Toys and Games Market in India 2010

Summary

The Toys and Games market is valued at INR 40 bn in 2010 and is expected to grow rapidly in the future.

The perception towards toys and games as a necessity for all round development of child will drive the market.

The report begins with an overview of the industry indicating market size, growth and the various types of toys in the market. Major manufacturing hubs in India have also been highlighted.

An analysis of the drivers explains growth factors such as growing disposable income, growth in

preschool, large population of children, changing people¡¯s perception, increasing awareness of quality

issues, developing mall culture and National Program for the Development of Toy Industry. The key

challenges identified include large scale imports of toys from China, old technology and obsolete design.

The report identifies the key trends including preference among parents towards educational toys and

games, growth in movies and cartoons character toys and entry of major foreign players.

Competition section provides the share of organized and unorganized players. It also provides brief profiles

of major domestic and foreign players in the market. The section contains a snapshot of their corporation,

financial performance, business highlights and their product portfolio, providing an insight into the existing

competitive scenario.

Indian toy industry is slowly developing and climbing the progress steps locally as well as globally

The very word toy makes you remind of your childhood. They are categorized into many types like the major rulers in India are the plastic toys which capture 80% of the toy industry and is said to earn a profit of approximately 10-20% every year. Another types of toys available in the market are fabric toys, paper toys, and wooden toys, metal toys and DIY toys (containing arts and craft toys) that are manufactured mostly by the cottage industry. However, out of these the metal toys are considered to be sharp toys which are harmful for children and a hindrance in their safety, that is why these toys are known to be slowly loosing it's popularity. Another popular category of toys seen today are educational toys and activity toys which help build the mind and body of the child, then there are soft toys, electronic toys, battery operated toys and board games like chess and monopoly. Toys these days are popular not only with kids but adults have also entered this field through the medium of sports and games. Today many sports and games are been played by the adults at national and international levels representing their country and nation. Also ultimately it is the adult's decision of which toy to buy for their child. While the end user is a child, the mother is the

decision-maker and the father holds the financial strings. Parents, now-a days also prefer to play with their child in order to interact well with the child. So, they are seen to playing boards games and other toys with their children. The Indian market is vastly different from that of overseas, where toys are bought as a child's development aid, i.e. they are considered to be equivalent to books. But in India the scene is different. Content and quality are the major drawbacks here. Unlike other developed economies amount of toys spent per child in India is very low. The metros and 'A' category town account for most of the branded purchase and sell even at higher price points. Largely the rest of the market is highly price sensitive and items above Rs.200 results in planned purchase and not impulse buying. In C and D category towns, unbranded and lower quality toys sell at average price points below Rs.100. However, the scene over here is slowly changing but still it will take a few years more.

The Rs.800-Rs.1200crore-estimated Indian toy industries are dominated by approximately 1250 small and very small producers scattered across the country. Most of the producers are based in the Delhi, Mumbai, Northern State of Punjab, Uttar Pradesh and Haryana, also some in the Southern State of Tamilnadu and in other clusters across India's central states. It has a 35 - 40crores manufacturing base out of which Delhi especially Noida rules 30 crore markets and Mumbai rules the other 10 crore market. The Grey market and other small-unorganized sectors dominate the rest of the markets.

Major multinationals such as Lego Toys dominate the most of this sector. Lego itself controls Upto 20% of the domestic market; another player is Leo Toys, which is largely credited with pioneering the organized toy market in India. Funskool Toys is the third largest toy producer. All three big players have linkages with Indian multinationals, with a collective market share of roughly about 16% of entire toy sector. Apart from these, three there are many other players like Chirantan Enterprise, Plastech International Pvt.Ltd., Aries Inc. and many others who run the toy market in India.

