Accessing the ASEAN Consumer Market: Toys and Games(Distribution Channels)

Across many ASEAN nations in recent years, the toys and game industry has continued tobe affected by the increasing popularity of online shopping. This migration affects sometoy categories more than others. E-commerce already dominates the baby and pre-schooltoys market as parents are the key decision makers in the purchase of these sorts of toysand are inclined to search for these products online to find the best deals.

Despite the rise of e-commerce, bricks-and-mortar stores are still the preferred channelfor some categories of toys, especially dolls, superhero action figures, board games, andscience, technology, engineering and math (STEM) toys. Purchases of these sorts of toysand games are highly driven by children’s choice, and parents like to try them out withtheir kids before buying them. This kind of shopping activity can enhance the bondbetween parent and child.

Going shopping together for toys is a favourite activity for many families, especiallyduring holiday seasons. Hong Kong toymakers and suppliers eyeing the ASEAN marketneed to keep aware of developments in both online and offline channels in order not tomiss opportunities.

Toys and Games Specialist Stores

Toys and games specialist stores are a one-stop shop for toys, games, parties and gifts.They remain a preferred option for many ASEAN families shopping for traditional toys forchildren over three years old – toys such as dolls, action figures, board games and STEMtoys.

However, older children and teens in ASEAN are becoming increasingly reliant on theirsmartphones and social media at an early age. As a result, e-commerce is expected tocontinue to gain market share as a distribution channel for toys and games. It isbecoming increasingly difficult for offline channels to match the convenience, numerousgood deals and vast product ranges offered by online shopping. In response to thegrowing demand for online shopping, many toys and games specialist stores havecreated their own online shops to offer convenience and a seamless transition acrossonline and offline channels.

Notable Examples of Toys and Games Specialist Stores

Indonesia

Toys Kingdom – One of the biggest toy chains in Indonesia, with more than 30 storesacross the country. Its flagship store in Grand Indonesia offers a complete product range,and comes with impressive in-store decorations and professional sales staff which help toenhance the experience of shopping there.

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Kidz Station – Another well-known toy speciality chain with more than 70 stores in thecountry, housing popular toy brands, such as Hasbro, Disney, Mattel and LEGO. It alsosells collections of licensed products including clothing, footwear and stationery.

Toys Kingdom and Kidz Station in Indonesia (1). Toys Kingdom and Kidz Station in Indonesia (2).

Multi Toys & Games – Established for nearly 10 years, it focuses on figurines and moviememorabilia. It is an authorised distributor of well-known brands like Bandai, Goodsmileand Kotobukiya. It has retail outlets in several key cities, but also sells through its onlinestore and several online marketplaces.

Toys City – A one-stop shop for kids that sells toys, costumes and stationery through itsnetwork of more than 10 stores.

Malaysia

Toys”R”Us – While Toys"R"Us is closing or selling its US and UK stores, its operation inAsia is business as usual, spanning a network of over 400 brick-and-mortar stores acrosskey Asian countries, including Mainland China, Hong Kong, Japan, Malaysia, thePhilippines and Thailand. The chain has about 40 stores in Malaysia, mainly concentratedin Selangor and Kuala Lumpur.

Sheldonet Toy Store – Specialises in pop culture toys, figurines, and collectibles fromglobal brands such as FUNKO and Bleacher Creatures.

Toy Garden and Toywiz – Focuses on limited editions of toys and collectibles, especiallyToy Biz and Marvel figures. Established in 2004, the store has three outlets throughoutKlang Valley. It offers a wide variety of brands, including Hot Toys, Enterbay, Star Wars,Marvel, Transformers, LEGO and Hot Wheels.

Thailand

Early Learning Centre (ELC) – Became part of the Mothercare company in 2007. ELCprovides educational toys for children up to the age of eight. Its products are soldthrough franchise and wholesale operations across many Asian markets, includingThailand, Malaysia, Indonesia and Singapore.

Toys”R”Us – One of the leading toys chains in Thailand with 10 stores across the country,most of them in Bangkok.

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Unique positioning of Toys and Games Specialist Stores

In key cities in Thailand, Indonesia and Malaysia, online shopping is gaining an ever-increasing share of the toys market. As a result, providing a fantastic in-store experienceis critical for toys and games speciality shops. They encourage customers to explore morein the stores by providing demonstrations, hands-on access to the games and toys, andrecommendations and assistance from the in-store staff. They look to develop a uniquepositioning and advertise the aspects that set them apart from other distributionchannels.

While most toy shops in ASEAN offer a full range of toys and games, some focus on justone type or category, such as educational toys or figurines. These shops aim to becomethe primary destination for specific groups of customers shopping for that particularcategory of toy. If Hong Kong toymakers can identify toy shops or chains which specialisein selling their products and which match their market positioning, they will have a verygood chance of winning orders from those retailers.

Nursery and Baby Shops

Along with baby essentials and baby clothing, many nursery and infant shops also offertoys – especially pre-school toys, such as bathtub toys, push cars, dolls and soft toys andtricycles.

