Page 300 - 2018 White Paper on the Business Environment in China
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8 White Paper on the Business Environment in China
stores, and highlights the pressures U.S. firms face as they Toys and games sales are expected to continue
try to expand in new markets with sales stagnating back growing over the forecast period, with new
home. Alibaba’s reach and China’s preoccupation with developments like AR/VR technology set to be the
education could give Mattel the thrust it needs to win over main driver of value growth within video games. And
the country’s so-called “tiger mothers”, who aggressively insiders expect the industry to see stronger growth this
push their children to be the best in school. “Chinese year. May Liang, Chairwoman of China Toy & Juvenile
parents tend to buy more educational toys, science kits Products Association, attributed that confident forecast
and learning toys than all their counterparts in America to Chinese toymakers efforts. “Brands are spending
and Europe,” said Shaun Rein, Managing Director of more on marketing and promoting more smart
China Market Research Group. While Mattel has garnered products, combined with intellectual property, to entice
a nearly 2 percent share of the estimated $31.5 billion consumers,” she explained. “From our conversations
toys and games market in China, it has been unable to with producers in China, this year [2017] will see
replicate the success it has enjoyed in the United States. stronger growth in toy sales. We educate customers
The company’s inability to gain a firmer foothold in the about the benefits of toys. That’s why more consumers
Chinese market is in contrast to the brisk pace of growth see toy buying as a necessity for kids growing up, not
in the country’s toy market since 2010. China’s toys and a luxury,” Liang added (Yao). In addition, the growing
games sector expanded about 10 percent between 2010 population of new-borns under the two-child policy
and 2015, compared with a meager 1.7 percent increase is also expected to provide continued momentum to
in the United States, according to market research firm traditional toys and games (Euromonitor). Although
Euromonitor. Market leader Guangdong Alpha Animation China’s toy industry has outperformed light industry as
& Culture Co., Ltd. held 4.4 percent of the market in 2015, a whole, it still faces challenges going forward. Intense
while Danish toymaker Lego commands a 2.8 percent competition among domestic toy manufacturers
share (Ganesan and Carale). drives down margins. Meanwhile, land and labor costs
continue to rise, meaning higher upfront investments
Domestic manufacturers dominated toys and games into higher tech production methods is increasingly
in 2016, with Tencent Holdings and NetEase.com leading crucial. These factors will lead many to consider lower-
video games and Alpha Group leading traditional toys cost alternatives (Koty).
and games. Eight of the top 10 players in toys and games
are local manufacturers, with such players having a Cosmetics
price advantage, extensive distribution and rich media
resources. During 2016, Internet retailing remained the China is on pace to become the world’s largest beauty
leading channel for toys and games and continued to gain market in 2017, according to the latest Morgan Stanley
sales share at the expense of store-based channels, such research report. When it comes to beauty products, this
as electronics and appliance specialist retailers and media means a shift toward premium brands. In Morgan Stanley’s
product stores. Internet retailing is the most important propriety AlphaWise survey of Chinese consumers, 84
retail channel for video games software and the second percent of respondents said that they planned to buy
largest channel for video games hardware and traditional more expensive or similarly priced skincare brands in
toys and games. Both manufacturers and retailers tend to the coming year. Respondents reported similar plans
build up their own online shops to facilitate online sales for makeup purchases. This may bode well for online
given the fact that consumers nowadays prefer shopping retailers, but may prove challenging for companies who
online due to busy lifestyles and limited time for visiting rely on supermarket and department store sales of their
physical stores (Euromonitor). According to Chinese products. Regardless, the power of Chinese consumers
e-commerce website Baobei360, which concentrates promises to remain a going economic concern, as they
on baby products, the average amount spent on toys become the largest force driving the global beauty
per child under the age of 16 in China is less than $30, market (Morgan Stanley).
compared to over $200 in the U.S.. This suggests that
there is still significant growth potential in toy spending Consumer demographics are shifting toward a
per child, particularly given that Chinese parents have younger, more affluent segment with an increased sense
consistently proven willingness to invest heavily in their for luxury goods such as beauty and care products. The
children (Koty). cosmetics retail trade revenue grew from 19.5 billion
yuan in March 2016 to 21.49 billion yuan in March 2017.
