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Date: 05/01/2000
SUMMARY The toys and games market (excluding video games) in Australia was valued at US$438 million in 1999. The estimated annual industry growth rate is four percent. Australia offers a favorable set of demographics, which in turn influences the demand for toys. The population of children under 15 totals nearly four million, with an estimated average yearly expenditure on toys per child of US$229. A standout feature of the Australian economy in recent years has been the continued growth and importance of consumer spending in the market. Household consumption continues to comprise a large portion of the national account, and retail trade figures regularly establish new spending records. In light of these realities, U.S. producers of toys should find good sales opportunities in Australia. The U.S. holds a fifteen percent share of the toy market. The toy market is often price sensitive and competition from numerous overseas suppliers is strong. Success often depends on the ability to secure a particular niche in the market. The Australian toy market is price competitive, with quality, design, innovation and promotion as important aspects to bear in mind when entering the market. Many products are imported from low-cost Asian manufacturers, notably China, Taiwan and Thailand. Local manufacturers comprise only a small percentage of the market. Australian children today are interested
in more sophisticated toys. Fashion and peer pressure are often more
important to them than brand loyalty. Parents demand value for money
and high levels of safety in the toys they purchase. Participants
in the toy industry must adhere to the Australian Toy Standard (AS1647).
Also, toy packages must include cautionary labeling, to be used by consumers
as a guideline.
Market Profile Expenditure on toys in 1999 totaled US$438 million, an increase of 25 percent over the 1998 figure. Despite the significant growth during the last twelve-month period, the annual growth of the toy market is expected to average four percent into the foreseeable future. The expected decrease in the growth rate is due, in part, to the trend toward electronic games. Traditional toys, such as dolls and wheeled vehicles, remain popular. Consumer demand has become more selective, with an increasing trend toward more elaborate, quality toys. Offering good quality toys is imperative to success. The following areas have experienced growth in recent years:
However, this category appears to be the most vulnerable to early oblivion, due primarily to the transient nature of children's likes and dislikes in this area. Toy sales in Australia are remarkably seasonal, with up to eighty percent of sales during the Christmas season and January summer holidays. Australian people (particularly children and youths) tend to be receptive to U.S. brands and products, evident in the continuing growth and interest in film, television, and music from the U.S. Australian consumers are generally willing to pay for quality, which benefits U.S. manufacturers, that tend to produce high quality products. U.S. suppliers continue to maintain a constant market share of fifteen percent of the import market. Statistical Data TOTAL ESTIMATED MARKET SIZE FOR
TOYS AND GAMES
US Dollars Million
Best Sales Prospects Future growth is forecast for high
quality educational toys in timber or plastic. Consumer interest
in educational toys remains high, while the market for inexpensive "junk"
toys, including novelty items, toy guns and similar items, has noticeably
declined in recent years.
