Toys and games sees sound retail value sales growth
Toys and games remained one of the most dynamic markets in Russia in 2013, although its retail value sales growth rate decreased compared to the previous year’s results. The development of traditional toys and games in 2013 was fostered by record birth rates and an increase in the young population. Video games, however, experienced a temporary slowdown in 2013, restrained by an overwhelming shift towards the free-to-play model in mobile games and a declining interest in hand-held video game consoles. As licensing has become more common in toys and games, branded products by international players have remained the most demanded. However, with the adoption of a strategy of development of children’s products at a governmental level, the situation is gradually changing in favour of local manufacturers.
Demographic situation favours toys and games development
In 2013, toys and games producers did not see shortage in an ample consumer base. Following the government’s 2007 birth stimulation programme, positive natural population growth was registered for the first time in two decades in 2013. Alongside the increasing number of young children, the stable economic situation and growing disposable incomes have allowed parents to spend more on traditional toys and games. Following the trend in developed countries, young children are maturing at an increasingly younger age, spurring the development of scientific/educational toys. Video games is becoming less dependent on the demographic situation as it attracts consumers from most age groups, creating products which suit both gamers with sophisticated taste and those who play video games casually.
Toys and games is set to stay highly competitive
Producers of every type of toys and games face a high level of competition, which is expected to intensify further. In toys and games, economies of scale play a significant role, which makes entry on a small scale extremely difficult, unless a new entrant can successfully find an unexplored niche or enter with an innovative product. Toys and games, however, relies more on traditional products backed by licenced brands, which regain popularity with new cartoon or film releases. Complementary to the consumer base, which according to demographic forecasts is expected to slowly decrease, new entrants will have little chance to succeed without offering an innovative product or a larger production scale. Incumbents, on the other hand, will be forced to invest in product quality, widen their assortment and comply with consumers’ expectations. Moreover, fiercer competition between Russian and foreign manufacturers is very likely, as Russian companies have been offered more privileged conditions by the government.
Other Leisure and Personal Goods Specialist retailers is the main distribution channel, with increasing competition from hypermarkets
Other Leisure and Personal Goods Specialist retailers being presented by baby related stores accounted for the biggest share of retail value sales of toys and games and remained the main distribution channel in 2013. Detskiy Mir and Begemot/Begemotik continued to lead in terms of traditional toys and games retail value sales. Many specialist retailers of scientific/educational toys, such as Umnitsa and Imaginarium, have proved to be successful. Disney announced plans to open its specialist retailer store in Russia in 2014. However, more and more sales of toys and games are moving to mass market channels such as supermarkets and hypermarkets, where impulsive purchases take place. In video games, electronics and appliance specialist retailers remains the leading channel. Video games software value sales continued moving steadily online in 2013. However, media products stores remained popular in 2013, as gamers enjoy additional features available with tangible copies of video games.
Macroeconomic instability and demographic forecasts suggest slowdown
Toys and games still holds potential. However, an overall slowdown is expected in the forecast period. Negative structural changes in demographics, smoothed out by the governmental birth stimulating initiative, will take their toll on the industry. The economic situation does not suggest bright prospects for traditional toys and games in Russia. With the rouble plummeting and the geopolitical situation worsening in the first months of 2014, manufacturers became worried about their export potential and consumers can expect increased prices on imported toys and games. This trend, however, is characterised as temporary and the macroeconomic situation may stabilise during 2014. Besides, currency fluctuations, to a large extent, have been caused by global tendencies common to all developing economies, as experts point out. Video games is expected to see a better performance than traditional toys and games in the forecast period. After a slowdown in 2013, video games is set to demonstrate significant growth in 2014, with continuing sales of PlayStation 4 and the release of Xbox One. In addition, Take-Two Interactive Software Inc has announced its plans to release Grand Theft Auto 5 for PC. This may influence overall video games greatly, as the majority of Russian gamers play on PCs rather than on consoles.
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