Toys – The Cultural Divide
The large toy manufacturers in the U.S. and Europe do not agree on too many things but they do agree on one point – while the business today is in the U.S. and Europe, the long-term potential is elsewhere. To illustrate the point, the chart below compares the six Continents on three parameters – population of children below 15 years of age, toy sales, and per capita income.
Source: Population: Population Reference Bureau [PRB] 2012 , Toy Sales: Toy Association 2010 , Per Capita Income: World Bank 2010
What this tells us is that the consumption of toys by the <15 population is by far the highest in North America, followed by Europe, Latin America and Oceania. The gap between the two metrics is by far the widest in Asia and Africa. While economic factors play a major role in this – see the comparison between Toy Sales and Per capita income – the graph suggests a major unexploited market opportunity in, again, Asia and Africa followed by Latin America.
Yet, when we listen to what the leading American manufacturers – Mattel, Hasbro, LeapFrog – have to say about their business, their focus is virtually totally on North America and Europe. This is understandable since the majority of their sales is in these two places – see the chart below:
Source: Population: Population Reference Bureau [PRB] 2012 , Toy Sales: Toy Association 2010, Mattel/Hasbro/LeapFrog Sales Annual Reports 2012
The problem with this approach is that the North American toy market has been flat to down for virtually a decade now and that Europe is pretty much going the same way. Yes, there is today also more emphasis on Mexico and Brazil than has traditionally been the case but the chart above shows that Latin America is relatively small potatoes in terms of potential. So, why should this be the case? What is wrong with Asia and Africa?
One answer is that North American manufacturers appear to instinctively shy away from both Continents because they are much more comfortable with the North American, European and Latin American environments – culturally, linguistically, demographically and, most importantly, in the approach to play and hence to toys.
Yes, there are differences between the Mom in Wichita, the Hausfrau in Darmstadt and the Carioca in Rio, but these differences are totally unimportant if you look at the similarities. The opposite is true when you go to Africa or Asia. The explanation most often given is that pricing is too low, costs of adapting products to local mandates too high, the political risks too extreme. While all true up to a point, these are in reality mere justifications for "not going where no one has gone before."
Toys start with product development, and in the case of the three companies, development is done in the U.S. by highly talented and extremely well educated people who have mostly lived all their lives in North America. If they travel at all, they do so within an American cocoon.
They most likely see Bangkok from an air-conditioned hotel room, or discuss marketing with their U.S-educated Egyptian colleagues in a Cairo skyscraper or think that the shops on Cape Town’s Cavendish Square represent the African mainstream. They most probably never sat down and talked to a Buddhist abbot in a Lao monastery, or shared a midday meal of rice and fish with a farmer in upcountry Thailand, or lived with a Muslim family in a village in the Nile Delta.
But these are the people who epitomize the way a country, or a culture, or a religion, sees play, and hence determine what toys are or are not appropriate for their children.
One company learned this the hard way in China. Barbie is still today the number one fashion doll in the world and Mattel Inc. spent literally millions on a several-story flagship store in Shanghai in an effort to finally get a foothold in China. That was in 2009. By 2011, the store was history.
Where they went wrong was that they did not even suspect that China was different from the United States on a very fundamental level. The bedrock of the Chinese worldview is Confucianism, and two of the guiding principles governing behavior are Renqing, which broadly translates as the absolute need to adhere to decorum, propriety and politeness; and Keqi which mandates modesty, humility and good manners in all situations.
Barbie, in the eyes of the Chinese mothers, does not meet the mandates of these two precepts for their daughters and so they stayed away in droves.
Secondly, as a corollary to these two principles, the Chinese concept of "femininity" is very different from that of American. In China, "feminine" is more about sweet and soft rather than smart and strong, more about gentle and loving rather than dazzling and fashion-forward.
I thought I would ask a friend of mine, William Xie from Toybiz.cn, located in Yangzhou, about 200 miles north of Shanghai, what his take was on Monsters, now the number one fashion doll in the United States:
"I agree only upright figures gain the affection of the children. We are reluctant to take something vicious or ugly. I have not heard about Monster dolls in China. Just now, I surfed Internet, took a look at them. Perhaps will never give them a second thought."
I also spoke with a number of my friends in Thailand – all mothers of teenage daughters. Their reaction to both Barbie and Monsters was "mai supharb loei" – loosely translated "not at all polite." "Polite" in this context means appropriate.
