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Most parents will buy rattles and dolls for their children from a very young age up until the child hits his/her mid-teens – with just the types of toys purchased changing as the child grows older.

The potential of the global toys & games industry is heavily influenced by demographic trends such as the number of households and birth rate. There’s also a seasonal variation in the types of toys & games currently popular around the world; depending on blockbuster action flicks, emerging WWE stars, and fashion trends.

Thailand’s demographics in particular hint at a widening market for the toys & games industry. The natural birth rate in 2017 was about 240,000 – this refers to the number of births in a year subtracted from the number of deaths – representing a population growth rate of about 0.4%.

Population growth rates peaked in the 1970s at about 3% but aggressive public awareness campaigns by Thai authorities have brought this figure down substantially.

At the same time, annual household income more than doubled from $1,089 in 1999 to $3,276 in 2015. Thai families might not be growing as quickly as before but they definitely have more to spend.

Source: Ceicdata

Higher disposable income also means the sale of toys & games isn’t restricted to children only. Older consumers are forecasted to impact sales too, especially in categories like action figures and accessories.

According to Euromonitor, the value of Thailand’s toys & games industry was estimated to be worth US$376 million in terms of sales volume in 2015. The same report forecasts sales to increase to US$541 million by 2020, or by an average of 9% a year.

That’s a sizeable chunk that brands like Hasbro and Mattel should be eyeing carefully, especially as internet retail is predicted to grab a larger piece of the pie in the coming years, making it critical to double down on mobile/web acquisition channels.

Where do Thai consumers buy toys?

ecommerceIQ initiated a survey to understand online consumer purchase habits for toys & games in Thailand. There were over 300 participants spread across the country.

What was interesting to find was the availability of offline retail wasn’t a bottleneck to transacting online. Only 2.9% of respondents said they ignore online channels because of malls or shopping centers.

The largest inhibiting factor for online purchases is the prevalent lack of trust.

Thai people feel either the pictures online are either heavily photoshopped or they’re usually disappointed when receiving the product after purchasing.

Top reasons why customers don’t shop online for toys in Thailand. Source: ecommerceIQ

But not all is lost. Survey respondents in the 18-24 & 25-34 age category were, on average, 43% likely to indulge in online purchases for toys and games. Those were the two youngest tiers surveyed and it is likely as they grow older they’ll carry these preferences with them.

If online channels optimize the overall buying experience, it’s plausible that the proclivity towards web shopping will increase when it comes time for them to buy toys for their children.

Another encouraging trend that forecasts enhanced ecommerce market share in the future is the amount that users spend online. People with higher basket sizes are more likely to shop online. The largest segment actually spends north of $100/order.

And what toys are people in Thailand purchasing exactly? The survey shows Nerf guns are wildly popular for online purchases along with board games like Monopoly and Transformers action figures.

The overall survey results are consistent with Euromonitor’s analysis of the toys & games industry in Thailand that says the popularity of internet shopping is expected to continue its trajectory of rapid growth, fueled by younger shoppers.

40.1% of this category were secured by web channels in 2015, as compared to 13% in 2010 (although this does include video games, which our survey results excluded).

Euromonitor also makes another prediction: traditional toys and games distributors are expected to expand their internet retailing options over the coming years as more users flock towards this medium.

How can toy brands take advantage?

It’s not enough to list your products on a marketplace and engage in paid campaigns every now and then. Users don’t trust online advertisements; they’re eager to purchase but the one thing holding them back is the nagging uncertainty that the product won’t match expectations.

Often they’ll visit an offline store to see the product up close and personal before purchasing. Little wonder why influencer marketing is becoming so important in a brands’ marketing mix.

Influencer marketing platform MuseFind says 92% of consumers trust an influencer more than an advertisement. And with adblockers flooding browsers, it’s likely that your target consumer simply won’t even view your advertisement, no matter how much money you pour into the campaign.

In Southeast Asia, brands can take a cue from China’s bold forays into live streaming. Quartz predicts this is now a U$5 billion industry with once ordinary citizens catapulted into superstardom simply by broadcasting their lives for the world to see. Such online influencers routinely recommend products they use and their audiences follow suit. Evocative marketing is becoming the new normal.

Other than live streaming, product reviews by YouTube stars is another channel that potential shoppers gravitate towards. An unboxing video can help lower the trust barrier significantly as users know what to expect inside the package.

Some juvenile YouTube stars have racked up millions of subscribers on their page with their videos routinely garnering 10 million+ views.

Children need to feel they’re on the same wavelength as their peers, so if it’s ‘cool’ to buy a new toy then they’ll pester their parents until they get their hands on it.

And what’s cool is what’s trending on the internet.

THE BACKGROUND

Derived from Danish phrase leg godt, which means “play well”, LEGO has been a fundamental companion to children and adults with its trademark interlocking bricks.

Founded in 1932, the toy company learned an important lesson of staying true to your brand the hard way.