Notable Examples of Nursery and Baby Shops

Indonesia

Birds & Bees – As well as trendy baby gear, Birds & Bees also carries items such as toyteethers, dolls and soft toys, books and media, and baby gym and playmat equipment.

SUZANNA – Its products portfolio includes toys and gifts for newborn and kids.

Agabang Gallery – In addition to maternity and baby clothes, the South Korean retaileralso sells baby toys such as dolls, soft toys and mobiles.

Malaysia

Babyland – Established in 1982, Babyland is one of the oldest baby stores in Malaysia. Itsproducts include wooden toys, and infant and toddler toys, which are sold through bothits bricks-and-mortar store and its online shop.

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Mamours in Kuala Lumpur.

Mamours – As well as its wide selection ofstrollers and maternity products, it also sellsbaby toys. It has seven outlets across Malaysia.

Happikiddo – Carries over 100 internationalbrands, including baby and educational toys. Inaddition to its online store, the company hasseveral outlets in Kuala Lumpur.

Bebehaus – Has a wide range of baby toys,including bath toys, soft toys and educationaltoys.

Applecrumby & Fish – Its online shop offersvarious types of safety tested toys for babies and toddlers.

Thailand

Mother Goose – Founded in 2006, Mother Goose offers its own designed furniture,bedding and nursery room furnishings, along with other brands covering products fromaccessories to toys and clothes.

Kiddie Season – Offers a wide variety of toys, including baby puzzles, wooden toys andchildren’s games. The company is the sole distributor of the Italian toy brand LISCIANI.

Naturally! BeBe – Sells a wide range of soft toys, wooden toys and ride-on toys.

Baby‘n Me – Carries a variety of imported brands, with a focus on organic and eco-friendly products, including non-toxic art supplies, organic teethers and baby toys.

Opportunities Presented by Nursery and Baby Shops

Nursery and baby product retailers are open to working with foreign toy manufacturersand brands to improve both the breadth of their product range and the depth of theirvalue-added services. They are constantly seeking new and exclusive products to add totheir portfolio. If a toymaker or supplier can offer a product that is differentiated fromthose in the local market vide, it will find that the roadblocks to entry into the ASEANretail market are not as high as they might otherwise be.

When searching for a potential distributor or retailer in ASEAN, Hong Kong toymakersand suppliers need to understand the market positioning of the retailer, and work outwhether their products match the needs of the retailer’s target customers or add value tothe retailer’s existing product range.

Nursery and infant product retailers welcome collaborations with both established andemerging brands that can offer unique product concepts. However, manufacturers andsuppliers that want to sell through this channel should bear in mind that such retailers donot purchase wholesale except from world-renowned and popular brands. They prefer touse a consignment agreement to minimise their risks. New opportunities have emergedwith toys retailers in ASEAN building their own e-commerce sites. Online stores do notface the same physical restrictions on space as bricks-and-mortar shops, which makes iteasier for suppliers to persuade retailers to offer their products for sale.

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Department Stores

While department stores have suffered in recent years in the West, they are still thrivingin key ASEAN cities like Bangkok and Jakarta. In Thailand, Central Department Store, TheEmQuartier and Siam Paragon are packed with shoppers during weekends and holidayseasons. Department stores are an ideal channel for selling toys and games in ASEAN, asshopping at the weekends is a favourite pastime for many families. Department storesoffer a wide variety of toys, from classic playthings like puzzles, arts-and-crafts kits andsoft toys to school gear, books and educational toys. In general, department storecustomers have above-average incomes and are not overly price-sensitive. They usuallyshop with their families and the main factor in their decision-making when it comes toshopping is the needs and welfare of other family members.

Major Department Stores

Indonesia

Traditional department stores in Indonesia are facing stiff competition. There are a widevariety of department stores in the country, targeting different market segments. Metro,SOGO and SEIBU target middle- and upper-class consumers while local departmentstores like Matahari and Ramayana serve the mass market with a variety of goods thatare a step up in quality from those offered by the traditional market. MatahariDepartment Store, the nation’s largest department store chain with over 150 storesacross the country, focuses on lower- to middle-income consumers.

Despite this intense competition, new players have continued to enter the Indonesianmarket from abroad, including Korea’s Lotte Department Store, Malaysia’s Parkson andCentral from Thailand.

Malaysia

Department stores remain an important shopping destination for Malaysian families asmost shopping malls in the country still have a department store as the primary anchortenant.

Parkson Department Store, which opened its first shop in 1987, operates an extensiveretail network which in 2018 comprised more than 45 outlets in Malaysia.

Metrojaya Department Stores runs a chain of eight department stores and over 100speciality stores offering items at a medium-to-high price point. It currently has fiveoutlets in Peninsular Malaysia, at Mid Valley Megamall, Plaza Pelangi, Island Plaza, BukitBintang Plaza and The Curve, Mutiara Damansara.

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Pre-school toys in a Malaysia department store (1). Pre-school toys in a Malaysia department store (2).

Thailand

In Thailand, department stores are magnets for tourism and shopping. They are popularvenues for friends’ and family gatherings, dining, recreational activities, as well ascommercial events like new product launches, festive promotions and small-scaleconcerts. Competition among department stores in Thailand is fierce as the market iscrowded with numerous key brands and individual brands. Most high-end departmentstores, such as Siam Paragon, Central Embassy and The EmQuartier, are clustered in theSiam, Chidlom, and Phrom Pong areas.

