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China’s Toys and Games Market (3): Pricing and Brand Factors podcast

Given China’s rising income levels, mainland parents are now more willing to buy good quality toys for their children. According to a survey[1] conducted by the Hong Kong Trade Development Council (HKTDC), mainland parents’ average annual expenditure on toys (RMB2,596) and frequency of purchase (15.7 times) today have risen considerably when compared to 2014, suggesting that toys have now become a consumer product bought on a regular basis by mainland parents for their children.

Although mainland parents do not consider brand a major factor in their purchase decisions, they nevertheless agree that toys of well-known brands come with more stringent quality control and better quality. Meanwhile, Hong Kong toy brands are well recognised on the mainland, and prove particularly popular among high-income families.

Marked Rise in Spending on Toys


Mainland parents today are willing to spend more on buying toys. The survey found that parents spent on average RMB2,596 on buying toys for their children in the past year, up 143% when compared to the findings of a similar survey in 2014, and higher than the increase in monthly household income (78%) during the same period.

The most pondered average unit price and annual frequency of toy purchase were RMB744 and 15.7 times respectively, growing at a rate similar to the rise in monthly household income. Meanwhile, the average unit price of toys bought (RMB199) registered an increase of only 49%, lower than the growth in monthly household income. On the other hand, the average unit price of the most expensive toy bought recorded the sharpest increase when compared to 2014, up 234% to reach RMB898. This shows that the total spending on toys and average unit price of toys bought have gone up mainly because parents are more willing to buy more expensive toys for their children and purchase toys more frequently.

At a focus group discussion, one parent born in the 1980s said: “My parents feel that spending RMB1,000 on a toy is too extravagant, but I don’t think so. The two generations of parents hold different views towards spending on toys.”

Chart: Habits of Spending on Toys (comparison of the overall results in the 2014 and 2018 surveys)
Chart: Habits of Spending on Toys (comparison of the overall results in the 2014 and 2018 surveys)

In terms of spending power, the survey found that parents in different cities are becoming more on a par, with spending on toys in the past year averaging RMB2,000-3,000. Parents in Shanghai show the highest spending power. Their total spend on toys in the past year reached RMB3,128, with the unit price of all toys bought and the most expensive toy bought averaging RMB264 and RMB1,272 respectively, while the most pondered average unit price was RMB1,053. These figures rank the highest among all surveyed cities.

Chart: Habits of Spending on Toys (Beijing, Shanghai, provincial capitals & non-provincial capitals)
Chart: Habits of Spending on Toys (Beijing, Shanghai, provincial capitals & non-provincial capitals)

Toy Prices Linked to Household Income and Children’s Age

An analysis of monthly household income shows that the higher the monthly household income, the more the parents spend on buying toys for their children and the higher the average unit price of the most expensive toy bought. However, the frequency of toy purchase and the number of toy types bought do not differ much among families with different household incomes. For instance, surveyed parents with a monthly household income of RMB7,000-14,999 made 14 toy purchases in the past year, while those with a monthly household income above RMB20,000 made 17 purchases. The findings indicate that overall, mainland parents, irrespective of their monthly household income, have a habit of buying toys for their children.

Chart: Habits of Spending on Toys, by Monthly Household Income
Chart: Habits of Spending on Toys, by Monthly Household Income

As children grow older, parents’ toy purchase habits undergo two changes. Firstly, surveyed parents with children in the 1.5-3 age group buy toys for their children most frequently, but their toy purchase frequency goes down as their children grow older. Secondly, the older the children, the higher the average unit price of both the toys bought and the most expensive toy bought. This may possibly be because older children often look for more functions in their toys. One parent at a focus group discussion said: “When children are younger, their toys did not feature too many functions. But as they grow older, they are looking for more functions in the toys, driving up the unit price of the toys we bought.”

Chart: Habits of Spending on Toys, by Gender and Age of Child
Chart: Habits of Spending on Toys, by Gender and Age of Child

STEM Toys Commanding Price Premium

STEM toys[2] are well received by mainland parents. Over 98% of the parents surveyed bought or are interested in buying STEM toys. The average unit price they are willing to pay for STEM toys is RMB414, 108% more than that for other toys (RMB199). The higher their income and the older their children, the higher the price that parents are willing to pay for STEM toys, with RMB300-500 being the price range cited by parents.

In recent years, activities such as robotics competition with STEM education as the theme have sprung up across the mainland in a bid to enhance parents’ understanding and positive perception of STEM education. As a result, parents today are willing to pay more for STEM toys. At a focus group discussion, one parent said: “If the toy can enhance my child’s learning I am willing to pay more than RMB500 for it.” Another parent said: “If I am to buy a more expensive toy it must be one which brings additional value on top of recreation and entertainment.”

Chart: Price of STEM Toys (Beijing, Shanghai, provincial capitals & non-provincial capitals)
Chart: Price of STEM Toys (Beijing, Shanghai, provincial capitals & non-provincial capitals)
Chart: Price of STEM Toys, by Monthly Household Income and Age of Child
Chart: Price of STEM Toys, by Monthly Household Income and Age of Child

Quality: Main Reason for Buying Branded Toys

According to the survey, 49% of the parents would pay attention to the toy brand, but it is not the main factor affecting toy purchase. 39% of the parents surveyed remarked that they would buy branded toys as much as possible, while 4% would only buy branded toys. In selecting among toys of a similar type carrying similar functions, parents are willing to pay a 41% price premium for branded products.

