country’s current life expectancy of 77 is expected to keep on rising. Based on projections we found this could be into the high 80s by the end of the 21st century.

China is not alone in seeing increased life expectancy and reduced births. This is a problem across many countries in the modern world. China though is not like any country. The meteoric rise of the economy and living standards has been a phenomenon like no other in history. With China poised to become the world’s biggest economy at some point in the not-too-distant future, anything which threatens China’s future economic growth is a threat to the global economy.

More specifically though for the toy business, a hefty drop in the number of children being born means less kids to play with toys. While this may seem on the face of it apocalyptic (it certainly would be in the USA or European toy markets), we have to remember that China’s toy market is still growing and maturing, and as living standards and disposable income continue to grow in China, the number of people who can afford to buy toys for children grows, as does the total spend per child in those more affluent families. Think of two graphs going in opposite trends – one moving down (birth rate), and one moving up (disposable income & spend per child). The net result is less catastrophic than the headline birth numbers might suggest.

The second perspective from a demographic point of view is that due to the ticking time bomb of ageing population, China’s government seems likely to need to more effectively incentivise Chinese people to have more children. While we haven’t seen evidence of this to date, it seems likely steps will have to be taken over the next decade to boost the birth rate and to support the economy and demographic balance of society.

One additional point that is important to understand is that the total number of births in China remains is still high versus other countries. While 12 million births in China is a big reduction, it still remains by far the second biggest number of births globally behind only India. To put this in context, for the period from 2015 to 2020, China had 4 times more total births versus the USA. With most international toy companies far from reaching market saturation in China, it seems likely that the total $ market value of China’s toy business will still grow over the next decade, albeit at a reduced rate due to the decreased birth rate.

We run a Consultancy business for toy & game companies. We work with major toy & game companies through to start ups and one person bands. For more information on how we help toy & game companies grow their distribution around the world: www.KidsBrandInsight.com/services

For more articles & insights on the toy and games business, sign up here for our free e-newsletter sent straight to your inbox: https://forms.aweber.com/form/54/1325077854.htm

 

Entering China’s Domestic Toy Market With Jacqueline Vong of Playology International Inc

Entering China’s Domestic Toy Market With Jacqueline Vong 

In the latest episode of our PLAYING AT BUSINESS podcast, we interview Jacqueline Vong of Playology International Inc. Her story is both compelling and unique due to her experience working in the toy trade in both North America and inside China’s domestic toy market. With China now ranking as the world’s 2nd biggest toy market we find out how toy companies can enter the ever growing Chinese toy market.

We also discuss the practical challenges of doing business in China, as well as taking a look at Playology’s work in the area of content distribution.

You can listen to this podcast episode here:

https://playingatbusiness.libsyn.com/chinas-domestic-toy-market-with-jacqueline-vong

If you enjoy the Podcast, we encourage (beg!) you to share it with your friends and colleagues in the toy business 🙂

 

 

 

The Ever-Growing Importance Of China To The Global Toy Industry

The Ever-Growing Importance Of China To The Global Toy Industry

Spoiler alert: this article is not primarily about OEM manufacturing!

For those who have been in the toy business for a long time, China is synonymous with toy manufacturing, and has been for the working lifetimes of most people in the toy trade. China has been an incredible manufacturing resource for toy companies. Much has been written about the pressures on China’s toy factories (including by ourselves), with rapid economic development which makes labour intensive toy production less and less viable in China. Labour cost inflation is the primary reason why toy companies are increasingly looking to Vietnam, India and other Asian markets to pick up some slack in terms of lower labour costs.

This manufacturing picture though is not the only picture. There are two major areas where China is going to offer huge opportunity, competition and activity for the toy business around the world for the forseeable future:

Domestic China Market

There was a point in time when China’s domestic toy market was primarily generic locally manufactured toys. Over time though, as China’s economy has developed and living standards have increased substantially, China is fast becoming the major growth opportunity in the world today for established toy companies. The fact that Lego has plans to open 80+ stores in China should give a strong indication of just how big the domestic toy market opportunity is in China. If current levels of economic development and brand adoption continue, China could become the world’s biggest toy market in a decade potentially.

