Industry

Toy Industry

Consumer Discretionary

The global industry that designs, manufactures and sells toys, shaped strongly by seasonal demand around gift giving holidays such as Christmas, Easter and Three Kings Day. In 2005 United States toy sales reached about 22.9 billion dollars, with children aged 8 to 12 alone accounting for roughly 221 million dollars in annual spending, and manufacturing is heavily concentrated in China, which makes about 70 percent of the world's toys through more than 8,000 toy firms concentrated in Guangdong Province's Pearl River Delta, supplying about 75 percent of toys sold in the United States. Major retailers such as Toys R Us once operated more than 1,500 stores across 30 countries with annual revenues exceeding 13 billion dollars, and the industry has faced growing competition from digital entertainment, prompting many toy makers to add electronic features and online connectivity and, more recently, to contend with distributed manufacturing that lets consumers 3D print toys from open source designs.

Facts

Sector

Consumer toys and games 1

FAQs

Why do many toy producers manufacture in China?

Price-sensitive consumers and intense cost competition push many producers to offshore and outsource production to China to reduce costs.

A 2013 European Commission study of the toy industry found that consumers are fairly price sensitive and that the market has a low concentration of producers, so producers face cost and price competition to a significant extent. That competition is reflected in the production strategy of many producers, which offshore and outsource production to China to reduce production costs. Some firms deliberately keep production in the European Union, such as LEGO and Playmobil, and the study found no definite trend in one direction or the other.

How did video games change the market for traditional toys?

Traditional toys held more than 70 percent of the toy market in 1998 and fell to 47 percent in 2008 as video games rose.

A 2013 European Commission study describes video games as a close substitute for traditional toys, especially when children are a bit older. In the EU9 group of European markets and the United States, traditional toys and games represented more than 70 percent of the total market for toy products in 1998 and fell to a lowest point of 47 percent in 2008. In recent years both markets showed an increase in the share of traditional toys and games, which the study partly explains by the larger impact of the economic recession on video games, and by cross-over toys that combine video games and apps with traditional toys.

Connections