EXECUTIVE SUMMARY
Multiple factors pulling down traditional toys and games sales
Taiwan has been experiencing a combination of low consumer confidence since prior to the global financial crisis and a low and ever declining birth rate. This, combined with increasing demand for video games, has continued to drag down retail sales of traditional toys and games across the board.
Free games impact video hardware and software sales
Taiwanese game players have a preference for free games, both in online games and mobile games, due to both cost and an established culture of free gaming. This greatly restricted sales for both video hardware and software in 2011. As game prices in Taiwan are almost identical to those in markets abroad, games often appear expensive to local gamers.
Large multinationals grab a larger share
Stiff competition and tough economic conditions have conspired to favour well-resourced companies. As a result there has been much consolidation amongst the large multinational players. Very little room or opportunity has been left for local players to carve out a slice of the market.
Distribution costs for traditional games and toys rising
With an increased preference for video games by Taiwanese consumers, retail sales of traditional toys and games have been shrinking. Less shelf space is generally allocated for these manufacturers. This has resulted in greater competition to make products accessible. Competition for shelf space is expensive and a further burden on smaller companies in traditional games and toys.
Modest growth expected for toys and games
Toys and games is expected to see moderate growth over the forecast period. Traditional toys and games is expected to continue to see declining retail sales despite improvements in the economic situation. Free games is expected to take its toll on hand-held video game consoles and games for hand-held video game consoles. This area is also likely impact sales of static video game consoles and games for static video game consoles in the longer term. However, good prospects for certain categories such as action figures and accessories, pc and console game downloads and mobile games will still drive growth for toys and games in Taiwan.
Economic situation improving but Taiwanese remain hesitant
After two dismal years for the Taiwanese economy where GDP declined by just over 1.1% in 2008 and almost 2% in 2009, the economy rebounded in 2010, growing 11%, and then further expanded at a more moderate 4.4% rate in 2011.
Taiwan’s exports fell off sharply during the global economic crisis. Many companies laid off staff as a result during this period. As the economy has picked up, many companies have not sought to begin rehiring at previous levels. As a result, the unemployment rate remains around the 4.4% mark, just under the highs of 5-6% reached in 2009 and 2010.
Current impact
Recent GDP growth has benefitted larger firms more than it has consumers. Many working consumers continue to fear job losses. This contributes to the ongoing reluctance to spend. During 2011, retail sales for both traditional toys and games and video games were affected by this instability.
There has been an increased demand for traditional toys and games, but this has been almost solely at the budget end of the spectrum with cheap Chinese imports benefitting most. The product range of traditional toys and games through grocery retailers has decreased, with these stores increasingly now focused on low- to medium-priced products.
Department stores as well as traditional toys and games stores constantly promote and offer discounts to entice shoppers. With regards to video games, growth for both video games hardware and software has also slowed. Consumers remain hesitant in making purchases and usually seek out discounts.
Outlook
Taiwan is increasingly reliant on China for growth. Expected robust growth in China is predicted to translate to strong growth in the Taiwanese economy. Forecasts are for around 5% growth over the forecast period. Population growth will be slow, unemployment is expected to drop slightly and the importance of manufacturing will further decline. Much new employment is expected to arise from services.
Future impact
In the short term, consumer confidence is unlikely to be fully restored despite the realisation of better economic prospects. Over the long term, demand for higher-priced products will increase considerably. Impulse purchases will pick up as consumers are more easily tempted to buy. Unit price sales in this area are expected to improve significantly towards the end of the forecast period.
Declining birth rate impacts sales of toys and games
According to industry sources, the drastic decline in sales of traditional toys and games in Taiwan is directly linked to Taiwan’s shrinking market base. Taiwan’s birth rate is low and continues to fall. The birth rate dropped to just over 7.2 in 2011 from almost 9 per 1,000 in 2011. The number of children in the 0-14-year-old bracket dropped by 15% during the 2006-2011 period. The 3-4-year-old group underwent the fastest decline, down 18% over this same period, whilst the population aged 0-18 months recorded the second fastest decline, more than 16%.
Current impact
The ongoing low birth rate has had a negative impact on overall demand for traditional toys and games. This impact has been especially significant for manufacturers positioned in the categories for younger children, as the shrinking market base has led to an ever-worsening decline in retail sales for baby, infant and preschool toys and games as well as ride-on vehicles. Preteen toys and games, due to a broader target segment, have been less affected.
Declining sales have also resulted in a decline in retail sales space. High costs in getting a product on store shelves have made competition for shop space harder. As a result, product range is smaller and many operators are being left out of public exposure.
Outlook
Taiwan’s birth rate is expected to continue to drop. The rate is forecast to fall to under 6.9 per 1,000 persons by the end of 2016. At the same time, the proportion of the population aged 0-14 is expected to drop by 19%, a decrease from the current 3.6 million to 2.9 million by the end of forecast period.
Future impact
With fewer children to spend money on, it is inevitable Taiwanese parents and grandparents will invest more on the children in their family. Toys will be one of the areas that benefits from this extra attention, particularly educational toys.
With increased attention from adults within the family, there is likely to be room for higher-value, trend-driven products. Manufacturers will be freer to offer higher-priced and more complex toys, and expand their product range at the same time. Branding will again become increasingly more important and a stronger deciding factor for consumers in toy and game purchases.
Digital games changing the toys and games market in Taiwan
The portion of Taiwanese playing video games increased from just over 27% in 2006 to almost 32% by the end of 2010. Of these, approximately 87% aged 13-19, the largest group, played video games in 2010. Close behind were the pre-teens (aged 7-12) with over 83%. In total number terms, adults (aged over 20) represented over 71% of the total video gaming population in 2010, with total numbers up 40% between 2006 and 2010.
