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Scope for Hong Kong OEM Toy Sector as New Russian Chain Launches

Detsky Mir branches out into discount educational / developmental toy sector following Urals trial.

Photo: Detsky Mir: Expanding horizons for Russia’s leading toy retailer.
Detsky Mir: Expanding horizons for Russia's leading toy retailer.
Photo: Detsky Mir: Expanding horizons for Russia’s leading toy retailer.
Detsky Mir: Expanding horizons for Russia's leading toy retailer.

Those Hong Kong toys and games distributors / manufacturers looking to sell into the vast Russian market – said to be the world's ninth largest – now have an additional route in, following the news that Detsky Mir, the country's leading toy retailer, is to launch a new chain specialising in low-cost educational playthings. Trading as ABC, its outlets will target those consumers looking for less-costly items than those currently on offer via the parent brand or through the ELC (Early Learning Centres), an existing subsidiary.

At present, the company maintains 579 stores under the Detsky Mir brand, as well as 48 ELC outlets, managed as part of a franchise agreement with UK-based Mothercare. It acquired the latter after their parent company withdrew from Russia following the sharp drop in sales triggered by the 2008 global financial crisis. Over recent years, few new ELC stores have opened, with the company's focus having been very much on its lead brand.

The sanctions imposed following the Ukraine crisis proved a further blow to the ELC chain, as the deprecation of the rouble sent the costs of its wholly-imported stock soaring, pricing it out of the range of the average Russian consumer. In a bid to counter declining sales, additional non-Mothercare lines were introduced, with many of them representing a distinct drift from the chain's core early-learning proposition. This is widely seen as having diluted the brand and led to public uncertainty over its exact retail positioning.

Perhaps surprisingly, the new ABC chain will adopt a similarly broad product profile. Each of its proposed sites will be up to 150 sq m in size and will stock a multi-brand assortment of affordably-priced toys targeted at a broad age range. Of the 1,500 items on offer at each site, 20% will be ELC-sourced, with the remainder consisting of both own-label items and items from well-known brands. In terms of receipt expectations, these are said to be closer to ELC's typical US$35.00 transaction level than the average Detsky Mir spend of $20.00.

Chelyabinsk, a vast industrial city in the Ural Region, was chosen as the site of the first ABC store, with the second due to open in Novosibirsk, Russia's fourth largest city, in the late summer of this year. This regional soft-launch is seen as in line with the increasingly common practice among Russian retailers of trialling new concepts well away from the larger – and more lucrative – metropolitan areas. To date, though, the company has made no comment as to whether this new chain will be eventually extended into Moscow or St Petersburg.

In light of this latest development, it may well be worth Hong Kong-based OEM suppliers / distributors active in the toy sector looking into the opportunities it opens up with regard to the export of developmental / early learning toys and games. As well as simply seeking orders from the chain and its agents, a proactive approach to creating bespoke Russian language editions of popular western games and gadgets is likely to find buyers particularly receptive.

Leonid Orlov, Moscow Consultant

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