300
stores, and highlights the pressures U.S. firms face as they Toys and games sales are expected to continue
try to expand in new markets with sales stagnating back growing over the forecast period, with new
home. Alibaba’s reach and China’s preoccupation with developments like AR/VR technology set to be the
education could give Mattel the thrust it needs to win over main driver of value growth within video games. And
the country’s so-called “tiger mothers”, who aggressively insiders expect the industry to see stronger growth this
push their children to be the best in school. “Chinese year. May Liang, Chairwoman of China Toy & Juvenile
parents tend to buy more educational toys, science kits Products Association, attributed that confident forecast
and learning toys than all their counterparts in America to Chinese toymakers efforts. “Brands are spending
and Europe,” said Shaun Rein, Managing Director of more on marketing and promoting more smart
China Market Research Group. While Mattel has garnered products, combined with intellectual property, to entice
a nearly 2 percent share of the estimated $31.5 billion consumers,” she explained. “From our conversations
toys and games market in China, it has been unable to with producers in China, this year [2017] will see
replicate the success it has enjoyed in the United States. stronger growth in toy sales. We educate customers
The company’s inability to gain a firmer foothold in the about the benefits of toys. That’s why more consumers
Chinese market is in contrast to the brisk pace of growth see toy buying as a necessity for kids growing up, not
in the country’s toy market since 2010. China’s toys and a luxury,” Liang added (Yao). In addition, the growing
games sector expanded about 10 percent between 2010 population of new-borns under the two-child policy
and 2015, compared with a meager 1.7 percent increase is also expected to provide continued momentum to
in the United States, according to market research firm traditional toys and games (Euromonitor). Although
Euromonitor. Market leader Guangdong Alpha Animation China’s toy industry has outperformed light industry as
& Culture Co., Ltd. held 4.4 percent of the market in 2015, a whole, it still faces challenges going forward. Intense
while Danish toymaker Lego commands a 2.8 percent competition among domestic toy manufacturers
share (Ganesan and Carale). drives down margins. Meanwhile, land and labor costs
continue to rise, meaning higher upfront investments
Domestic manufacturers dominated toys and games into higher tech production methods is increasingly
in 2016, with Tencent Holdings and NetEase.com leading crucial. These factors will lead many to consider lower-
video games and Alpha Group leading traditional toys cost alternatives (Koty).
and games. Eight of the top 10 players in toys and games
are local manufacturers, with such players having a Cosmetics
price advantage, extensive distribution and rich media
resources. During 2016, Internet retailing remained the China is on pace to become the world’s largest beauty
leading channel for toys and games and continued to gain market in 2017, according to the latest Morgan Stanley
sales share at the expense of store-based channels, such research report. When it comes to beauty products, this
as electronics and appliance specialist retailers and media means a shift toward premium brands. In Morgan Stanley’s
product stores. Internet retailing is the most important propriety AlphaWise survey of Chinese consumers, 84
retail channel for video games software and the second percent of respondents said that they planned to buy
largest channel for video games hardware and traditional more expensive or similarly priced skincare brands in
toys and games. Both manufacturers and retailers tend to the coming year. Respondents reported similar plans
build up their own online shops to facilitate online sales for makeup purchases. This may bode well for online
given the fact that consumers nowadays prefer shopping retailers, but may prove challenging for companies who
online due to busy lifestyles and limited time for visiting rely on supermarket and department store sales of their
physical stores (Euromonitor). According to Chinese products. Regardless, the power of Chinese consumers
e-commerce website Baobei360, which concentrates promises to remain a going economic concern, as they
on baby products, the average amount spent on toys become the largest force driving the global beauty
per child under the age of 16 in China is less than $30, market (Morgan Stanley).
compared to over $200 in the U.S.. This suggests that
there is still significant growth potential in toy spending Consumer demographics are shifting toward a
per child, particularly given that Chinese parents have younger, more affluent segment with an increased sense
consistently proven willingness to invest heavily in their for luxury goods such as beauty and care products. The
children (Koty). cosmetics retail trade revenue grew from 19.5 billion
yuan in March 2016 to 21.49 billion yuan in March 2017.
300
