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Toy treat of profits

Tags: hypermarkets, supermarkets, distribution, Licensing, Franchise, Islamic, toys, Toys r Us, Hamleys and Build A Bear, Carrefour, Spinneys, Lulu, Geant, Toys R Us, Kidzania, The toy store, baby shop, Fun City, Middle, East, retail

BY Namita Bhagat | February 13, 2012 | comments ( 0 ) |

Toy treat of profits

Offering huge scope for the toy brands across the globe to grow and generate large profits is the MEA Toy market. Exlore various business models followed in the region.

Toys are meant to bring joy, fun as well as learning to kids during their growing years. Children these days seek innovative gadgets instead of traditional toys. The Kids in the Middle East  are no different and the region's children toys retail market is burgeoning. According to the estimates, the Middle East and Africa’s Toy market is valued at USD1.5 b a year and is growing stronger.

Encouraging facts
In the region, the average annual expenses per child on toys and games, is almost double as compared to Europe. This is because in most of the countries in the region, about half of the population is less than 16 years and the families on average have five children. Thus, the region has larger costumer base which is discerning, deep pocketed looking for a variety of toys products including; toys, hobbies and baby products to sports equipment, children’s furniture and more. These costumers are increasingly buying products from organised retail stores, shopping malls, hypermarkets and supermarkets. The trend signifies positive development in region’s toys retail market.

Market suppliers
Many local and the international toy companies and suppliers have established their presence in region. Some of the local players are; The Gulf Greetings, Playwell International, Simba Middle East, Glory Horizons, Party Centre, White Heart, Ravissant, Toy store etc. While the global brands like Toys r Us, Hamleys and Build A Bear have also made inroads in the local market. These toy manufacturers employ various distribution channels to make their products available to the end consumers.  

Distribution models
The toy supply chain may comprise levels such as inventor, manufacturer, retailer and the end customer. Further, the toy makers set up their sales network through business models like distributorship, retail, franchise, and the brand licensing. These models provide varied entry points to the prospective individuals and businesses looking for investment opportunity at various levels of toys supply chain. They can become part of growing Middle East toys industry via these models.   

 Licensing: This business model is commonly practiced in the toy industry. The licenses can be given for design, manufacturing, distribution and retail i.e. at any stage of the product supply chain. The license provides exclusive rights to the holder for brand’s design, production, distribution or sales.

Wholesalers : The toys wholesalers or bulk sellers buy products from the toy manufactures and supply them to the retailers. Playwell International, a leading player in the Toy industry in the Middle East manufactures and distributes children’s toys in more than 17 countries in the region. Simba Middle East, part of the international toy company Simba Dickie Group offering wide product range comprising puzzles, building blocks, wooden toys, art materials and instrumental toys is a prominent distribution company in the region. The UAE based Glory Horizons, creator of Dubai Summer Surprises Mascot, Modhesh; and Ravissant General Trading a local distribution company also offer high quality toy products and brands. These toy makers and/or distribution companies deliver toy products to the other market segments including hypermarkets, supermarkets, department stores, shops, institutional customers and to Early Learning Centres etc.  

Retailing: The retail distributors are the ones who directly cater to the end consumer. The organised retailers like Carrefour, Spinneys, Lulu,Geant, Toys “R” Us, Kidzania, The toy store, baby shop, Fun City source their products from the bulk suppliers. These retailers cater to individual customers visiting their hypermarkets, supermarkets, department stores and shops.

Franchising: Franchising is paving way for the manufacturers/distributors and retailers seeking quick expansion. The potential investors wanting to start toy retailing by partnering with established toy brands may also opt for this model. Besides, leveraging from the recognised brand, the franchisee does not require direct interaction with the distributors as the franchisors handles the toy wholesalers.

Key franchised brandsAn interactive entertainment retailer from the US ‘Build A Bear specialising in customised stuffed animals has marked presence in the Gulf region via franchise model. It has two locations in Dubai, UAE and also has presence in Bahrain, Qatar and Kuwait. Another  specialty Toy Retailer ‘Toys R Us’ launched by the Al-Futtaim Group in Dubai in 1995 has total of 14 locations in Dubai, Sharjah, Abu Dhabi, Al Ain in the UAE, Qatar, Bahrain, Oman, Kuwait, Egypt. Also, UK’s children toy brand Hamleys Franchise is soon opening its new store in Riyadh, Saudi Arabia. It is planning to open more locations in the Saudi Arabia and within Kuwait and Qatar during the next 18 months. Currently, it has three stores across the region including the flagship Dubai outlet. Hamleys is aspiring to extend its footprint further in GCC and Middle East.

Now, ‘The Toy Store’ a brand owned by Dubai’s Gulf Greetings General Trading and a prominent toy specialty retailer in the Middle East, is also looking to expand its network via franchising model. The brand currently has retail stores in the UAE and Bahrain and distribution centres in every GCC country.

Market challenges
The overall success of the toy brands depends on several factors including optimum product supplies. The suppliers are posed with number of challenges to remain profitable and grow their market share. Here are some challenges to be dealt with:

a) Innovation: As change is sweeping every other sector, the toy industry also needs to bring in innovation in the products in terms of variety and technology.

b) Prices: The brands require competitive pricing to cater to varied incomes.

c) Quality: The toy traders require complying with the quality, health and safety standards and best practice regulations of the region.

d) Counterfeiting: The imitation products are a big threat to the sales and profits of the original products.

e) Culture: The toy manufactures need to keep in mind the Islamic cultural and traditions for presenting their product lines.

The Toy industry in the Middle East is challenging as well as rewarding. Even as electronic toys are leading product category followed by soft and hard toys, the suppliers also need to concentrate on ‘Edutainment’ toy products that find more acceptability with the parents. Besides, product innovation, varied price points and optimum supply chain enhance toy retail sales growth and brand’s overall success. Thus, the potential investors and business seekers may opt a model which best suits their investment objectives to be part of the promising toys sector in Middle East.





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