Description
Fragmented retail channels are often one of the major obstacles that toy makers face when entering emerging markets. Emerging markets typically have a high share of sales though unofficial channels, such as bazaars and street markets. In addition, there is generally a lack of established retail chains, whether in supermarkets or specialist toy retailers, thus requiring much more effort to reach consumers.
CORPORATE STRATEGIES IN EMERGING TOY
MARKETS
April 2013
© Euromonitor International PASSPORT 2 TOYS AND GAMES: CORPORATE STRATEGIES IN EMERGING TOY MARKETS
? Fragmented retail channels are often one of the major obstacles
that toymakers face when entering emerging markets. Emerging
markets typically have a high share of sales though unofficial
channels, such as bazaars and street markets. In addition, there is
generally a lack of established retail chains, whether in
supermarkets or specialist toy retailers, thus requiring much more
effort to reach consumers.
? A good indication of retail market fragmentation is the “Street
Market Index”. The index is constructed looking at the share of
modern grocery retailers as a percentage of total grocery sales in
the country. While modern grocery retailers are usually chained
stores, traditional retail is composed largely of small family-owned
businesses, including the street markets and bazaars that are
particularly prevalent in emerging markets.
? For example, from the retail standpoint Vietnam would be one of
the most challenging countries to enter for a foreign toymaker, since
modern retailers account for a small share of the market. Likewise,
so called “unorganised retail” channel is very important in India,
where close to 90% of grocery sales are through this channel.
? At the opposite end are emerging markets such as Poland and
Mexico. In Poland, for example, 70% of total grocery sales occur
through modern retailers. The toy industry is following this trend,
with many chained toy retailers having emerged recently.
Fragmented retail among the key obstacles to reaching consumers
ROUTES TO MARKET
© Euromonitor International PASSPORT 3 TOYS AND GAMES: CORPORATE STRATEGIES IN EMERGING TOY MARKETS
Toy shopping varies throughout the world
ROUTES TO MARKET
Most Popular Channels for Traditional Toys and Games 2011 (Value rsp)
© Euromonitor International PASSPORT 4 TOYS AND GAMES: CORPORATE STRATEGIES IN EMERGING TOY MARKETS
A success story
? The Barbie store failure in China may have gained attention across the world, but at the same time Mattel
has been quietly enjoying the rewards of a strong performance by the brand in India.
? The popularity of Barbie in India is not completely a surprise. The Barbie brand in general has long been
better known in India than in China. Further, Mattel has put a lot of effort into localisation, making sure the
brand lives up to its potential. The Barbie I Can Be line of dolls, designed in the likeness of popular
Bollywood actress Katrina Kaif, is a good example of very successful localisation.
? Dolls are a fairly strong category in India overall, enjoying significant popularity among girls, in contrast to
construction toys, which have not been able to win significant share of the market. LEGO is barely present
in the market, being distributed in the country by Hasbro’s Funskool division.
Barbie in India
CATEGORY TRENDS
© Euromonitor International PASSPORT 5 TOYS AND GAMES: CORPORATE STRATEGIES IN EMERGING TOY MARKETS
LEGO in China
CATEGORY TRENDS
LEGO – strong in China but missing potential
? LEGO is already fairly successful and well-known in
China, where it is the third largest Western toymaker
in the country, after Mattel and Hasbro.
? But there is also much space for growth. China is
expected to be the second most dynamic construction
market globally over 2011-2016, adding US$472
million to overall sales in constant 2011 prices, and
unlike in other markets, LEGO accounts for only a
fraction of construction category value sales in China.
? There are various reasons for this:
? First, LEGO has put less emphasis on the Asia
Pacific from a marketing standpoint. When
compared with other emerging markets, there is a
stark contrast in LEGO sales. In Russia, for
example, LEGO sales totalled US$223 million in
2011, in China its sales were a relatively small
US$51 million in the same year in retail value terms.
? LEGO is renowned for not manufacturing toys in
China.
? Competition from less expensive alternatives in
China present a significant challenge to its
increasing market share.
© Euromonitor International PASSPORT 6 TOYS AND GAMES: CORPORATE STRATEGIES IN EMERGING TOY MARKETS
? Rising disposable incomes are one of the key
drivers of toy sales in the emerging markets,
making branded toys affordable to a wider
population. At the same time, emerging markets
are still more price sensitive and this explains why
unbranded toys often have high shares in these
countries. A sensible pricing strategy is thus one of
they key areas to focus on when entering emerging
markets.
? Toy licences may be becoming increasingly global,
but having a “local touch” may go a long way to
winning market share in a country. There is
generally a nostalgia element in play when parents
purchase toys, with a preference for something
familiar. As such, having a local character or local
licence may boost sales in the strongly. It can also
be seen as giving back to local culture, and
becoming part of childhood in a market.
? Over 2006-2011, toy retailers experienced a boom
in Eastern Europe and Latin America. The toy
chains are usually locally grown, and may be less
familiar to international toymakers, but the
presence of chained toy retail makes the markets
more accessible overall. Building good relations
with local toy stores and collaborating on
exclusives or promotions can be very successful.
? Baby/infant/pre-school is generally the most
successful toy category across all emerging
markets. Not coincidentally, Hasbro’s Indian
division is named “Funskool”, a variant on its
Playskool brand of pre-school toys. Having pre-
school toys in the portfolio is thus especially
important when considering emerging markets
expansion.
