In this article, we’ll talk about toys’ opportunities in China throughout the story of the amazing development of Lego.
For the Danish toymaker, it’s soon going to be over 80 new stores open in China, with most of them in third and fourth-tier cities. China is like a bridge for Lego. Indeed, the multicolored bricks company has seen its revenue grow following a double-digit evolution compared to low single digits’ growth in US and European market.
To understand china’s superpower, understand its environment:
- China GDP (Purchasing Power Parity) increased from $20 trillion in 2015 to over $23 trillion in 2017
- In 2018, the purchasing power per inhabitant increase of +6.6%
- Rise of the minimum income per inhabitant
- Development of the middle class: 350-400 millions of peoples
- Largest population in the world with 1.4 billion netizens
- 236 million kids from 0 to 14 years old
- Chinese kids’ pocket money represents $58.25 billion
Lego success story in China.
- 2017: the company owned 50 stores
- 2019: the company is opening 80 new stores in 18 cities
From 2011 to 2015, the company’s revenues rose 91%, and net profit rose from €557 million to €1.23 billion. In 2017, Lego experienced its first decline in profit and revenues since 2004.
A very short experience though, as in 2018 the company enjoyed again a 4% rise in its revenue to €4.87 billion, meaning a net profit reaching €1.08 billion.
While the European and US market is getting more and more challenging for companies (bankruptcy of Toys R Us and Top Toys), China is in contrary turning out to be a real toys paradise for kids but also for businesses.
For more information about trends and opportunities on the Chinese toy market
How did Lego adapt itself to the market?
A digital world
Lego is well known to produce those multicolored bricks that kids love so much. However, the company is not famous at all for video games and other digital games. Nevertheless, they noticed the evolution of the country in both terms: economical and behavioral.
Therefore, they decided to adapt themselves and create an online community for children where anybody can upload their own designs and construction, but also comment on it. Online videos that could reach a very large public, over 1 billion views for some of them.
Moreover, the company allows kids to build settings while using apps within a smartphone to “see” additional story elements and be given tasks while having fun with these legendary colored bricks.
Education is something extremely important for Chinese people. However, the paradox is that for many of them parents should not bear the responsibility of educating kids. They consider that this is the grandparents’ or teachers’ job to do so.
However, Lego positioned himself as participating in this education. Therefore, they’re literally taking part in the kids’ experience while offering kids the opportunity to develop their creativity through construction games. In the meantime, Lego also makes up some new products more accurate to parents’ expectations, such as a construction designed teaching computer coding concepts to prekindergarten age.
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They also developed toys in conjunction with East China Normal University to teach science, technology, engineering, arts and mathematics lessons to elementary school children in Shanghai.
Last but not least, the company is also cooperating with China’s Ministry of Education while training over 60,000 primary and middle school teachers.