Toys and Games: Quarterly Statement Q4 2020

December 2020

While income elasticities play a role in demand for toys and games, soft drivers have been critical in shaping industry growth in 2020. Consumers’ need for entertainment and e-learning at home led to a surge in a number of toy categories and video games, which also created opportunities for wider social events. Licensing remains strong in 2020 and long term. Also, channel shifts and digitalisation highlight the need for robust omnichannel retail and communication strategies in 2020 and beyond.

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Key findings

Soft drivers weigh in over income elasticities in 2020

While GDP and income elasticities would be expected to play a role in the growth trajectory of toys and games, soft drivers have played a critical role in shaping dynamic and healthy industry growth in 2020, including the need for entertainment at home and e-learning, demand for value-added products, the acceleration of digitalisation, and the surge of e-commerce.

Select categories see most growth globally, also supported by innovation

Categories within traditional toys such as scientific/educational toys and games and puzzles performed exceptionally well in 2020 due to demand for toys that provide entertainment and educational benefits. Additionally, console gaming sales, software and hardware, received a boost in 2020 in view of the hometainment trend, with expected growth past 2020 not least due to the release of PlayStation 5 and Xbox Series X/S.

Licensing surges ahead in 2020

Licensing remains high on the agenda for many toy manufacturers and others looking into the industry, and 2020 saw significant focus on new launches of successful licensed characters by players such as Hasbro, Funko, and Mattel. The categories they play in, dolls and accessories and action figures, built on their pre-COVID-19 popularity and will continue to show positive results moving forward.

Omnichannel strategy proves vital in face of uncertainty

Drawbacks of focusing on narrow distribution strategies have become apparent for some retailers and manufacturers in 2020. Adopting a strategy that focuses on a variety of engagement and selling avenues to tap into a broader consumer base – e-commerce, flagship store opening, virtual selling events, virtual try-outs – will provide more opportunities for potential success in the future.

Likely trend towards more consolidation in retail as small retailers struggle

Many small retailers struggled in 2020 due to closures and poor e-commerce logistics, while larger retailers like Amazon, Walmart and Target were not forced to close down, but were able to continue capturing sales from others in the industry. As a result, many small independent specialist toy retailers face the possibility of permanent closures, leading to more retail consolidation across markets.

Introduction

Scope
Euromonitor International and COVID-19: forecasts and analysis
Toys and Games: COVID-19 data and reporting timeline
Key findings

Drivers

Four drivers for toys and games under COVID-19
Soft drivers: How we quantify COVID-19-specific effects in the model
Soft drivers outweigh income elasticities in markets like the US
Americans are spending their stimulus cheques on non-essentials
US 2020 holiday sales drivers: click and collect and experiential marketing

Macroeconomic Update

Summer was more optimistic, but the pandemic starts the second wave
In our baseline view, economies start rebounding in 2021
Three scenarios examining the impact of a more severe outbreak
Our view in short
Forecast real GDP growth in 2020 under different scenarios

Q4 Toys and Games Update

COVID-19 impact on the toys and games industry
Traditional toys slows in 2020 due to China, but some categories thrive
Video games growth accelerated globally by hometainment
Positive drivers of growth weigh in heavily
China: recovery expected after tumultuous 2020
US: hometainment , licensing and value-added products drive growth
LEGO: innovation and customer engagement on multiple platforms
Hasbro: offering digital solutions to meet COVID-19 challenges
Licensing surges ahead in 2020 and remains a viable strategy for growth
Social media: Facebook and YouTube popular in homes with children
Smaller businesses and retailers tap into the livestreaming trend
Channel shifts and adopting an omnichannel approach in 2020

Opportunities and Conclusion

Short-term vs long-term opportunities
Virtual worlds beyond entertainment
Omnichannel approach vital to stay competitive

About Our Analytic Capabilities

About Euromonitor International’s Industry Forecast Model
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