China therefore has growing importance to the toy industry because there are only so many countries in the world which offer such a large market alongside significant upward growth. The challenge for many toy companies though is that China (like all markets) has its own quirks in terms of culture, distribution setup, media and consumer wants. To use the Lego example again, Lego has launched products tailored to the Chinese market – this is in itself quite a statement, because Lego’s range is one of the most global in the toy business. The major U.S. stock market listed companies have been investing heavily in China’s domestic toy market for at least a decade because above all they need growth to satisfy their investors.

For smaller toy and game companies it can be daunting to know where to start with selling in China, and just like elsewhere, finding a good committed distributor can be challenging, but nevertheless the opportunities are significant and growing.

Chinese manufacturing companies launching their own brands

China has been the world’s toy manufacturing powerhouse for so long, and many manufacturing groups have generated significant wealth over decades by manufacturing toy products on an OEM basis for other companies. Even from way back though, some toy factories went direct to building their own brands in Western markets supplied from their own factories in China. This method of doing business is growing. Logically speaking it makes sense after all, maybe once a toy factory supplying OEM manufacturing might make 15% profit or more, but today with increased labour costs and constant downward pressure on pricing from customers while costs rise might be lucky to generate 5% profit. It makes sense then that of those thousands of Chinese toy factories some should invest to seek to transition from manufacturing toys for other people to designing, manufacturing, selling and marketing their own products and brands.

This could be one of the most disruptive implications of China’s economic development for toy markets around the world, as long- established toy factories with significant expertise move up the value chain to compete with their one-time customers. In the last 12 months, our company has Consulted for more Chinese factories looking to move up the value chain and establish their own brand than we did in the 5 years before that.

China’s role in the world, and especially for us in the toy business is changing. This vast heavily populated country at one point supplied our industry with a large industrial capacity, huge workforce and cheap labour. Looking forward though, while Chinese factories will continue to play a very significant role in supplying toy companies with OEM manufacturing, that role is likely to recede over time. Whereas China’s domestic market is likely to grow significantly, and the number of Chinese toy factories switching from OEM to creating and building their own brands is going to increase significantly which will add competition and new product development streams to the market.

We run a Consultancy business advising toy companies on how to grow their business by a combination of strategic analysis and export sales facilitation. We have helped more than 100 companies grow. Our clients range from $multi-billion FMCG giants through to start ups, from long established toy companies to toy factories and everything in between. We work with companies around the world – recent projects have been delivered for clients in the USA, UK, China, Hong Kong, India, Eastern Europe and beyond. For more information on our process and methodology for growing toy sales: https://www.kidsbrandinsight.com/blog/toy-co-growth-booster-program/

The Future For China & Toys

THE FUTURE FOR CHINA & TOYS

China has been the heart of the toy industry in many ways for the last few decades. With a dominant position/share of toy manufacturing China has been the key source for toy companies. These though are interesting times – China’s traditional cost benefit on labour heavy toy production seems to have waned considerably in the last few years in particular. Numerous Chinese toy manufacturing groups have opened factories in Vietnam to balance out China’s rising/risen labour costs. Yet the question remains not just will China continue to be a viable source for labour heavy non automated production of toys, but also does it want to? With the pollution problems in several major population centres, the difficulty finding workers who can live in the key manufacturing centres on factory production line jobs and the fact that China’s accelerated & awe inspiring economic development is now pointing towards higher end automated/technology driven manufacturing.

Aside from the manufacturing consideration, China has become an extremely important toy market for distribution also. This importance stems from two factors: 1. The size of the market, with China having moved ahead of Japan’s powerful toy juggernaut in terms of market size in the last few years to take the mantle of world’s 2nd biggest toy market.  2. The certainty of significant market growth over the next few years – as the more mature Western markets grow in low single digits, China’s increasing wealth is filtering through to consumer spending on toys. Moreover, the relaxing of the 1 child policy will clearly lead to higher birth rates, and as every child born will have toys, growth is therefore assured.