Central Group runs many leading department store brands in Thailand, including CentralDepartment Store, Robinson Department Store and Zen. Central Department Store ispositioned in the mid- to high-end market, whereas Robinson Department Store offersgood value-for-money merchandise for the mass market. Central Group’s departmentstores include large children’s departments selling not only Thai toys but also importedproducts, particularly Japanese and Korean brands.

Founded in 1981, The Mall Group operates shopping malls and department stores, suchas Siam Paragon, The Emporium and The Mall Department Stores. Most have a toysdepartment targeting children, teens and young adults.

Opportunities Presented by Department Stores

Department stores are often the primary distribution channel for many foreign brands orsuppliers. However, suppliers of non-branded products may find it hard to be selected bydepartment stores. They may need to pay high rental fees for space and a highercommission on sales. Department stores take a cut of anywhere between 20 and 40% onsales depending on product category and brand strength, although the norm is around35%.

However, department stores are becoming more open to working with emerging brands,in order to bring in innovation and excitement to their product ranges and their shoppingenvironment. These collaborations between department stores and emerging brandsusually involve selling a limited number of products in a select number of stores for ashort period of time. This gives both parties a chance to test the market’s receptivity tothe products and work out whether these short-term collaborations can be turned into along-term relationship.

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In recent years, some major department stores in ASEAN have expanded their toysdepartments and increased the shelf space for toys and video games, targeting bothchildren and adults. This opens a new window for opportunity for Hong Kong toys andgames manufacturers and suppliers.

Trade shows and referrals are one of the main ways department stores source toys andgames. Their toy sales are very much led by movie box office trends and theirpromotional activities are often synchronised with cinema releases. When departmentstores are sourcing toys and games, they pay special attention to safety andentertainment features.

Many department stores buy imported products from a domestic importer, who operateslike a domestic distributor or wholesaler. This can help to lower freight costs and deliverytime in comparison with international freight. Some department stores prefer workingwith distributors for the following reasons:

Distributors supply small quantities of wide selections of products from differentsuppliers.

Distributors handle the import and customs clearance of the goods from overseassuppliers.

Distributors warehouse and deliver the goods to department stores.

Some distributors assist in retail display and merchandising.

Some offer marketing materials and co-marketing opportunities.

Some department stores prefer buying directly from the manufacturer or brand ownerbecause it is cheaper to do it that way. However, without a distributor to act as a middle-man, overseas suppliers may need to devote additional time and resources to eachretailer’s order.

Whether a supplier is selling directly to a department store or through a distributor, it isimperative that it maintains a close customer relationship with the department store andunderstands the needs and requirements of the retailing business as regards productsourcing, merchandising display, inventory management, and distribution in each localmarket.

Pros and Cons of Selling to Department Stores

The Pros

Greater brand awareness and validation

Wider exposure in the local market and visibility to other buyers

The Cons

Department stores do not purchase wholesale

Department stores often require a higher commission rate

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Not easy to develop a long-term strong relationship as department stores havethousands of suppliers

Extended payment terms of up to 60 days

Bookstore Chains

Amazon-style e-tailers are continually enticing shoppers away from traditional bricks-and-mortar bookstores in ASEAN. Bookstore chains in key cities have transformed theirshops into cultural and lifestyle destinations full of eye-catching presentations,attempting to make them more attractive to customers. To bring in young consumers,many bookstores have added toys, anime memorabilia and video games to their productofferings.

B2S (Thailand) – Part of the Central Group, this bookstore chain has started to transformits outlets into lifestyle concept stores, catering for new-generation consumers,particularly students, young adults and professionals.

Toys displayed at B2S in Bangkok (1). Toys displayed at B2S in Bangkok (2).

MPH (Malaysia) – Has about 30 outlets in Malaysia and four in Singapore. It has a heavypresence in Klang Valley, operating in major shopping malls. In Singapore, MPHbookstores are located in Raffles City and Parkway Parade.

Batcat (Thailand) – A book store and museum in Thailand with the largest collection ofsuperhero and anime memorabilia in Asia. As well as offering toys, games and costumes,Batcat has showrooms dedicated to memorabilia of superheroes.

Kinokuniya – a Japanese bookstore chain with a presence in Indonesia, Malaysia,Thailand and Singapore. All Kinokuniya outlets feature a large collection of Japanese- andEnglish-language books.

Opportunities Presented by Bookstore Chains

Bookstore chains in Thailand, Malaysia and Indonesia are located across the wholecountry rather than just in first-tier cities. As such, they have the potential to become anideal distribution channel for toymakers and toy brands that intend to build an expansivefootprint in the region. As consumers’ buying habits change, bookstores have started toincorporate new features and improve their product mix to enhance their overallshopping experience. They are actively sourcing new products with aesthetic appeal and

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unique concepts.

Wide selection of toys available at a bookstore inKuala Lumpur (1).

Wide selection of toys available at a bookstore inKuala Lumpur (2).

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