The Indian toy industry is large and growing, but it is disorganized and there are some serious problems to be navigated which also takes into factor distribution & marketing challenge. Many of these toys are routed through Dubai & Malaysia. Even as the Cheap Chinese toy market are flooding the domestic market having said that we do design or modify some games to reflect Indian taste in them is absolutely true. Some games we import are slightly modified to Indian interest i.e. we have a slightly Indian taste monopoly. Social relevance is another factor that is being used.

The past one-decade has shown that the Indian toy industry makes quick strides in terms of exports and production. India produces a wide range of toys made of plastic, mechanical activity toy, soft dolls, stuffed toys, board games, puzzles, educational games, metal and time toys, electronic toys and games etc. It is estimated that the industry volume is US $ 1 billion in the organized sector and about US$ 1.50 billion in the unorganized sector. There are more than 1000 units in the small sector and even a large number in the cottage industry. With the lowering of tariff barriers, the market is open now and the Indian industries are facing the challenge of ensuring their competitiveness in a sector where both distributors and multinational competitors are concentrated and form cheaper products which are mainly from the South East Asian Countries. According to an estimate, the global market of toys will touch more than US$ 150 billion by 2007 and thus realizing it's potential the Indian toy industry has correct time opportunity to put itself on the world map. Indian toys can have major share of the world market if they are keenly based on the latest technology and are marketed properly. By some toy industries, domestic market size this year is estimated to is in the range of Rs.500 crore while some think that it is at Rs.1000crores.

Like many other industries, the Chinese factor is a major issue for domestic toy manufacturers, which has resulted in a chaotic market condition. Chinese and Taiwanese manufacturers have been innovative and specializes in novelty items which last Upto approximately ten months. These are of cheaper quality and hence less expensive which quickly captures the interest of the Indian buyer. As per the sources last year, the Chinese exported around $ 8 billion worth of toys. Indian imports this year will be around Rs.150crore, which is nearly half of the domestic toy market. But sources say that Chinese toys will be an issue for the

domestic organizations for roughly another few more years before the customers will turn away from poor quality as the issue is not only cheap toys but also counterfeits which impact the legal licensee of a toy. Also Chinese toys that are currently imported do not have much content and so the question of threat has not crossed it's limit as yet because most importers are first timers and they discard toy imports due to poor margin. But if not taken care for Chinese products will turn out to be the biggest threat when toys with good content are made.

Degree Of Competition

The degree of competition within the industry looks at the external environment, the number of firm, size of the firm and concentration in the industry. Looking at the degree of competition within an industry's environment it is understood that it is simply the beginning to analyzing industry attractiveness. The degree of globalization is another factor that influence attractiveness, if a company entering an industry can also enter a global market then it is attractive. The extent of government control also has an influence on the attractiveness of the industry. The threat of new entry affects the firms already existing in an industry and if a new rival can easily get in then the market becomes more competitive, thus firms must put some barriers to stop others from entering. The existing leaders should create a brand identification, the new entrants thus will have to try and take satisfied brand loyal customers away from the leaders which makes it a difficult

task for them to conquer. The threat of substitute products also comes into concern. If substitute products are readily available, then the firms are likely to suffer. Since there are different suppliers in the toy industry, the suppliers have less bargaining power because the buyers can go to another supplier and so in the toy industries not one supplier holds a critical component for the toy retailer. The power of buyers should also be taken as a considering factor when analyzing the attractiveness of the industries because powerful buyers extract price concession for product thus reducing industry profitability.

Tax Barriers

Though the government has removed excise from most parts of the toy industry the VAT which is 4% and 12.5% for battery operated toys along with Octroi, which is 4%, remains a dilemma to be solved by the toy manufacturers. The problem is that major part of the industry is unorganized and these unorganized players are known to bypass tax ultimately leaving the burden of taxation only on the organized sector. The organized sector suffers due to this, as they have to sell their products at more prices in the market. However, toy associations like TAITMA and others are trying their best and are appealing to the government in eradication of the taxes.

Indian Market With Global Scenario.

