I presented the Toys and Games: Key Trends Shaping Consumer Demand address at PlayCon held in Arizona, US over May 7-9, highlighting some of the major macro drivers affecting toys and games sales worldwide, including economic and demographic trends, while focusing on the global performance of traditional toys and games, video games and digital gaming. My keynote speech also included an assessment of youth leisure time activities and the role of technology, as well as the typical purchase decision-making process for global consumers when they are buying toys and games.
One of the key trends to emerge at the congress, which was attended by over 150 high-profile toy industry professionals from key companies and organisations, was the unstoppable rise of internet retailing in traditional toys and games. The preliminary findings from Euromonitor International’s latest global research, due to be published in June, confirm this important trend, now shaping the toy distribution landscape worldwide. Increasing internet penetration and usage, competitive pricing and wide product availability have made internet retailing a clear winner in traditional toys and games.
% of Traditional Toys Sold Via Internet, Selected Markets, 2008/2013
Source: Euromonitor International
Almost Half of Internet Users Will be in Asia Pacific by 2020
Source: Euromonitor International
Amazon Leads Internet Retailing in Traditional Toys
Global internet retailing of traditional toys and games amounted to more than US$8.3 billion in 2013 and, as highlighted at PlayCon, Amazon is the world’s biggest online retailer of toys. Having started as a books specialist in 1994, it has since expanded into other items, and now has a dedicated toys and games page, stocking a wide variety of toys.
Amazon has a global reach, with deliveries to more than 160 countries worldwide. In addition, Amazon has developed twelve specific websites in the US, Canada, UK, Germany, France, Italy, Spain, China, Japan, India, Mexico and Brazil. An extensive international presence makes the retailer more attractive to niche toy suppliers, such as in educational/scientific toys, which can harness a wider consumer audience through Amazon. The relationship is symbiotic, as Amazon in turn benefits by having a larger variety of toys on its website.
Familiarity and security are among the most important characteristics consumers look for when they shop online, and having a well-established online store has made it easier for Amazon to transition into toys. Amazon had over a 12% share of the global internet retailing market in 2013, more than five percentage point ahead of its closest rival, Alibaba Group Holding.
Winners and Losers in Toys Moving Online:
- Grocery retailers are setting up online operations, and have several advantages in this area. First, they are well-known brands so extensive marketing is not necessary. In addition, as many customers are starting to purchase grocery items online, it is more convenient for them to buy toys from the same online shop than to venture elsewhere. The ability to collect items in store is also an advantage, particularly where home delivery is problematic.
- Amazon and other specialist online retailers provide ideal windows for niche product makers, such as small hobby toy makers, to reach their consumer. They may not have the capacity and product range to get listed on the shelves of Wal-Mart or Toys “R” Us, but online retailers are more willing to deal with small quantities.
- Traditional toy stores are facing stiff competition from a plethora of new entrants into toy retailing – such as internet-only toy retailers, grocery retailers and toy manufacturers selling online. They may have staff knowledgeable in toys, but that may not be a significant advantage in the eyes of an online shopper, who can rely on user feedback on sites such as Amazon.
- Hobby stores target a niche market, offering items which often cannot be found elsewhere. As many of the typical die-cast model and model kit collectors are looking online, where they can reach wider enthusiast communities, such bricks and mortar stores will find it more difficult to attract customers.
Internet Retailing Presents a Real Alternative
The popularity of on-line shopping will continue to increase, with most growth happening in emerging markets. Currently, in almost all emerging regions, although internet retailing is one of the most dynamic channels for traditional toys and games, it still represents just a fraction of toy distribution. By 2020, 40% of the global population is expected to use the internet, reducing the digital divide between developed and emerging markets. Many of the most promising emerging economies, notably China and India, could potentially possess some of the most attractive internet retailing environments in the world to tap into. While credit card ownership and delivery may be a challenge, internet retailing remains a very strong option for many toymakers, particularly niche ones, to reach the population outside the main metropolitan centres.