Current impact
Over the past decade since 2000 there has been an overall switch from traditional games and toys to video games in Taiwan amongst 7-14-year-olds. This movement has cost traditional toys and games players greatly. The video games market has also been suffering from the impact of “free-to-play games”, the common model in online games and mobile games.
The demand for both PCs/MACs games and online games has declined drastically. In 2011, approximately 90% of sales activity generated from online games was from pay-per-item products such as treasures and weapons. Although static video game consoles and games for the consoles are yet to be affected, retail demand for hand-held video game consoles and games for the consoles themselves has been suffering. At the end of the review period, product range and availability for hand-held video game consoles and games is very limited.
Outlook
The popularity of video and digital games will increase. All age groups, adults and children, are expected to show growth, with younger children forecast to show the biggest increase. The growth in smartphone ownership and wider availability is expected to push popularity of digital games.
Future impact
The movement into digital gaming will not only further impact traditional toys and games players, both big and small, but it will also impact video game consoles and software demand. Online “free-to-play” games, with the wide range available and greater depth in game play, are likely to be less impacted.
It is likely that providers of video games software will start looking into digital games, especially mobile games and online games, through the free-to-play business model. Competition amongst developers in the digital game industry is likely to heat up, which should result in increased games software development and a wider range of products. Japanese toy themes may also make the move into mobile games over the forecast period.
Japanese toys and games lead the way
Taiwan has both historic links with Japan and more recent links through popular culture. Nowadays, the popularity of Japanese manga and Japanese cartoon TV programs for children is very strong. Children grow up on a diet of almost exclusively Japanese cartoons and animation.
Current impact
Across all toys and games, Japanese products are considered preferred items of choice amongst consumers. These products tend to have a high level of acceptance when introduced into the Taiwanese market.
Bandai (Taiwan) Co Ltd, the leading player in traditional toys and games, and Tomy Co Ltd, the second largest player, are both Japanese companies. A large portion of toys from both companies closely follow popular trends and these are amongst the fastest-growing products.
Overall, five of the top 10 software players in Taiwan are focused on Japanese-themed games. Namco Bandai Partners Taiwan Ltd is the leading video games software player in Taiwan and has games such as Gundam, Naruto and Super Robot Wars. Nintendo Phuten Company Ltd was the third most important player, with Super Mario Bros the third best-selling software in 2011. Tecmo Koei Holdings Co Ltd, the fifth player, owns the second most popular software game, Shin Sangoku Musou.
Outlook
Japanese-themed toys and games will continue to be popular in Taiwan over the forecast period. Taiwanese society is influenced by trends in Japan and there are few alternatives available to Japanese TV programming for children in Taiwan. This will mean Japanese animation will continue to be a dominant cultural impact and influence on children growing up in Taiwan.
Future impact
There will continue to be strong recognition and acceptance of Japanese-themed characters and manga/cartoon-influenced products in Taiwan. With the decline in traditional games, it is likely Japanese toys in this category will be much less impacted than most other competitors’ products. There is currently a growing trend towards collectibles, both amongst children and adults, in Taiwan and this area will most likely increase in importance.
Enhanced consumer spending power towards the later years of the forecast period will likely support growth in higher-priced Japanese toys and games. Furthermore, software developers of popular Japanese games are likely to extend their presence and existing popularity into mobile game platforms. With this success, there is likely to be an even greater consolidation of market share in the hands of Japanese toy and game companies.
Licensing increases in importance for trend-driven categories
In Taiwan, traditional toys and games are highly trend driven. Much of the sales in this area are generated through higher-priced licensed toys and games from Japan. In 2011, as much as 25% of total retail sales of traditional toys and games originated from licensed products, up from 24% in 2006.
Current impact
Overall, most licensing continues to be of Japanese products. However, leading brands include a mix of international brands and Japanese brands, such as Thomas & Friends and Disney, as well as Gundam and Transformers for boys and the all-time girls’ favourite Hello Kitty. According to industry sources, licensing costs total around 10% of the wholesale value of a product and licensing is seen as an effective investment. A large portion of products from leading players such as Bandai (Taiwan) Co Ltd and Tomy Co Ltd are licensed. In 2010-2011, the Transformer product line was the major focus for Hasbro product development. In late 2011, Hasbro launched its first construction toys, under the KRE-O brand, also based on the Transformer theme. The recent economic turmoil has deterred new entrants from licensing. Most new activity has been limited to leading brands and players.
Outlook
Taiwan’s economy is expected to make a substantial improvement and consequently there is expected to be a significant rise in spending power towards the end of the forecast period. Furthermore Taiwan’s declining birth rate will lead to more money being spent on children; fewer children and more money will likely result in a greater temptation to buy higher-priced products. These changes should help push unit prices up for toys and games.
Future impact
With a stronger economic environment and more attention being heaped on children, the importance of licensing is likely to increase. Branding will be more important and play a greater role in decisions consumers make when purchasing toys and games.
Consumers will be in a position to spend to buy desired products. This will make it easier for consumers to purchase licensed products that tap into trend-driven themes; consequently this area will be of growing appeal for manufacturers. Smaller- and medium-sized players will be increasingly more able to invest in licensed products with increased chances of success.
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Overview
Discover the latest market trends and uncover sources of future market growth for the Toys and Games industry in Taiwan with research from Euromonitor's team of in-country analysts.
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The Toys and Games in Taiwan market research report includes:
- Analysis of key supply-side and demand trends
- Detailed segmentation of international and local products
- Historic values and company shares
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This industry report originates from Passport, our Toys and Games market research database.