The toy Industry across the world is highly fragmented. The present size of the toy market can be estimated to be about Rs.4.5billion. The biggest problem in estimating the size of the industries is the presence of large number of very small players. Besides there is no excise imposed so even the figure of production are not available. Four very large players have global operations namely Mattel, Lego, Hasbro, and Bandai. Mattel Toys are the largest toy manufacturer in the world. Bandai of Japan & Mattel have a strategy alliance worldwide for marketing each other's product. Mattel has been in India since 1985. The company sells toys under the brand name of Barbie, Hot Wheels, Star Beans etc. The Mattel Company is a $6 Billion company out of which their market share in India is around 20%.

Apart from that the Indian Toy Industry is very fragmented and very region based. The Indian market is largely unorganized and the market is very small compared to the population and per capita income. Small Scale nature of business has resulted into low product innovation and low investments in new equipment and technology, which has over all resulted into small market size. The toy business is based on constant innovation and you need to be on your toes and produce new innovative toys if you want to survive in the market. Another reason of small size market may be because of large number of small players and low

advertising and marketing money spent. But since the last four or five years the market has shown a healthy growth rate. The market is said to grow at 15% to 20% per annum, which is said to be a sound situation and it is further said to grow for least five or six years. However, the Indian market is highly price sensitive. Reduction in prices of our products has been a contributor to increase in the sales. There are reservations in the Small Sector Industries (SSI), which the government is thinking to de-reserve which will allow the companies to take up capital investments over Rs.100 million and also they would be allowed to collaborate with foreign companies. In addition, the formation of task force by the department of SSI has proved to be a positive development. Many toy associations of India in association with others has started funding programs for providing good infrastructure which at present is very poor compared to China who has developed strong manufacturing facilities and infrastructure. Funding is also required for improving technology and quality standards. In addition, sufficient amount is required for brand building, which is a challenging task for Indian manufactures in view of the size of the industry. Brand building is an expensive option and requires deep pockets. Returns on investment have to be spread at least over 5 years. One even requires being financially strong in order to face international competition, so these funding programs with the help of associations will definitely prove to be a growing point for the industry. In addition to this, with the advent of multi-format retailing and mall concepts taking place in the country the reach of toys is increasing. Also Free exports were there from first, which has helped in boosting the industry further.

Global 2007 Estimation

As per the talks in the market, it has been estimated that the global market of toys will touch $150 Billion by 2007. The toy industry in India since the last one-decade is also seen making quick strides in terms of production and exports and it now produces a wide range of toys. Though it's ups and downs does affect it's market condition and despite of going through a turbulent period overall it is said that the Indian toy industry is slowly developing and climbing the progress steps locally as well as globally.

CHINA accounts to the biggest market for both indoor as well large toy market in the world.

Market Analysis of China Toy Industry

It is indicated that there are more than 6,000 toy enterprises in China. About 75% toys all over the world are produced

in China, and China has become the actual large country for toy production. However, China is not a toy consumption

country. The national market capability is even less than the sales volume of one foreign toy enterprise. However,

insiders think highly of this potential consumption market. Chen Lvmei, Director of Baby & Children Sector of

Guangdong Alpha Animation and Culture Co., Ltd., expressed her sufficient confidence in China’s becoming a large

toy consumption country in the future, “when toys become the necessity of Chinese children, there could be a turning

point of toy market in China, which could be realized within 5-10 years.” The insiders also point out that foreign

enterprises have put more focus on Chinese market, and more and more foreign-oriented Chinese toy

enterprises have begun to sell in domestic market. The competition of Chinese toy market would certainly be fierce.