Growth in chained toy retail may open doors to
the market
Pre-school, pre-school, pre-school
Don’t forget localised toys Disposable incomes may be rising, but price
remains important
Know your market
RECOMMENDATIONS
doc_698299805.pdf
Fragmented retail channels are often one of the major obstacles that toy makers face when entering emerging markets. Emerging markets typically have a high share of sales though unofficial channels, such as bazaars and street markets. In addition, there is generally a lack of established retail chains, whether in supermarkets or specialist toy retailers, thus requiring much more effort to reach consumers.
CORPORATE STRATEGIES IN EMERGING TOY
MARKETS
April 2013
© Euromonitor International PASSPORT 2 TOYS AND GAMES: CORPORATE STRATEGIES IN EMERGING TOY MARKETS
? Fragmented retail channels are often one of the major obstacles
that toymakers face when entering emerging markets. Emerging
markets typically have a high share of sales though unofficial
channels, such as bazaars and street markets. In addition, there is
generally a lack of established retail chains, whether in
supermarkets or specialist toy retailers, thus requiring much more
effort to reach consumers.
? A good indication of retail market fragmentation is the “Street
Market Index”. The index is constructed looking at the share of
modern grocery retailers as a percentage of total grocery sales in
the country. While modern grocery retailers are usually chained
stores, traditional retail is composed largely of small family-owned
businesses, including the street markets and bazaars that are
particularly prevalent in emerging markets.
? For example, from the retail standpoint Vietnam would be one of
the most challenging countries to enter for a foreign toymaker, since
modern retailers account for a small share of the market. Likewise,
so called “unorganised retail” channel is very important in India,
where close to 90% of grocery sales are through this channel.
? At the opposite end are emerging markets such as Poland and
Mexico. In Poland, for example, 70% of total grocery sales occur
through modern retailers. The toy industry is following this trend,
with many chained toy retailers having emerged recently.
Fragmented retail among the key obstacles to reaching consumers
ROUTES TO MARKET
© Euromonitor International PASSPORT 3 TOYS AND GAMES: CORPORATE STRATEGIES IN EMERGING TOY MARKETS
Toy shopping varies throughout the world
ROUTES TO MARKET
Most Popular Channels for Traditional Toys and Games 2011 (Value rsp)
© Euromonitor International PASSPORT 4 TOYS AND GAMES: CORPORATE STRATEGIES IN EMERGING TOY MARKETS
A success story
? The Barbie store failure in China may have gained attention across the world, but at the same time Mattel
has been quietly enjoying the rewards of a strong performance by the brand in India.
? The popularity of Barbie in India is not completely a surprise. The Barbie brand in general has long been
better known in India than in China. Further, Mattel has put a lot of effort into localisation, making sure the
brand lives up to its potential. The Barbie I Can Be line of dolls, designed in the likeness of popular
Bollywood actress Katrina Kaif, is a good example of very successful localisation.
? Dolls are a fairly strong category in India overall, enjoying significant popularity among girls, in contrast to
construction toys, which have not been able to win significant share of the market. LEGO is barely present
in the market, being distributed in the country by Hasbro’s Funskool division.
Barbie in India
CATEGORY TRENDS
© Euromonitor International PASSPORT 5 TOYS AND GAMES: CORPORATE STRATEGIES IN EMERGING TOY MARKETS
LEGO in China
CATEGORY TRENDS
LEGO – strong in China but missing potential
? LEGO is already fairly successful and well-known in
China, where it is the third largest Western toymaker
in the country, after Mattel and Hasbro.
? But there is also much space for growth. China is
expected to be the second most dynamic construction
market globally over 2011-2016, adding US$472
million to overall sales in constant 2011 prices, and
unlike in other markets, LEGO accounts for only a
fraction of construction category value sales in China.
? There are various reasons for this:
? First, LEGO has put less emphasis on the Asia
Pacific from a marketing standpoint. When
compared with other emerging markets, there is a
stark contrast in LEGO sales. In Russia, for
example, LEGO sales totalled US$223 million in
2011, in China its sales were a relatively small
US$51 million in the same year in retail value terms.
? LEGO is renowned for not manufacturing toys in
China.
? Competition from less expensive alternatives in
China present a significant challenge to its
increasing market share.
© Euromonitor International PASSPORT 6 TOYS AND GAMES: CORPORATE STRATEGIES IN EMERGING TOY MARKETS
? Rising disposable incomes are one of the key
drivers of toy sales in the emerging markets,
making branded toys affordable to a wider
population. At the same time, emerging markets
are still more price sensitive and this explains why
unbranded toys often have high shares in these
countries. A sensible pricing strategy is thus one of
they key areas to focus on when entering emerging
markets.
? Toy licences may be becoming increasingly global,
but having a “local touch” may go a long way to
winning market share in a country. There is
generally a nostalgia element in play when parents
purchase toys, with a preference for something
familiar. As such, having a local character or local
licence may boost sales in the strongly. It can also
be seen as giving back to local culture, and
becoming part of childhood in a market.
? Over 2006-2011, toy retailers experienced a boom
in Eastern Europe and Latin America. The toy
chains are usually locally grown, and may be less
familiar to international toymakers, but the
presence of chained toy retail makes the markets
more accessible overall. Building good relations
with local toy stores and collaborating on
exclusives or promotions can be very successful.
? Baby/infant/pre-school is generally the most
successful toy category across all emerging
markets. Not coincidentally, Hasbro’s Indian
division is named “Funskool”, a variant on its
Playskool brand of pre-school toys. Having pre-
school toys in the portfolio is thus especially
important when considering emerging markets
expansion.
Growth in chained toy retail may open doors to
the market
Pre-school, pre-school, pre-school
Don’t forget localised toys Disposable incomes may be rising, but price
remains important
Know your market
RECOMMENDATIONS
doc_698299805.pdf