So that’s where we’re at today – a Chinese toy manufacturing sector facing challenges & in the process of moving up the value chain and an internal Chinese toy market which is a major growth opportunity both locally but also for those established toy companies with the ambition and wherewithal to take on the China opportunity.

Looking forward, here are some observations about what’s to come for China & the toy industry:

CHINA & TOYS – FUTURE MANUFACTURING

The one truth which is clear is that the traditional heartland of toy manufacturing in the South of China is likely to encounter change going forward. The local economy, real estate prices etc dictate that local workers will struggle to work in low end manufacturing jobs, even if the factories pay them more, that will in itself cause change as the factories will be less competitive on price leading to less business which is the biggest change driver of them all in business! In addition the traditional model of bringing in workers from further afield in China’s interior seems to be less viable as the overall economic growth/maturing of the economy makes these jobs less and less worth leaving your family for.

The good news for Chinese toy manufacturing though is that the toy industry totally has the China habit – trying to get a toy company to move away from China to other Asian manufacturing countries like Vietnam or India has been compared to trying to get blood from a stone – the deeply embedded nature of the Hong Kong toy hub and long term factory relationships have created a huge inertia which means toy companies sometimes appear to literally need to be dragged kicking and screaming away from China!

On a more positive note, it is very clear that the Chinese toy manufacturing sector is in the process of moving higher up the manufacturing value chain – so we can expect significant growth in high end products where production can be automated/robotised and also in more advanced technology driven products. As such, while I expect China to (eventually) lose much of the low end labour heavy production, I believe it will keep a significant amount of toy manufacturing long term due to the higher tech production resulting from the knowledge driven more sophisticated economy that has arisen & will continue to develop.

In short, longer term I expect China to be a less dominant player in toy manufacturing, but still a major source, certainly for the next decade or so. Hong Kong is therefore likely to remain the hub of the Far East toy manufacturing scene for the forseeable future. Despite the increasing levels of growth/transfer of production to India, Vietnam and others we are seeing/will see over the next decade, the level of expertise/experience in Hong Kong and the fact it is as close to all Asian toy producing countries as anywhere else means Hong Kong is here to stay as our Asian hub for toy companies.

CHINA & TOYS – FUTURE OF CHINA’S DOMESTIC TOY MARKET

This section is mostly good news. The reality is this – China is today a distant 2nd to the USA in terms of domestic toy market size, but China’s toy market is growing rapidly. This is great news for the global toy industry – while mature markets like the USA, Canada, Western Europe etc., will continue to grow single digits due to growing population, China appears likely to see more significant growth – due to increasing standard of living and disposable income for more of it’s people. When you combine this with the relaxing of the one child policy, the resultant increase in birth rate which is set to be significant, and with the sheer size of China’s population, the reality is that China is likely to be the most consistent growth opportunity for toy companies for a decade or more. That’s not to say there aren’t challenges inherent within trying to grow in China, but there is a reason why Mattel & others are so focused on planting seeds of growth in China – in the medium-longterm China’s toy market size will eclipse that of the USA, while the USA still continues to grow at a lower rate.

In short, aside from short term issues, further global financial slowdowns/crashes, the bad movie year that was 2017 for the global toy industry and the constant fight for retail share/listings, the future looks glowing for the global toy industry, and China is a major factor in that rosy outlook!

 

by Steve Reece, CEO of Kids Brand Insight www.KidsBrandInsight.com,  a leading toy expert consultancy to toy companies around the world, which helps people & companies to get ahead in the toy industry, find the right toy & game factories and to consumer research test their products with kids and parents. Steve also advises investment companies via leading expert networks like Gerson Lehrman (Steve is an acnowledged GLG toy expert).