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Mukesh.9.Thmb.jpg Current scenario of Indian toy industry and its future trends

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Mukesh Jagwani | 14 Apr, 2020

With 26% of the population under the age of 15 years, it’s no surprise that Indian toy industry is accelerating. Valued at US$ 1.5 Billion in 2018, registering a CAGR of 15.9% during the year 2011- 2018. According to market research firm IMARC, the market is further estimated to cross US$ 3.3 Billion by 2024, growing at a CAGR of 13.3% during 2019-2024.

The estimated Rs 2-lakh-crore global toy market is dominated by China (from a manufacturing point of view (POV) and the US is the biggest from consumption POV), which sells close to Rs 1.4 lakh crore worth of products annually.

In India, the toy market is dominated by unbranded Chinese products with 90% of the market being unorganised. These Chinese toys do not comply with channel, quality or safety norms and thus turn out to be much cheaper for the Indian consumer, whose purchase decision is heavily influenced by price.

While this is a challenge, aware and indulgent parents with higher than average disposable incomes do opt for the 10% organised retail chains that offer quality products at a higher price point. The market for branded toys is growing with key players like Hamleys standing strong with 127 stores and the US based retailer, Toys R Us growing steadily with 12 stores currently operational across the country. Both the formats have aggressive growth plans for 2020 and beyond. In smaller towns, where access to these stores is limited, online e commerce players like Amazon and Flipkart are helping bridge the gap through door-step delivery.

From traditional toys like wooden carts, whistles, unbranded plush toys and dolls, the Indian
consumer is now transitioning to a new range of toys, heavily influenced by Social media and global Pop culture. The demand for international brands is on the rise and the Internationally licensed toy market in India is expected to grow exponentially.

Even YouTube trends like ASMR, Slime, DIY and more are being interestingly adapted into toys. Due to growing demand, toy manufactures are now focusing on producing licensed toys around globally popular shows like Paw Patrol, Peppa Pig, Masha and the Bear etc. Disney’s product lines from the Marvel cinematic universe and popular animated movies like Frozen drive a considerable portion of sales. It’s not uncommon to see small mom and pop stores selling Chinese replicas of the Disney/ Marvel or DC line of toys due to their ever-increasing demand.

Views on recent moves by the Indian Government
The India government has recently announced a stricter quality testing for imported toys and also considering imposing further curbs, making toys a part of the restricted list. It is also looking to increasing the import duty further by 60%, over the 100% that was already increased in the earlier budgets.

While it’s a welcome move to have stricter quality control in place because it would mean that the unbranded cheaper toys would find it difficult to make its way into the market and branded safer toys will have a larger play. This move could put India at part with the larger toy consuming markets like US, UK, Canada and Australia along with other top European countries, where most of the toys are branded and safe.

However, with import duty increase, a measure that the government of India expects to help in local manufacturing of toys, appears like a move coming from a lack of understanding of the industry dynamics.

To promote local manufacturing, incentivising manufacturing would be a much bigger invitation for international toy manufactures to set up shop in India and export to worldwide markets, rather than making it difficult to import. Simply because, most of the brands and entertainment properties that the toys are based on, are owned outside of India, and at least a speciality toy store in the organised sector like Hamleys or Toys “R” Us will continue to be merchandised over 90% with toys into the country, as India is one of the smallest consumption markets for branded toys globally and it would only make commercial sense for big global toy companies to set up a manufacturing facility for export rather than for domestic consumption.

Increasing import duties could only make branded safe toys more expensive and turning consumers to cheaper Indian made toys which aren’t of as high quality as international branded toys as of today. This measure means that the small Indian toy traders and retailers, apart from Indian corporates like Reliance who have significant play in toys will be severely impacted. A move that would not go down well with the traders’ associations that form a large voting base for the government. In any case with the current 20% duty, freight and tax rates, the branded toys are priced at least 2X, if not more, as compared to locally made toys for the same box size. So, by no means a threat to local manufacturing.

Moreover, making licensed, high quality international brands available in India continues to be a challenge due to tough Import norms and the recent increase in import duty. As a result, small businesses, who wish to legitimately license and sell these products suffer, while low quality, low cost Chinese toys continue to flood the market.

To stem this tide, it is necessary that the government takes steps to enforce stricter laws against counterfeit toys and enforce a ban on low quality Chinese products that are a safety hazard.

The author is the CEO of Winmagictoys Pvt. Ltd. and has a vast knowledge of the global toy industry.

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