Domestic and Foreign Enterprises Speeding up Occupancy of China Market

It is said that due to the current zero-tariff system for toy import, foreign brands advantageous in both cost and

reputation have always been playing a crucial role in the China market. Data indicates that foreign brands and Sino-

foreign joint venture brands have occupied nearly 80% of the market. Ms. Liang, a toy designer, indicates that world

top 10 toy companies including Mattel Group, Hasbro Group, SEGA and LEGO, etc. have already entered the

Chinese market. “In previous time, they entered the Chinese market with the aid of sales agency; while currently, they

have adopted the form of opening branches or offices, which has showed their more attention to the Chinese market.”

In addition, some cross-country toy leaders have transferred their toy production to China, and established close

association with many domestic suppliers. They have begun to speed up the planning of second and third level

market when occupying the high-end market.

When foreign enterprises have begun to speed up the planning of Chinese market, a large batch of once foreign-

oriented Chinese toy manufacturers have also turned their eyes to the domestic sales and started the planning, which

makes the Chinese toy market unprecedentedly prosperous. Ms. Chen told the reporter that during Shanghai Toy

Expo in October, 2009, one exhibition hall was especially set up for enterprises transforming their target customers

from foreign countries to China, which shows the great need of those enterprises. 

Ms. Zheng, the principal of a manufacturer previously engaged in toy export also said that after the international

financial crisis, 40% of the toys had been sold for domestic market. “Not only us, many manufacturers like us have

also done so.”

Capability of China Toy Market Exceeding RMB 20 Billion

It is obvious that it is the fast growing toy market that attracts robust toy manufactures. Insiders estimated that

according to the calculation of factory price of toys, the capability of China toy market has exceeded RMB 20 billion

every year and grown at a real fast pace. Ms. Chen stressed that at present, the consumption of China toy market is

still holiday consumption or gift consumption, which still exists a gap in comparison with the oversea necessity

consumption. She said that as the number of 80s’ parents increase, toy would gradually become the consumption

necessity for Chinese children. “At that time, the actual turning point of China toy industry is sure to come, which

needs about 5-10 years.”

Insiders point out that there has been essential progress of China toy market in recent two years, the most obvious of

which is that local toy enterprises have begun to attach importance to independent R&D and proprietary intellectual

property rights. A batch of local toy brands has begun to deploy the market with the gesture of market fresh blood.

Auby Toy is currently the top local toy brand. When analyzing the current market situation, relevant principal of Auby

considers that although foreign enterprises have their brand advantages, oversea living environment and children’s

behavior are quite different from those of Chinese. Foreign brands would probably be unaccustomed to it. As for

those enterprises transforming their target customers from foreign countries to China, although they have cost

advantage, they lack of the experience of make sales in domestic market. Therefore, for the local brands that have

constantly been devoted to the domestic market, there are numerous opportunities. It is reported that Auby will

strengthen the investigation on market and customers through establishing early education research center by

cooperating with children education specialists recently. The principal noted that “in fact, it has strategic significance

for Auby. Our objective is not only the toy production for babies and children, but also the products for pre-school

children. Hence, the research on children’s behavior is sure to become a crucial step.”

FUTURE PROGRAMMES AND ACTIONS ENVISAGEDFUTURE PROGRAMMES AND ACTIONS ENVISAGED:

TAITMA has chalked out the following line of action for achieving the desired results and attaining all-round growth of the toy industry.

 

To make concentrated efforts to bring all toy manufacturers under one common platform of TAITMA. This

will strengthen the Association in carrying out its development efforts.

To make strong representations to the Government of India to consider including the toy industry in the

list of “Priority Industries” in view of its large export potential and the toy industry’s vital role in laying

strong foundation to foster the growth and development of child’s imagination and education.

To propagate a code of ethics amongst the manufacturers against plagiarising others ideas and products.

To seek financial assistance and subsidies from available funding Government Institutions solely for the

growth and development of the toy industry.

(plagiarism of) 

To prepare “Toy Project Report” covering all developmental aspects with facts and figures and

explanation of factual problems and recommendations. This will strengthen TAITMA’s representations and

demands for growth of toy industry.