Based on current exchange rates, U.S. producers of toys need to be cost competitive. It should be noted that competing on price alone will prove very difficult, and hence finding alternative methods of differentiating a product is highly recommended, e.g., smaller minimum orders, consistent quality, reliable delivery and "new lines" that are slightly ahead of the competition. The most successful new toys of recent years have been those with an innovative concept, design or feature(s), coupled with high media exposure leading up to and immediately following the toy's introduction to the market. The most obvious examples of this are "Furbies" and "Tamagotchis". However, traditional favorites such as board games and plush teddy bears remain the cornerstone of the non-electronic toy industry. Much of the promotional activity for toys is conducted via television advertising. Most advertising is generated by individual toy manufacturers, and often along brand-lines. For example, Mattel and Hasbro advertise Barbie Dolls and Playdoh, respectively, on Australian television. The three commercial television stations in each capital city carry children's programs weekday mornings until 9 a.m., and afternoons from around 3 p.m. Saturday morning is also a popular time slot for children's shows. Television, and consequently television advertising, plays a large role in Australian children's lives and has an enormous impact on shaping their tastes and preferences in a wide range of areas - particularly leisure time activities involving toys and games. The aim of many companies entering the Australian toy market is to become the 'next big thing'. Peer pressure is often used as a vehicle to establish a toy's importance in the minds of the child consumer. However, once this aggressive marketing ceases, interest tends to fade as new toys continuously hit the market. It has been estimated that around 10,000 new or repackaged toys are released into the marketplace each year, with only a handful of those reaching 'fad' status. The 'Spice Girls' collection and other licensed merchandise are a good example of this phenomenon. Domestic Production With the exception of a few small educational toy manufacturers, local production does not represent strong competition in the Australian toy market. The majority of Australian toy manufacturers have either ceased operations or are now importing directly. Domestic production currently accounts for less than six percent of domestic market demand, decreasing by 0.4 percent from 1998. Domestic production is valued at US$24 million. Two explanations for the decline in Australian toy manufacturing are the reduction of import tariffs over the past decade and high labor costs. These factors have combined to make it extremely difficult for Australian manufacturers of many products, including toys, to compete with low-cost overseas competitors, particularly from Asia. At the end of this report is a list of educational toy manufacturers in Australia. 3rd-Country Imports With very few Australian manufacturers supplying the domestic toy market, imports comprise a very high percentage of the total. In particular, Asian-based manufacturers have developed and will continue to maintain the lion's share of sixty percent of the import market, with China, Taiwan, Malaysia, Thailand and Indonesia being the most significant sources from Asia. In 1999, these five countries supplied US$254 million of Australia's total imports of US$422 million. Fierce competition from these high-volume, low-cost overseas suppliers is an obstacle to new entrants in the market. Asian countries (particularly China) have a stronghold in the doll, stuffed toy and metal toy categories. Imports from Japan and the United Kingdom, which account for eight and five percent of the market respectively, cater to the mid-to-upper end of the market. Imports from third countries for the next three years are expected to grow by an annual rate of four percent, as reflected in the expected overall market growth. U.S. Market Position The U.S. holds a fifteen percent share of the Australian toy import market. Toy shipments from the U.S. totaled US$47 million in 1998 and US$62 million in 1999. For the foreseeable future, imports from the U.S. are estimated to increase by four percent, in line with the overall industry growth. U.S. manufacturers are currently leading suppliers in the categories of wheeled toys and puzzles/puzzle books. Competition from Asia is a major factor affecting the potential growth of U.S. toy imports. The Asian countries of China, Taiwan, Malaysia, Thailand and Indonesia account for a combined market share of sixty percent, with imports totaling US$254 million in 1999. Imports from other countries and domestic production represent modest competition. The major U.S. suppliers to the Australian
market are: Fisher-Price, Hasbro, Mattel and Tyco
Industries.