When the company posted a loss in 1998 for the first time in its history, an internal audit found that no significant innovation had been made in the company for a decade.

It caused the company to hastily diversify its portfolio to include sectors it had no experience in.

This resulted in the company launching electronic toys, dabbling in video games, launches its own clothing lines and watches, and even building theme parks.

LEGO in Asia

Although eventually successful, LEGOland was a financial burden during its first creation and was sold to Merlin Entertainments.

Their attempts at disruption only succeeded at alienating fans and driving the privately-held company almost to the brink of bankruptcy.

With $800 million in unpaid debt in 2003, LEGO’s then CEO Jørgen Vig Knudstorp was convinced that the company was on a path to crash and burn.

“We’re running out of cash.. [and] likely won’t survive.”

The path to LEGO’s revival started in 2004 when Knudstorp began enforcing cost-cutting decisions and selling any LEGO’s business subsidiaries unrelated to the core product.

These actions steered the company back to its ‘brick’ business and the company began listening to the needs of its customers once again.

LEGO in Asia

Lego figure of Jørgen Vig Knudstorp, LEGO CEO who led the company out of the rut

13 years later, revenue increased five-fold and returned to profit. LEGO was named the most powerful brand in the world earlier this year and posted the highest revenue ($5.7 billion) in its 85 years history.

Now they’re looking at Asia.

THE CHALLENGE

Despite record-breaking results, the company’s sales grew only 6% this year after experiencing five years of double-digit growth. In LEGO’s biggest market, the US, sales fell flat despite a significant increase in marketing spend. The company also had to increase prices in the UK after the weakening of the pound following Brexit.

With an already high profile and static demand in mature markets where two third of its revenues come from, the company is hard-pressed to expand – enter Asia.

Although the toy company has been present in the region for the last three decades, LEGO believes that it still hasn’t unlocked Asia’s untapped potential where almost 60% of the world’s children reside.

Conquering Asia isn’t easy as the company faces several issues that are unique to this marker, namely having to price items for higher due to import duties and lack of an expansive retail footprint — causing LEGO to have to work with small distributors to reach audiences across single markets.

There is also a big difference of culture, where ‘play’ is defined differently and not considered as important for young children.

THE INNOVATION

In November 2016, the company opened its first factory in Asia (its fifth globally), located in China’s eastern Zhejiang province and an R&D hub in Singapore.

The decision to open the factory in China was motivated by the company’s 50% increase in sales from 2013 to 2015 in the country.

The 40-acre factory is expected to cut distribution costs and lower the price for customers in Asia. It’s also expected to produce 80% of the demand coming from mainly Japan, Korea, and Southeast Asia.

LEGO also opened its largest retail store in Shanghai on a mainstreet outside of Disneyland, as testament of its confidence in its belief that China will be its third biggest market after the US and Germany.

LEGO in Asia

The opening of the LEGO Store in Shanghai

In terms of digital marketing, it seems the company is tailoring their efforts to target certain demographic groups.

The company is not only popular with children but also appeals to adult fans, particularly in Asia where over 80,000 of them are.

When the company launched its limited edition Architecture series – the first product line made for adults – they featured Seoul’s Sungnyemun Gate and Tokyo’s Imperial Hotel to appeal to Koreans and the Japanese.

LEGO in AsiaLEGO also granted tech-savvy Japan early access to Cuusoo, an online tool that allowed users to design their own LEGO designs in hopes of creating local buzz around its products.

In more recent news, a year-long ‘Build Amazing’ campaign was launched in April in Singapore – a highly family oriented country-state – to encourage parents to think differently about the definition of success and emphasize LEGO’s role in in children’s development.

LEGO in Asia

“The picture of success can be anything, it all depends on what that child wants to envision for their own life. This generation [of parents] are starting to think differently, as in there is an element of creativity and imagination that can help foster that, it’s not a one way route anymore,” said LEGO Senior Regional Brand Manager, Kevin Hagino.

To further its position in the market, LEGO expands its reach through online channels, by selling through e-marketplaces including the Lazada and Central.

LEGO in Asia

LEGO official store in Lazada

THE STRATEGY

Earlier this year, the widely applauded Jørgen Vig Knudstorp stepped down from CEO to head LEGO Brand Group. The division focuses on building long-term brand potential as the parent company expands overseas.

“Our long-term ambition is to provide the opportunity for millions more children around the world to benefit from LEGO play experiences, especially in emerging markets,” said Bali Padda, LEGO’s current CEO.

By building on its presence in Asia, LEGO is trying to become what it calls a “third leg on the stool” to complement its traditional markets, Europe and the US.

“What we’re trying to achieve is to have a major presence in all three regions so we can have a natural hedge on currency flows,” revealed Knudstorp.

THE FUTURE

As the toy industry is poised to grow bigger and new-gen parents in emerging markets can afford to be more open and attentive to the needs of their children, LEGO is in a good position to win the market, even in the emerging ones.