The Indian toy market is currently valued at Rs 2000 crore growing at a CAGR of 15 per cent. The growth trajectory is all set to increase with the advent of international toy retailers and also due to the Indian retailers allocating a large share of store space to the toys category. Fuelled by video, console and computer games, the industry is also benefiting from a growing adult consumer base as this group takes a great interest in games as a popular leisure pursuit.
This is a market that caters to consumers who want to buy everything you have, don’t care what the cost is and are less than five feet tall. Innovations and creativity are the key to survival in this industry, selling toys isn’t exactly a child’s play − you need a lot more than super-hero characters to survive. In recent years the market has been influenced by changing consumer tastes, with children opting for more sophisticated video games and electronic toys. Children are also becoming increasingly accustomed to changing toys more frequently. This means toy and game manufacturers are obliged to introduce new products on a regular basis, and focus on innovation and technological advancements. “Toy industry is coming out of a nascent stage and is increasingly becoming a sought after category for both customers and retailers alike,” said Prasanna Nagarjan, Category Manager for toys, Crossword.
Only 35 per cent of the Indian toy market is organized and companies like Simba and Hamleys are hoping to create a niche in the branded toy space in India which is otherwise dominated by imports from China. Also, with the business environment for foreign retail getting conducive in India (100 per cent FDI in single brand retail); companies are hoping to expand their presence in the country.
Speaking on Hamleys at Infiniti Malad, Mukesh Kumar, VP, Infiniti Mall said, “Hamleys is known the world over as one of the best toymakers and it attracts a lot of kids to the mall. Today people don’t buy a particular product they buy a brand.”
At Crossword toys, they initially started as a filler category to compliment the children’s books range. However since the financial year 2011-2012 their focus on toys has increased by including vehicles, action figures, dolls and accessories, softtoys, outdoor play sets etc. The last year and half has seen toys category come to the forefront as one of the key drivers of the sales growth for Crossword. “As far as the range is concerned, we have already commenced our direct imports and those have been highly successful. We have been able to source very innovative and exclusive range of products from our
vendors overseas. This is also one of the main reasons for our phenomenal success in the toys category,” said Nagarjan.
Toys are no longer viewed as fun elements. Parents increasingly view toys as tools to develop a child’s intellect. Toys are designed to develop social, cognitive, physical, linguistic, sensory and motor skills in a child. Leading toy retailers in the world like Toys R Us have started to highlight the developmental aspect of toys while displaying it in stores. An increasing number of manufacturers are designing and highlighting these aspects in product packaging. These toys are more expensive than most leisure toys. Educational is also driving quick sales for Funskool. Nearly one-fourth of its revenues come from board games such as Monopoly, The Game of Life, Mastermind and Connect. One hurdle in the Indian toy
story is limited exposure to smaller cities.
Bumpy Indian ride
The Indian toy industry caters to about four crore kids in the age group of 12 years across the country. But domestically manufactured toys account for only 15 per cent of the market and the rest of it is flooded with imported toys from countries like China, Korea, Malaysia, UK and the US.
The small toy shops fulfill the demand of the masses, and the branded ones such as FisherPrice, Funskool, Hamleys, Lego and Mattel fulfill the demand of the middle and high-class.
The Indian cities such as Ahmedabad, Bangalore, Hyderabad and Pune are fast-emerging as toy production hubs. The toy industry employs almost 25 lakh people both in the organised and unorganised sector. Almost 70 per cent of the toy market in India is unorganised.
When asked about the challenges in this industry Juzer Gabajiwala, committee member of the Indian Toy Manufacturers Association, explains, “There is zero support from the government. Toy industry being very small each one is doing his own. The VAT differs from state to state. Andhra Pradesh has 12.5 per cent, Gujarat there is no tax. Four or five percent is understandable. We don’t have any value. Government doesn’t even hear us because we are too small.”Adding to this problem are the high grey market imports−reducing the price and importing products thereby resulting in a considerable
drop in taxes. While talking about international brands entering the country Juzer responds, “I don’t consider them as a threat. It will help us become stronger. We have to be cautious and prepare ourselves for it. They are already in but not so strong at the moment. Starting next year it is going to get tougher.”
Since technical knowledge is fragmented, Indian toy industry struggles to produce volumes for a globally competitive pricing. In spite of huge demand the sector still remains largely unorganized. Dogged by lack of innovation, marketing, advertising, distribution and abundance of imported products, the domestic toy industry must be provided with credit and marketing assistance by the Government.
From 2000 players a few years ago, barely 800 survive today. It is believed that nearly 40 percent of toy companies have shut shops since Chinese products started flooding into Indian market. Although the unorganized sector has been hit the most, players like Mattel, Funskool and a few others have been forced to fight back with strings of innovative strategies.
Rainbow of tomorrow
The pester power of kids and the increased ability to indulge into impulse purchase are important factors driving the market. Today the story behind each toy and the ability to customize it for the market keeps the brand afloat in the competition. According to a Euromonitor study, spending on toys and games in India is set to grow at 157 per cent between 2009 and 2014, much faster than other Asian countries such as China (84%), Taiwan (35%), South Korea (33.1%) and Singapore (17.2%). The Indian toy market is on its way to becoming one of the most advanced industries in the subcontinent.