Australian children today are maturing at a younger age, and have greater brand awareness and consumer choice than those of a decade ago. This is due largely to increased media exposure and higher disposable incomes. Marketing products directly to children can be successful, but is often fraught with risk. While there are some constants (such as an interest in sports), fads and fashions in music, television and the like change rapidly, and children are more prone to peer-pressure than brand loyalty. However, as toys remain a popular gift item (particularly at Christmas), it is recommended that manufacturers consider targeting parents and grandparents, as well as the children, as purchasers. For parents, price is a major factor in purchasing decisions for toys. If a toy is in the high price range, it is often perceived to be of good value and/or high quality. Australian consumers often purchase brand-name products at discount department stores because of cheaper prices. This has been emphasized by the recent development and introduction of a 'World for Kids' concept store within K-Mart department stores. The company hopes that this will create a niche in a price sensitive industry. Educational and "play value" are also substantial issues, and safety is a paramount consideration for parents when purchasing toys. The most important feature that children themselves look for when selecting toys is current fashionable trends and preferences of their peer group. As one industry expert states, "toys are like the fashion business - in one day, gone the next". Branded items are generally quite important to Australian children. The market for 'Virtual Pets' and other interactive toys has seen unprecedented strength and growth in Australia, evidenced in the successful releases of Tamagotchis and Furbies in recent years. There has also been a noticeable shift away from traditional toys toward more modern, electronic products. Parental interest lies in elaborate, quality toys, especially high-quality educational toys, rather than inexpensive toys. Demand is also value-driven, with consumers demanding quality products at lower prices. The most popular toys in Australia in the twelve months ended April 1999 were: Zapf Creations - Baby Born
- White
Import Climate The import duty rate on toys is currently five percent. To obtain further information, the contact details of the Australian Customs Service are: Australian Customs Service
Toys are also currently subject to 22 percent sales tax, based on the wholesale value of the goods. From July 1, 2000, wholesale sales taxes will be abolished with the implementation of an across-the-board Goods and Services Tax (GST) of ten percent. Additional information can be obtained from: Sales Tax Department
Despite being a minor player in the global toy manufacturing industry, Australia is playing a crucial role in developing International Standards. The toy industry in Australia is closely monitored and highly regulated by the Federal and all State Governments. Standards Australia, Australian Federal Government commission, has established the Australian Toy Standard (AS1647). Though essentially a voluntary standard, all participants in the toy industry are required to adhere to it, or face prosecution if found to be misrepresenting their compliance. In addition, both State and Federal governments have enacted regulations to produce mandatory standards in relation to certain sections of AS1647, in particular those relating to toys for children under three years of age. Labeling of toys is a particularly important and detailed area of the Australian Toy Standard. Virtually all toy packages must include suggested ages for use, and guidelines have been included in AS1647. Age labeling is intended to give the consumer a general guideline upon which to base toy selections for individual children. Chronological age, physical size, skill level and maturity, as well as child safety and the type of toy, should all be taken into consideration when age labeling toys. To obtain further information, the contact details of Standards Australia are: P.O. Box 1055, Strathfield, New South Wales 2135, Australia; tel: 61-2-9764-4600; fax: 61-2-9746-3333; website: http://www.standards.com.au. Distribution/Business Practices Both manufacturers and wholesalers undertake distribution in Australia. Retailers generally contact manufacturers for name-brand items and less well-known lines are purchased from wholesalers. There has been a marked shift in the retailing of toys in Australia in recent years. Over half of all toys (52 percent) are now purchased from general merchandise stores (including hypermarkets and discounters). Independent toy stores and toy chains (a group which once occupied a large portion of the market), now represent approximately 17 percent of toy sales each. Department store sales are slowing growing, with a current market share of eight percent. Retailing through mail order/catalogs is minimal, and sales of toys via the Internet are beginning to gain popularity. With the continued spread of Internet usage, this medium is becoming an important source of pre-purchase information gathering. The major toy retailers in Australia, by category, are:
Information on the financial strength of a prospective wholesaler can be obtained from the following credit reporting companies in Australia: Dun and Bradstreet (Aust.) Pty.
Ltd.
AMBA Credit Services Pty. Ltd.
Financing Financing practices are comparable to U.S. practices. The terms of payment are negotiable, with methods of payment that include an Irrevocable Letter of Credit, a standard Letter of Credit, and cash in advance. KEY CONTACTS ASSOCIATIONS Australian Toy Association
MANUFACTURERS Educational Aids (Aust.) Pty.
Ltd.
Educational Colours Pty. Ltd.
Finger Toys Pty. Ltd.
Kangaroo Worldwide
Life Education Products
Modern Teaching Aids Pty. Ltd.
WHOLESALERS Clipper International Pty. Ltd.
FBA Imports & Wholesale
Gift Fashion Trading Pty. Ltd.
Lucky Company Pty. Ltd.
Mauriane Trading Pty. Ltd.
Nalegold Pty. Ltd.
RETAILERS Big W
David Jones Ltd.
Kmart
Myer Stores Limited
Target Australia Pty. Ltd.
Toy Kingdom Aust. Pty. Ltd.
Toys 'R Us
Toyworld
TRADE PROMOTION OPPORTUNITIES Australian Toy, Hobby & Nursery
Fair
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