Surveyed parents’ choice of branded toys is affected by their monthly household income and their children’s age. The higher the monthly household income and the older the children, the greater the number of parents stating that they would buy branded toys as much as possible or only buy branded toys. One parent at a focus group discussion said: “Younger children do not seek branded products, as they know nothing about brands. As children grow older, they begin to pay attention to whether the toys are of well-known brands as they interact more and compare themselves against their peers.” However, household income and children’s age do not seem to be factors influencing the price premium parents are willing to pay for branded toys.

Chart: Habits of Buying Branded Toys (Beijing, Shanghai, provincial capitals & non-provincial capitals)
Chart: Habits of Buying Branded Toys (Beijing, Shanghai, provincial capitals & non-provincial capitals)
Chart: Habits of Buying Branded Toys, by Monthly Household Income and Age of Child
Chart: Habits of Buying Branded Toys, by Monthly Household Income and Age of Child

The parents surveyed who would buy branded toys as much as possible and those who would only buy branded toys remarked that they believe that branded toys come under stricter quality control and are therefore safer (89%). They also believed that the design of branded toys is more unique and innovative (70%). In a focus group discussion, one parent said: “I think there is better quality assurance for branded electronic toys.” Another parent said: “I am willing to pay a higher price for toys which are safe and feature more functions.”

Chart: Reasons for Buying Branded Toys
Chart: Reasons for Buying Branded Toys

Hong Kong Brands Welcomed by High-income Families

Although 56% of the parents surveyed said they have little understanding of Hong Kong toy brands, Hong Kong toy brands are generally perceived in a positive light by mainland parents. 77% of the parents surveyed think that Hong Kong toys are under stringent supervision and command excellent goodwill, and toy products made in Hong Kong are safer.

Moreover, 76% of the parents surveyed said that Hong Kong toy designers follow the latest trends closely, and can make use of their international experience to design more unique and innovative products. 66% of the surveyed parents said that even if Hong Kong toy brands are made on the mainland, the brand concept and product quality of Hong Kong brands are still better than mainland brands. According to the survey, the more the parents earn, the better they can identify with Hong Kong toy brands.

Chart: Views on Hong Kong Branded Toys
Chart: Views on Hong Kong Branded Toys

Conclusion

While mainland parents are willing to buy toys more frequently for their children and spend more, they have also become more demanding of toys. Parents are willing to pay higher prices for toys that are safer, feature more functions and can better enhance their children’s learning. Based on such market needs, toy traders can design and make toys with different functions and selling points.

Mainland parents generally believe that Hong Kong toy traders are good at leveraging their international experience, and have better brand concepts and quality control. Hong Kong toy traders may consider highlighting these characteristics in their publicity efforts.

Lastly, mainland parents attach much importance to STEM toys and are willing to pay double the price for STEM toys over other toys. STEM toys are set to become the focus in the mainland toy market.


[1] Please refer to the “Appendix” for background information on this survey.

[2] STEM is an educational approach that integrates the different subjects of Science, Technology, Engineering and Mathematics.

 

Appendix

Survey Background

In recent years, the rising income levels of mainland consumers have fuelled the rapid growth of China’s toy retail market. At the same time, new types of toys have arrived on the market, with STEM toys, new technology toys and electronic games becoming increasingly popular. It is expected that the full-scale implementation of the two-child policy by the mainland government in 2016 will also propel the growth of the toy market. In light of these developments, HKTDC commissioned a new purchasing behaviour survey on China’s toy shoppers to update the ones it carried out in 2010 and 2014. The aim was to track and assess changes in middle-class consumers’ purchase motivations, price sensitivity, brand preference and other trends. The findings of this survey should provide a useful set of references for Hong Kong companies wishing to tap the mainland toy market.

Methodology

The survey was carried out between October and December 2018. A total of 2,000 respondents completed the online questionnaire survey. Of these, 1,600 lived in Beijing, Shanghai and six other provincial capital cities, and 400 lived in eight non-provincial capital cities. Before the online questionnaire survey, two focus group discussions and three home visits were conducted in Shanghai and Chengdu with a view to gaining an in-depth understanding of the preferences of mainland consumers through qualitative analysis.

Table: Design of Focus Groups
Table: Design of Focus Groups
Table: Design of Home Visits
Table: Design of Home Visits
Table: Design of Online Questionnaire
Table: Design of Online Questionnaire
Table: Average Monthly Household Income of Respondents by City
Table: Average Monthly Household Income of Respondents by City
Table: Respondents, by Gender (%)
Table: Respondents, by Gender (%)
Table: Age of Respondents, by City (%)
Table: Age of Respondents, by City (%)
Table: Number of Children of Respondents, by City (%)
Table: Number of Children of Respondents, by City (%)
Table: Education Attainment of Respondents, by City (%)
Table: Education Attainment of Respondents, by City (%)
Table: Occupation of Respondents, by City (%)
Table: Occupation of Respondents, by City (%)

Note: Percentages may not add up to 100% due to rounding.

Content provided by Picture: C.H. Poon
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