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Selling To India's Growing Domestic Toy Market

As the most populous country in the world, and with a fast developing economy which will lead India to be the 2nd wealthiest country in the world by GDP within the next decade or so, clearly India is rising in terms of importance to the world. More particularly for the toy industry, India has been growing in relevance as an alternative toy manufacturing hub to China.

One under explored opportunity for toy companies though is India's domestic toy market. Although the market is perhaps surprisingly small today, officially valued at just a few hundred million dollars, clearly there are major growth prospects ahead with economic development advancing at a rapid case. China is a good example of a developing country with a massive population which went from very little consumerism to large scale consumerism, which has over time moved China to where it sits today as the world's second biggest toy market.

As more of India's population benefit from massive economic growth, and as several hundred million people are lifted out of abject poverty towards a more comfortable living we can expect to see growth in consumer spending, and in a country and culture which reveres children, we can reasonably expect to see major growth in India's domestic toy market.

There are two primary segments of India's current toy market: organised and less organised distribution channels. Organised channels are mall stores and toy specialist retailers with Hamleys being the leading toy retailer in India with not far off 100 stores. The majority of retail in India though is less formal, less structured and much more based on the independent retail sector with markets and one off stores dominating. Due to the massive size of India, and with traffic congestion rife across India's often heavily populated cities, it is usual to need to work with a large network (i.e. 100+) of local and regional wholesalers in order to service the market. Needless to say this causes challenges in terms of logistics, profitability and forecasting demand. The less formal retail sector is estimated to be valued at as much as three or four times bigger than the formal retail sector. The reality therefore is that we don't really know for sure what the overall toy market value is in India, but what we do know is that it is growing!

Recent policy and political shifts have added fuel to India's growth in the toy business. Following political tensions with China, where a large proportion of toys and toy component parts have been sourced from over the past decades, the Indian government has added punitive tariffs to toys (and other goods) from China. This has lead to two primary impacts on the Indian toy business: firstly, India's export oriented toy factories are having to quickly ramp up the supply chain around toys, which in turn over time will aid the second area of impact - that India's domestic toy demand will going forward increasingly be met by toys produced in India.

Clearly this last impact has major implications for any international toy companies seeking to ramp up their sales efforts into India. Increasingly toy companies will choose to manufacture within India in order to be able to viably supply the domestic Indian market without tariffs due to shipping in from China. Bearing in mind the costs of toy tooling, which makes duplication of tooling unviable except on high volume perennial products, these factors will tend to work towards boosting India's share of export toy manufacturing as the domestic market grows over the next decade and as international toy companies reach the point where they can't afford to not be selling into India.

For now though we are at the start of these big changes, but they are coming whether sooner or later!

Have you listened to our PLAYING AT BUSINESS podcast? We analyse key areas of the toy and game business, we interview leading people in the business and we discuss major trends and changes across toys & games. You can listen to numerous episodes here:

We also operate a Consultancy business (Kids Brand Insight) working with toy & game companies around the world helping them to sell more, increase revenues and grow profits. For more information on our Consultancy work with toy companies:


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