Toys R Us Grows in China; A Very Smart move

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Early this week Toys R Us, (see: "Jacqueline Vong is there for opening of 100th Chinese Toys R Us Store") proudly trumpeted the opening of its 100th Chinese Toys R Us store.  And that is just the beginning, they plan 30 more for 2016.

I think it is brilliant timing and I will tell you why in the next paragraph.  I have to admit, however, that not everyone agrees with me.  Doug Young, a writer for Forbes, said what was on his mind in this headline: "Toys 'R' Us China Toy Story — Real, or IPO Hype?".  Mr. Young opens with this statement: "Bottom line: Toys “R” Us’ big China expansion plan contrasts with pull-backs and departures for many major western retailers in the tough market, and could be aimed at generating buzz in the run-up to a potential IPO."

In my opinion, Doug Young is completely off base.  Yes, some chains may be pulling back or out but Toys R Us sells toys and China is about to be hit with one of the biggest baby booms in history.  At the end of December, 2015, China announced it was changing its one child policy to allow two per family.  China has, for the last 35 years, limited families to one child per household.  Now, with that figure doubling, we can anticipate that some families with one child will go back for a second and families yet to give birth will think in terms of two children.  That's going to mean a lot of babies.

So, Toys R Us is in the right place at the right time to take advantage of a baby and then child population hungry for toys and all things baby.  Good move Toys R Us.

 

3 thoughts

  1. Hi Richard,
    In my frequent travels to Mainland China I have always been fascinated that most Chinese made products including toys intended for the American/Western markets are rarely available for the Chinese consumers. Opening these added TRU stores I agree is brilliant with what is now the more relaxed second child rule. Prices might be low but certainly can be leveraged by the fact that the added freight cost incurred when these products are shipped to us in North America is negligible since most products are made in China and distributed in China. It will be interesting to see characters and pop culture icons popular in China translated into toys and kids’ accessories. Coupled with the smart way TRU develops, merchandises and markets the multitude of toy lines for different age groups, toy types and price points, it is a win-win situation for both the Chinese kids and parents as well as TRU International.
    I will say hello at the NYC Toy Fair!
    Lora Brady

  2. Hi Richard,
    You are right in assuming that with two child policy the toy sales should double literally when families have two child from current one child.
    At the same time TRU should turn their attention on India too, the reason being the economy is poised to grow upwards of 7 to 7.5% in the next 5 years and India has more than 60% of the population which are young.

  3. Hi Richard,
    I agree with you and add that as the population grows so will the middle class. They will be hungry for quality products. And of course the prices will be low because we all know that most toys are manufactured in China.
    Licensed product sales will be very interesting. I imagine TRU will add Chinese licensed characters to the mix as well as popular Western characters from movies etc. that circulate in China.
    All the Best,
    Peter Santaw

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