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Making Breakthrough via Intelligent Toys, IP Authorization and Accelerated Transformation

Statistics show that in 2019 China's toy retail reached 83.7 billion yuan. According to forecasts, in the next 5 years, China's toy sales will increase at a rate of 5% to 6%. Not only China, the global toy market is also demonstrating good momentum. By 2023, the global toy market's annual sales will exceed 120 billion US dollars.

Toy companies are expected to achieve growth through intelligent toys, IP authorization systemization and accelerated transformation.

Looking back at 2019, the global economy is shrinking. As the largest toy manufacturer and exporter, China is still advancing against the trend and growing steadily. In the past year, under the continuous change of the market environment, the reshuffle of the toy industry has intensified, and the market has been clearly differentiated.


What are the major trends in 2019 in the toy industry?

First, the intelligent trend is obvious. In 2019, consumers' strong demand for smart early education toys has spawned dark horse brands such as Benewtech and Tongzhisheng. During the Double Eleven shopping spree, Benewtech surged to the top place on the toy pre-sale list with a single category brand, and subsequently achieved tens of millions of dollars in financing. Tongzhisheng grew rapidly to become a leading brand of early education smart learning machine within one year and its sales performance on Tmall + Taobao Platform ranked first among the same category.

The competitive strength of early education smart toys mainly lies in two aspects: 1. Hardware: Core technology of AI artificial intelligence to make toys more intelligent. 2. Content: Whether the content carried by smart toys is attractive to users. In 2020, smart toys will become more intelligent, and the content of education will diversify.

Second, the toy market is taking the trend of branding and optimization. With the post-90s young parents becoming the major consumers of mother and baby products, their avant-garde consumption and parenting concepts have become the focus of business attention. Most of the post-90s generations were single children with excellent living conditions. Under the conditions of consumption upgrade, young parents are more willing to choose safer and better quality brand products. Therefore, in 2020, toy companies will attach greater importance to brand development and high-quality.

Third, the trade war has accelerated the reshuffle of the toy market, and more companies will turn to brand building and product innovation. Affected by the Sino-U.S. Trade war, some of China's export toy companies suffered a crisis of decreasing profits in 2019 and had to develop markets outside the United States to ensure continued profitability. Although the tariff increase was postponed in August with the easing of Sino-US relationships, toy companies still suffered a lot during this period. On the one hand, the United States turned to the Southeast Asian countries as production base. As a result, some Chinese companies lost orders for toy processing. On the other hand, due to the limited manufacturing capability in Southeast Asia, some highly skilled Chinese manufacturers can still receive orders with high technical and quality requirements faced with the impact of the trade war. In 2020, some companies with complete processing systems and superb processing crafts will still be able to survive. However, due to the low profitability of manufacturing and rising labor and tariff costs, more companies are turning to independent innovation and developing their own products to improve competitiveness.

Fourth, trendy toys continue to grow revealing the following three major features:

1. IP licensed toys will continue to grow. The main consumer group of IP model toys is the post-90s generation. When buying toys for their children, they tend to choose toys that are also attractive to adults, such as Transformers, Lego, and Bandai. The post-90s and post-95s male consumers are more likely to buy IP models and games, accounting over half of the total consumption.

2. Blind boxes continue to grow, but gradually become stable. Judging from the online data of the blind box brand PopMart, its Tmall flagship store has 200,000 active users, of which 100,000 are new customers and more than half of them buy blind boxes for the first time on Tmall. It implies that many people do not know what a blind box is and just buy it with curiosity. In 2020, as blind boxes move from niche to the general public and more people understand blind boxes, the proportion of new customers of blind boxes will decline, and some consumers who truly love blind boxes will become loyal customers. Therefore, after the bubble in the blind box fades, the sales growth rate will tend to be stable.

In addition, there will be more emerging brands in the blind box market. Data show that in the past year, the sales of blind box market increased by over 600%, and the number of brands increased by 300%. While the blind box market is growing, more blind box brands have entered the market. In comparison, in the building block market, although Lego occupies 30% of the market, 70% of the building block brands still compete with it. In online shopping platforms, previously after Alibaba and JD.com, it is difficult to find a third e-retailer giant, but Pinduoduo suddenly rose rapidly within 3 years to become a strong competitor against Alibaba and JD.com. In contrast, the blind box market, although PopMart is growing rapidly in the Chinese market, but it is still difficult to be a single giant. After the consumer curiosity fades, more niche blind box IPs may become even more popular.

3. IP authorization will tend to be systematic. In the context of consumption upgrade, Pan-entertainment IPs are gradually becoming popular. The younger generation of consumers is willing to buy products incorporating certain cultural value. Major toy companies have in-depth cooperation with popular IPs to seize the market share. With the rise of Chinese animation and the continued development of the original IP industry, there will be more valuable IPs emerging. The IP licensing industry will become more systematic and related licensing services will be more comprehensive.