Editor’s note: Domestic and overseas markets are both complicated in the year of 2009. No exception is for toy industry, which encounters with lots of uncertainty. Changing in market pattern and sales channels, trend of animation and comic toys and domination of prevailing toys are what industry concern. Writer of the following article advances his views and makes analyse. We will read it in two issues.

 

      The toy industry in 2009 appears many uncertainties. From the perspective of macro situation, one aspect is that the impact of financial crisis on the toy exports becomes even more prominent with an uncertain time of bottom line. Secondly, protectionism in international trade of the industry is active and we can not have clear concept about its influence and what kind of range will be impacted for toy industry. Thirdly, whether or not the effect of domestic demand can be apparent in short time to secure 8% of GDP growth and how much it can do to help the toy industry will be uncertain.

 

      From the micro perspective, firstly because of export resistance, more enterprises pay attention to domestic market and start the business into China’s market. Increased competition is inevitable, but it is still uncertain how market structure will evolve. Secondly, domestic market in 2008 appears new trends and new changes, when more domestic enterprises strengthen toys marketing work and investment, but we are not sure about its sustaining capacity and intensity. Thirdly, due to the impact of consumption downturn of EU and U.S. consumers and shrinking toy market, large toy enterprises that rely on exports now face uncertainty of how to survive and continue to develop. Fourthly financial tsunami has heighten unemployment and it is uncertain that whether China’s parents would reduce or restrict their expense upon kids’ toys.

 

      Based on so many uncertainties, our expectation and judgment for the domestic toy market of this year are also uncertain. So for this year’s expectation of domestic market, I think that the word “supposition” seems more suitable. However, in general, I believe that domestic toy market still has its base for consumption and we also see positive basic situation. Statistics show that from 2006 to 2008, China's average figure for annual newborns has exceeded 20 million. Absolute or relative value of infant and child products sales are all growing in recent year. In addition, the consumptive pattern as "6 +1",that is, ”six adults and a kid", does not fundamentally change and the total demand for toy market has not changed neither.2009 is bound to be a hard year, but also a year full of hope. It is full of all kinds of possibilities. Premier Wen’s words- "confidence is more important than gold " can be used as our belief in the hard times.

      From macro perspective for the market structure, toy industry is a very typical export and labor oriented industry since China’s reform and opening-up policy. The vast majority of enterprises "attach importance to outside but make light of the inside", and the nowadays economic environment makes more enterprises be determined to open up the domestic market and put forward the development strategy of "both inside and outside". The agony of any society or enterprise will experience in transition goes without saying. However, a lot of powerful export-oriented toy enterprises, if they really have adapted to the business environment of the domestic market, their vitality and impact will be enormous.

 

      I believe that the development trends of the future domestic toy industry will be a bit like the feudal separatism in Warring States period. It is no longer be dominated by few famous names like Auldey, Silverlit or Starmoon in recent years. More brands such as Lingdong Cartoon, Little White Dragon, Starjet, Qunxing, Shifeng are emerging. This will also mean that the threshold of the industry has been heightened and competition has gone keener. It is not only at the primary competition with price and products but also in the aspect of competitiveness in integrated marketing and even of general strength and development strategies of the enterprises. During the Warring States Period, the strategy of "alliances" will be used in the period of resource integration and market competition development of the toy industry.

 

      Thus, first two decades in 2000s will be crucial period of large development and reform of Chinese toys history. There will be a significant change and development regardless of business strategy, marketing, operations and other aspects. And the impact of this change and development will be very far-reaching. It will affect the Chinese transformation from "big toy country” to “powerful toy country “, and from "goods output “ to “brand export ". In the future, it will be the foundation of large-scale overseas brands mergers and acquisitions.

 

      Within the industry, Auldey, which is always at a leading place, sees its significant action in 2009 as to introduce their original theme animation “Go For Speed”. In addition to its strong products and multi-channel advantages at the 4WD cars field and many years of accumulated “Auldey Cup” competition promotion advantages, it must have a good start in 2009.

 

      4WD cars attribute to major categories of model products. This series of products can be assembled, upgraded and transformed. These characteristics as well as its core competitiveness in particular can not be matched by any other series of toy products. And its function can significantly enhance the capacity of the child's hands and minds. So it is not so difficult to understand why 4WD cars are ever flourishing over the years.

 

      The inherent property of 4WD cars is superior strong attraction. In addition to Auldey’s powerful publicity and promotion of cartoons, 4WD cars will surly become the mainstream products in 2009. Although this year there will be other major new type of theme animated toys introduced, currently no one is not to be compared with Auldey, neither in comprehensive operation capacity nor marketing strength.

