In summary of research from experts such as the United Nations, China’s central bank, and Wall Street, the overall outlook for the global toy market in 2024 reveals a mix of positive and uncertain factors.
Lü Daliang, Director of the Statistical Analysis Department of the General Administration of Customs of China, emphasizes that despite the significant challenges faced by the world economy in terms of recovery and sustainable development, positive factors contributing to China’s economic recovery continue to accumulate.
Turning our attention to the toy industry, there are both favorable and less optimistic aspects.
Current Features of the Industry
As the world’s largest producer and exporter of toys, China’s toy industry is to some extent a microcosm of the global toy market.
In 2023, China’s toy exports totaled $40.57 billion, marking a 12.2% YoY decline and eight consecutive months of negative growth. Despite the vibrant Christmas toy market in Europe and the United States and the impressive sales records of Chinese “Double Eleven” trendy products, the overall market consumption remains relatively weak. Upon closer examination of market information and data, the following features become evident:
▐ Feature 1: Oversupply in the market.
After the outbreak of the pandemic, the implementation of epidemic prevention and isolation measures briefly boosted toy sales, attracting a considerable influx of capital into the toy industry and leading to a significant increase in the number of toy-related enterprises. This influx is reflected in the diverse array of toy products available on the market, catering to consumers of all ages, from infants to seniors.
Data indicates that in 2023 alone, more than 70,000 new sellers joined the e-commerce platforms in the toy industry.
In the European and American Christmas markets, as soon as the fourth quarter begins, various e-commerce platforms and large shopping malls rush to release “Christmas Hottest Toys” shopping lists for children and parents to refer to, with each list featuring dozens to hundreds of products.
Traditional toys like building blocks now come in various shapes, including not only buildings, vehicles, planes, and rockets but also flowers and fruits, creating a dazzling array of options.
In the market, there is an abundance of electronic remote control toys, anime IP-authorized products, and more, leading to a clear oversupply.
▐ Feature 2: Consensus on low-price strategies.
Given the global economic downturn and its potential impact on consumers’ willingness to purchase toys, both e-commerce platforms and physical stores in 2023 actively promoted low-priced products to attract consumers.
On the well-known e-commerce platform Amazon, the “Most Popular Toys for Kids” list includes several products priced at less than $10. For instance, the Benzem 28-piece children’s pull-back car is priced at only $9.99. Larger products, such as the EsiPlay Slot Car Track Set, which includes 4 slot cars, 2 controllers, and a double-race game circular crossover track, are priced at only $39.99.
This pricing strategy is also evident in physical stores, as seen in Walmart’s “Top Toys for Christmas 2023” list, where nearly half of the products are priced below $25.
Challenges and Opportunities in the Industry
Toys are not essential commodities, and the prosperity of market consumption is closely tied to economic development.
Predictions for the global economic development outlook in 2024 from various authoritative organizations are cautious. The Organization for Economic Co-operation and Development (OECD) believes that the global economic growth rate will slow to 2.7% this year, the lowest since 2020. The International Monetary Fund (IMF) forecasts a global economic growth rate of 2.9% in 2024, a 0.1 percentage point decrease from its July estimate last year.
In such an economic environment, the toy industry is likely to continue facing challenges related to a downturn in economic activity and decreasing consumer willingness to spend. The following situations are particularly noteworthy for companies:
▐ Situation 1: Significant fluctuations in raw material prices and the RMB exchange rate.
As China’s toy industry is primarily export-oriented, the production costs of enterprises are closely related to the prices of raw materials such as plastics and the exchange rate of the RMB.
According to research by investment banks like Goldman Sachs, in 2024, as the Federal Reserve concludes its interest rate hikes, the US dollar interest rates and exchange rates will continue to decline. This is advantageous for the return of demand for commodities, and it is expected that the S&P GSCI commodity index, dominated by petroleum, will achieve an annual return rate of 21%. Within this, the energy sector is projected to rise by 31%, and the industrial metals sector by 17%. Regarding the RMB-to-USD exchange rate, it is likely to fluctuate between 6.9 to 7.3 RMB to 1 USD throughout the year, following a pattern of being high at the beginning and end of the year, with a low in the middle. While such speculations may not be entirely accurate, they still hold some reference value.
▐ Situation 2: Inevitable intensification of industry consolidation.
Toys are not only an evergreen industry but also beneficial for addressing labor employment issues. Consequently, countries such as India, Vietnam, Mexico, and even Iran have explicitly expressed support for the development of the toy industry. Some multinational toy companies have also established new product processing plants in these countries.
In this scenario, China’s toy enterprises are undoubtedly facing increasingly fierce competition in overseas orders. Domestically, during the three years of the pandemic, the relatively strong sales of toys, especially trendy products, have prompted many people to join the toy industry. According to data, last year saw the addition of over a million registered companies nationwide engaged in toy-related businesses.
In fact, the escalation of competition has led to a continuous decrease in the selling prices of some products, such as children’s vehicles.
However, where there is a challenge, there is also an opportunity. In 2024, China’s toy industry development presents several positive aspects:
▐ Positive Aspect 1: Signs of improvement in market demand.
After the November meeting between the leaders of China and the United States in San Francisco, this is beneficial for Chinese toy processing enterprises to secure more overseas orders.
An observable phenomenon is the 134th Autumn Canton Fair, which attracted over 190,000 overseas buyers from 216 countries and regions, representing a year-on-year growth of over 50%. Participating companies reported not only an increase in the number of buyers but also a more straightforward process of placing orders.
Furthermore, after destocking in 2023, orders for 2024 from European and American multinational toy companies are expected to return to normal. Due to the high-quality requirements of multinational companies, many orders currently depend on Chinese enterprises for production.
▐ Positive Aspect 2: Continued Expansion of the Toy Consumer Base.
Despite the optimized epidemic prevention and control policies, the trend of kidult (adult) toy consumption, stimulated by epidemic isolation measures, continues to grow. As early as 2022, over a quarter of global toy consumption came from adults, and entering 2023, this trend shows no sign of diminishing, with indications of further diffusion.
Reports suggest that during last year’s Christmas in Europe and the United States, “more than half of adults planned to buy toys for themselves during this holiday.”
Research from the American Toy Association also yielded similar results: “We found that adults not only shop for themselves, but 20% of them also buy toys for their elderly parents and other elderly relatives.”
In the domestic market, trendy products such as blind box toys and cotton dolls have successfully expanded to younger consumers. Just last year, the market size of cotton dolls alone exceeded ten billion yuan.
“Toys are poised to become a hobby for adults,” is how foreign media succinctly captures this phenomenon.
Despite the anticipated improvement in the market operating environment this year, the challenge for businesses is how to survive and grow amid intensifying industry competition and an environment where supply exceeds demand. The toy manufacturing industry is expected to face even more competition in the future. Therefore, it is crucial for companies to strengthen technological transformation, actively innovate in product development, and swiftly transition from being a major toy producer to a formidable force in toy manufacturing—a task that is pressing and unavoidable for companies in the industry.