Mattel sees potential in early education market
Mattel Inc, the world’s largest toy maker, is tapping into China’s early childhood education market by working together with local investment conglomerate Fosun Group.
The California-based toy giant announced on Wednesday that its joint venture with Fosun will aim at launching a network of play clubs which combine preschool educational services and retailing. The joint venture is subject to Chinese regulatory approval.
The first play club is expected to open in early 2018, targeting children aged up to 6. It will be located in the newly completed Bund Finance Center in central Shanghai, where Fosun moved its headquarters two months ago.
Covering 1,500 square meters, the club will include entertainment, classrooms, a day-care area, catering and a retail space. Club Med, which Fosun acquired in 2015, will offer its expertise in operating children’s clubs, said Qian Jiannong, senior vicepresident of Fosun Group.
The investment amount
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and the companies’ respective stake in the joint venture were not disclosed.
According to Shenzhenbased market research firm CIConsulting, China’s early childhood education market will grow by 20 percent annually to reach 348 billion yuan ($51 billion) in 2020.
billion
Fosun has had its eyes on this market ever since China relaxed its family planning policy in October 2015. It took over British high-end nursery product brand Silver Cross in 2015. The company also invested in two online parenting platforms — BabyTree and Qbb6 — late last year.
Following its cooperation deals with e-commerce giant Alibaba Group and BabyTree earlier this year, Mattel Chief Executive Officer Margo Georgiadis said the joint venture with Fosun is proof of Mattel’s strategy to accelerate growth in emerging markets.
Mattel opened its first flagship store, the House of Barbie, in Shanghai in 2011. However, the store, which cost the company $30 million, only existed for two years. By opening its online stores on Alibaba’s Tmall and Amazon in 2011, it has registered steady sales growth in China, especially for Mattel’s toys for babies and infants, according to global market research firm Euromonitor International.
The Chinese toys and games market was estimated at 218 billion yuan in 2016 by Euromonitor. However, the market is saturated and highly fragmented, with no player holding more than a 5 percent market share in 2015. Local toy maker Guangdong Alpha Animation & Culture took the biggest share — 4.4 percent — in 2015 while Mattel only took the fourth-biggest share of 2 percent. Mattel’s international competitor Lego took a slightly bigger share of 2.8 percent.
Euromonitor Senior Associate Carol Lyu suggested that toys and games manufacturers should consider branching out into sectors such as entertainment to gain higher profit margins.
expected value of China’s early childhood education market in 2020
Mattel Inc expects to grow three to four times in the more than $31 billion toys and games market in China by 2020 through digitally connected toys, as it intensifies its efforts to take on Lego Group and Hasbro Inc in the country.
Mattel — which more than halved its dividend to fund the new efforts — said its emphasis on e-commerce and repackaging its core brands as educational toys and connecting them to the internet would boost its standing in the fragmented market.
The toymaker has a market share of around 2 percent in China, lagging behind construction toy maker Lego which has 2.8 percent control over the market. Hasbro is catching up with 1 percent, according to Euromonitor International.
Mattel has been revamping its toys, developing AI Barbie Holograms, smart sensorsenabled Hot Wheels cars and virtual reality powered View-Masters to make them relevant to millennial parents.
The new, digitally connected toys will be launched globally in late 2018, the company said on Wednesday.
“In China, there is a lot of recognition on linear learning and development. There is a real need for development of EQ, primary motor skills and social-emotional skills,” Mattel Chief Executive Margo Georgiadis said.
Georgiadis, a former Google executive, took over the reins of the toy company in February and was hired for her tech expertise and e-commerce knowhow.
The company said it aims to enmesh more educational content with other brands such as FisherPrice and Thomas & Friends, which are popular in China.
“As we think about the opportunity in China ... it is driven by the basic fact that there are 210 million kids in China, while there are 55 million in the US,” Georgiadis said.
“Just the sheer size of the market ... it’s an enormous market opportunity.”
Economists said that although the new investment only accounted for 1 percent of the ECB’s total 68 billion euros in foreign exchange reserves, the purchase of renminbi assets reflected the growing acceptance of China’s status as a global economic power in Europe — along with a desire to build closer ties with one of the world’s largest economies.
“The inclusion of renminbi assets by the ECB is significant to the nation’s efforts to internationalize the renminbi,” said Nathan Chow Hung-lai, a Hong Kong-based economist at DBS Group.
“It definitely has a positive impact on renminbi in the long-term, but the shortterm impact on the onshore yuan exchange rate is not obvious,” he added.
E Zhi-huan, chief economist of the Bank of China (Hong Kong), said that the willingness to purchase renminbi assets by one of the most powerful central banks in the world reflected the market confidence in the renminbi.
Meanwhile, the National Bank of Belgium also announced it completed foreign reserve investments in renminbi and South Korean won during the first half of 2017 as part of its diversification strategy, buying 200 million euros worth of yuan and 100 million euros of the South Korean currency respectively, according to the bank’s statement.
The yuan held steady after the US Federal Reserve raised its benchmark interest rate, as the market expected, by 25 basis points on Wednesday.
ECB’s forex investment in renminbi in H1