The toy market in China remains a market to develop. Indeed, the turnover of the market is estimated at more than 28 billion dollars with an average increase of 22% per year. According to the research firm Euromonitor, in 2020, the market is expected to reach 300 billion yuan. However, the average basket allocated to this item is only $ 30 per child. Toys represent a market where; product innovation is valued to stimulate market growth.
China is the biggest producer of toys, with a manufacturing “made in china” estimated at 80%. The market has strong competition from international and domestic brands. Foreign brands are generally positioned and dominate the high-end toy market, while domestic brands are positioned at low prices.
Local brands dominate the toy and video games market in China. There are Tencent Holdings and NetEase.com for video games and Alpha Group for toys. Eight of the top ten toy companies in the market are national brands because they have an advantage in terms of price, distribution network and resources.
Electronic toys and video games have a strong growth in the market because they are more and more affectionate to consumers and because this segment affects a large target of consumers (children and adults). Indeed, the arrival of VR / AR technology is a source of growth in the market.
Distribution on the market is taking a new turn, since a preference can be found via the online channel for the purchase of toys at the expense of physical stores. Online shopping is the most important channel for video games and children’s games. To facilitate the customer journey and its purchasing process, the brands have created their online stores.
GROWTH OPPORTUNITIES FOR BRANDS
The market is attractive for international brands and for a variety of reasons:
The end of the one-child policy: Since 2015, the Chinese government has abolished the Single Child Policy Act and now allows parents to have two children. This change will affect many sectors in the country including that of toys. Indeed, the government foresees an increase in births of 2 million newborns per year following the abolition of the reform. This change offers brands development opportunities in the marketplace.
Emergence of the middle class: In recent years, the whole country has been in a state of flux. The Chinese middle class is evolving and has an increasingly strong purchasing power, allowing it to aspire to new expectations and new needs. The development of this class is to be taken into consideration by the brands since it represents a potential of customers of 300 million people.
A growing preference for quality toys: toys from foreign brands are becoming popular with consumers. Indeed, being international brands in China remains a competitive advantage in the market thanks to consumers’ perception of these brands. The Chinese see foreign brands as high-end products and guaranteeing product quality. Moreover, they are known to convey the differentiation and self-esteem of individuals through the purchase of these brands.
Fast Growth in e-Commerce: China has become the giant of online commerce as it is the most important market in the world. Online sales in 2016 represent a total of 701 billion euros, an increase of more than 26% according to the National Bureau of Statistics of China. With its population of more than one billion, the Chinese digital sphere has had more opportunities to stimulate this distribution channel. Moreover, the rapid adaptation of individuals to digital has enabled the development and appropriation of this channel among consumers. In addition, social trade is a growth factor in the toy market, since it allows a stronger interactivity between brands and consumers.