To prepare a Handbook on the toy industry covering all relevant Government notifications, specifications,

trade practices, all relevant statistics, names and addresses of toy manufacturers, traders, etc. This will

be very useful to all concerned as they get all information of toy industry at one place.

To strongly represent to Central and State Governments with a justified plea for removal/reduction of

Sales Tax, Octroi, Excise and Customs levies.

To educate and convince the manufacturers for application of safety standards formulated by Indian

Standards Institution to raise the quality of the products. This will result in enhancing the marketability of

toys both in the Indian markets as well as Export markets.

To make strong representations to the Ministry of Commerce for justification of export incentives.

To make a plea for a separate Export Promotion Council for the toy industry or alternatively to consolidate

export of all toys under one Council, e.g. The Plastics and Linoleum Export Promotion Council and Trade

Fair Authority.

To assist in the formation of a consortium of manufacturer-exporters under the guidance of TAITMA.

To establish an Exhibition Cell at the Head Office in Mumbai and to organise Toy Exhibitions thoughout

the country. This will result in purposeful relationship between manufacturers and consumers.

To establish Display Centres for toys in the leading cities of India.

To organise for group advertising in leading local and foreign newspapers and periodicals under the

banner of TAITMA for the benefit of the members to assist individual entrepreneurs to advertise

effectively at a subsidised cost.

To maintain a reference library for the benefit of members by subscribing to toy trade magazines

published all over the World to enable them to keep in touch with latest developments.

To keep regular correspondence with Indian Trade Embassies in India and to develop mutual trade

benefits through Toy Associations abroad.

ndia's toy market growing 20% a year 

Growth despite low penetration.

The Indian toy market is growing at one of the fastest paces anywhere in the world and, with a weak local industry, international toy producers could be forgiven for thinking that the burgeoning industry is child's play for suppliers.

From a current base of around US$282 million, the Indian toy market could see sales topping US$1 billion inside 10 years, offering the kind of incentives that many toy makers dream about.

For a start, Indian producers already recognise that the 1980s are long gone, and that China-produced toys are able to dominate an industry in which Indian toy makers used to be highly competitive.

As it is, many Indian manufacturers now import and distribute Chinese toys, based on the lower pricing available from the Chinese mainland.

Hanung Toys, an Indian firm with an exclusive licence to manufacture animated characters, such as Popeye and Garfield, still experiences difficulties competing with Chinese-made toys, which are cheaper, but are often highly innovative.

Indian companies which are interested in importing toys are pleased that they are, as sector leaders, exempt from excise duties on imported toys or components. At another time, relaxed duties had been seen as a method of promoting the domestic trade.

Indeed, government initiatives to promote the local toy manufacturing industry have not been particularly impactful. At a new toy city near Delhi, space that was allocated for 135 toy companies actually has only 10 currently in operation.

Which is not to say that the country lacks successful players. Some are making strong marketing efforts in both Europe and the US, and taking advantage in the trend towards board and building games that do not require substantial research and development funding.

Mahindra Intertrade, a trading subsidiary of tractor and utility group, Mahindra & Mahindra, has acted to win the distribution and marketing rights for Lego toys in the South Asia region, and will initially distribute toys in Sri Lanka.

The Lego Company has entered into a strategic alliance with Mahindra Intertrade to sell Lego-branded toys, Legoland park play pieces, lifestyle products and other materials.

However, the Indian toy market still has a long way to go to show the sophistication and spending levels of developed economies. The per capita expenditure on toys in India is a minute fraction of US50 cents per annum, when compared to the US$34 per capita in the US.

There is a lack of awareness of toys, non-availability of quality products, and a somewhat neutral approach taken by state and local governments.

On the other hand, toys are starting to become lifestyle commodities, propelled by higher disposable incomes and affordable prices. More acute marketing and efficient distribution could create an environment for striking growth, particularly as the population is increasingly aware of global icons and entertainment via satellite and cable TV.