 

      If in a regional market, there are two or more series of theme animation toys introduced at the same time, the result may be that the marginal benefit of each category declines rapidly and significantly. Another law is products with “big momentum, broad infiltration and long lasting “will be the last winner which is in line with the basic theory of the study of modern media. After all, the guidance and influence of televisions are far-reaching and extensive.

 

      The high-end market of 4WD cars is Auldey’s particular market. The low-end market will be the focus of competition. Too many manufacturers have the old mould of 4wd cars or keep stock and they renovate the price and package to come back to the market again.

 

      In the past accountant report forms of the traditional pure export-oriented toy enterprises, marketing expenditures are basically blank, or only expenses of taking part in exhibitions for the public relations. However, as market competition intensifies and the establishment of the brand and the promotion of sales require, marketing investment of the enterprises become indispensable.

 

      Before 2000, it had been extremely rare that marketing budget can be paid independently by toy business. But over the past two or three years, it is common occurrence for enterprises to invest more than 300 million yuan in marketing. Marketing investment in the traditional sense mainly contains two major blocks: sales cost and marketing costs. The proportion of marketing investment that stands for the income of each enterprise is not all the same at different stages in different environments. Relatively speaking, the proportion of generous and powerful enterprises will be much higher.

 

      At present, expenses on marketing of the toy company are mainly used for the introduction of high-level marketing professionals, authorized right of animated cartoon, the expansion of channels, the media spread and so on. During this period, old pattern was broke and new pattern has not been taken shape yet. There is an obvious character that the relative return of the marketing investment is abundant and the brand is growing fast. It shows that market space is still large during the current period. For instance, during 2007-2008, the rapid spurt brands such as Feilun Toys all play the role of dark horses. I believe that 2009 will continue to see more "black horses ".

 

      From the view of these toy companies, the input on current market must have corresponding returns. These ideas are natural; but the problem is when the enterprises can not achieve the desired return, they suspend or stop the continuous input, indicating that they are lack of a comprehensive and systematical awareness of the nature of the marketing job. Rome was not built in a day. Brand building and consumer awareness are also a long-term, sustained process. Therefore, a truly successful

 

      Enterprise is not because it can achieve the brilliant moment, but can survive when others fall down. This is what we often say that the "the ever green" companies.

  

 

      When the toy industry’s awareness on animation marketing is still blank, the Americans broadcast Transformers which gives us a vivid lesson. When time goes by, marketing awareness of domestic toy enterprises starts to awaken. The beginning of the introduction of foreign-based professional animation works since the mid and later period of 90s of last century, mainly from Japan, also make very substantial market returns.

 

      Since national policy limits the introduction of foreign cartoons, during the period of the turn of the century, the pushing power of animation marketing to the sales of the mainstream toys is also limited. Toy manufacturers basically make hot spots in market in the way of integrated marketing, such as the hot sale of Race-Tin and the early YOY0 ball. Among them, there is one works that has a very good response from the market- Kabutakku, which is developed in a way similar to Ultraman. After 2005, Blazing Teens and Bakugan and so on animations and other similar melodrama appear in China’s market. The biggest advantage of these films is short production cycles and relatively low cost. The disadvantage is easy to block when broadcasted on prime-time.

 

      All of these works have a significant special characteristic, that is, to take the core product lines as core sequence of the story. I call it "professional” animated film. In other words, animation cartoon is just a large-scale advertisement of toy products. The corresponding of "professional-type" is "universal type" of animation which tells story taking cartoon image as main part, such as the classic Tom and Jerry, Mickey Mouse and Donald, Pockemon and so on. A third type is "story" animation, such as Naruto and She-Ra.

 

      The market performance of professional animation is more and more prominent during these 2 or 3 years and its market share becomes larger. This is very easy to understand, because resource of the channel distributors is limited. At a time, if the funds are more used on products of animation category, funds that used on other traditional products are naturally reduced. For distributors wholesalers in particular, the animation products are very attractive, because there are fewer chains of sales, the methods are easy, goods flow is quick and the unit shipments are large.

 

      "Be tired of the old when have new ones” is one of the children’s consumption psychology, which determines the toy’s characteristic of popularity. The product is bound to be soon upgraded. Children’s pocket money that spent on the topic popular toys becomes more and they will naturally reduce consumption on other toys.

 

(To be continued)