Abstract
Why buy this report
- Get insight into trends in market performance
- Pinpoint growth sectors and identify factors driving change
- Identify market and brand leaders and understand the competitive
environment
Executive summary
Growth increasingly driven by video games
Although sales of traditional toys and games still constituted the bulk of
total toys and games sales, the growth of video games was significantly
stronger and by 2005 accounted for more than a third of total sales value.
This is an increase from 2004 when video games accounted for almost 31% of
total sales, and the relative growth rates suggest this trend will continue.
Between 2001 and 2005, sales of video games increased by an average of 8% in
value per year. Meanwhile sales of traditional toys showed a lower average
growth, of just 5%. In 2005, there was an increase in sales of traditional
toys of just 0.5%.
Despite the overall lacklustre performance of the traditional toys and games
industry in 2005 in comparison to video games, some sectors continued to show
steady growth. This was primarily the case for construction and activity
games, and dolls and figures. Additionally the popularity of franchises based
on film and television characters continued to secure strong sales for these
sectors, as well as for the video games market.
Steady price drops affecting industry growth
Toys and Games in the Netherlands are generally priced higher than most other
European countries, with a significant gap between the Netherlands and
neighbouring countries such as Germany and Belgium. This led to allegations of
price fixing and a formal investigation by the Dutch consumer association, the
Consumentenbond in 2004. The price increases had been strongly correlated with
the introduction of the Euro and had in some cases prices jumped by as much as
40% in the 2000-2002 period.
Since 2004 prices for toys and games have fallen fairly significantly,
although the affect of this decline on value sales has been diluted by the
increasing amount spent per child, due to more expensive products like video
games being bought for children, and higher incomes of families. This decline
in prices is related to the overall decline in toys and games spending and
shifting production patterns.
Seasonal nature of toys and games sales
Sales in the toys and games market are closely linked to the seasons, with by
far the highest sales seen in November and December in the run-up to
Christmas. This is particularly acute in the Netherlands due to the importance
of the Sint Nicklaas celebrations on December 5, known as Sinterklaas.
Although in recent years Christmas celebrations are growing in popularity,
Sinterklaas remains the most important festivity, with toy shops dropping
prices sharply in November.
Changing production dynamics
One of the leading causes of the price decreases has been the shift in
production to the Far East, with imports from China constituting the majority
of toys and games products available on the Dutch market in 2006. This had led
to increasing pressure on Dutch manufacturers to lower their prices to remain
competitive, and has led many to shift production abroad. Many Dutch companies
like Bruynzeel consequently produce most of their products in China.
This shift has led to controversy in the Netherlands following reports by
consumer and human rights associations on the mistreatment of workers in
China. It has also led to the Netherlands becoming the fourth largest importer
of toys and games in Europe, although many of these imports are then shipped
further to other European countries. According to national statistics, more
than 65% of these imports originate in China.
Production costs within the Netherlands rose in 2005-2006 due to the
increasing cost of raw materials, especially oil. Additionally, new EU safety
legislation led to increasing costs as each component of any toy produced must
be rigorously tested, increasing production costs by 5-8% in many cases.
Video games growth challenging the leading manufacturers position
The leading toys and games manufacturers remained relatively unchanged, with
Mattel and Hasbro still far ahead of the rest, followed by the biggest Dutch
toy producer Jumbo. However, the speed with which the video games market is
growing suggests that this equilibrium will change somewhat in the future. The
largest video games manufacturers, Sony, Nintendo and Microsoft, have all seen
rapid growth and Nintendo' s sales figures rival those of Lego. Furthermore,
with the release of a new batch of next generation consoles, including the
Nintendo Wii (formerly known as the Nintendo Revolution), Playstation 3 and
Xbox 360, this growth is expected to remain strong.
The boom in video games sales has attracted attention from other
manufacturers, with Mattel and Lego both developing new divisions aimed at
this market. Additionally, a number of lesser-known software developers
including Namco Bandai, Playlogic and Guerilla Games are enjoying strong
performances.
Indoor games still largest sector, but showing signs of decline
The largest sector among traditional toys and games products is indoor games,
including items like board games and puzzles, which still retain their appeal
to consumers. Nevertheless, sales of indoor games, more than any other type,
show consistent and heavy signs of decline and, if trends continue, are
expected to lose this dominant position by 2011.
Dolls and figures remained popular choices among traditional toys. Similarly,
activity and construction toys continued to sell, including items like LEGO,
Playmobil sets, Meccano and train sets. Their increasing popularity
demonstrates the enduring appeal and market penetration of such products, and
reflects the continuing appeal to consumers of toys with electronic and
mechanic components.
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