While Mattel has obviously been burned, one company has decided not to fall into the same trap – Hasbro. Hasbro’s business In Asia has so far been minimal outside Japan where they are being handled soup to nuts by Takaratomy and in India where they have a sometimes-rocky joint venture with Funskool. They have now decided to go into China with the help of a company that is truly at home there - Guangdong Alpha Animation and Culture. They have very recently signed a letter of intent to set up a joint venture with the objective of breaking into this huge potential market with a partner who is fully attuned to the intricacies of doing business there.
In the case of LeapFrog, the company’s main competitor is VTech, a company based in Mainland China and the absolute market leader in Electronic Learning Products throughout Asia. Given the cultural challenges that attend any learning endeavor in Asia, there appears little doubt that VTech has this part of the world pretty much locked up.
Whereas the traps for Western toy companies in Asia are cultural but basically benign, the same cannot be said for the Middle East and Africa where the threats are religious and very real. If you offend Asians, they just ignore you and do not buy your products. If you offend Islam, the result could be bodily harm to your employees and destruction of your business. And it is easy to offend Islam if you do not know what you are doing:
· In December 2011, Iranian officials have banned dolls based on Bart, Homer, and the rest of the Simpsons clan in a fight against "Western intoxication." Mohammad Hossein Farjoo, secretary at the Institute for the Intellectual Development of Children and Young Adults in Tehran, cited the Simpsons' irreligious attitudes as offensive, and thus not welcome in Iran. Farjoo explained that dolls with distinguishable genitals, as well as dolls of adults, are prohibited in the country.
· Again in December of 2011, Iran’s morality police initiated an official ban on the Barbie doll (and her companion, Ken) for being offensive to Islam. In fact, the Koran forbids a girl having a boy friend before marriage or vice versa
· Late 2011, Saudi Arabia’s Commission for the Promotion of Virtue and Prevention of Vice, the Gulf Kingdom’s religious police, confiscated toy guns thought to make anti-Islamic noises offending the Prophet’s wife Aisha.
· Last year, a Happy Meal toy that made patrons of McDonald’s restaurants in Saudi Arabia unhappy because it purportedly insults Islam’s prophet Muhammad has been removed from distribution in the Muslim desert kingdom. The toy, a Mighty Morphin Power Rangers plastic figurine, stands on one leg and pounds on its base with the other leg when a lever is pressed. Saudi Muslims who launched a campaign against the global fast-food giant say the designs on which the Power Ranger stomps form the name "Muhammad." The protesters demanded "the strongest possible punishment for the restaurant," warning they would "not be silent until this is realized." In response, McDonald’s Arabia said it withdrew the toy from all its restaurants "to safeguard against any accusations or misunderstanding.
· In December last year, a Turkish lawyer filed a complaint to UEFA, the European football federation, after Italian club Inter Milan wore a football jersey with a symbol said to be offensive to Islam, during a game with the Turkish team Fenerbahçe. The symbol of the northern Italian city of Milan, a red cross on a white background, apparently reminds Turks of an emblem of the Christian order of the Knights Templar of the Crusades, and is hence offensive to Islamic culture. Inter Milan consciously decided not to wear the controversial shirt during their match in Istanbul.
· Lego just a few weeks ago had to withdraw one of their most successful products, the StarWar’s building set featuring Jabba the Hut. Jabba’s palace was thought to be portraying a mosque and was hence offensive to Islam.
In short, the U.S. toy manufacturers could be excused for thinking that the downside of doing business in the Arabic and African world was greater than any upside. They definitely demonstrate this by the fact that neither Hasbro, nor Mattel, nor LeapFrog have a corporate presence in any Muslim country.
There is, however, an upside, except that other people are getting it. NewBoy FZCO is clearly one example. They are the makers of Fulla, the Arabic equivalent of Barbie and the best selling fashion doll in the Islamic world. Other than Fulla, NewBoy also makes and sells Electronic Learning Aids, Boys Action Figures, Remote Control Vehicles, Baby Dolls and Accessories, Nursery and Preschool toys and Activity sets. While their sales numbers are not publicly available, they are thought to be in the hundreds of millions of Dollars.
To tie it all together, I asked Harold Chizick, a senior toy executive formerly of Spin Master and MEGA Brands and now in charge of ChizComm, a marketing communications agency, what he thought of the prospects for the major U.S toy companies doing business in various parts of the world.
That is what he said companies should do when shaping new products:
"Partnership and trust are critical when it come to local market management. Manufacturers that embrace and implement market specific feedback and use it in the product development process increase their chances of success globally. While it is not always possible or economical to implement all market specific requests it should have an impact on the decision making processes of bringing a brand or product line into a specific market. Toy markets are not homogeneous and smart manufactures adjust their product selection and marketing by taking all factors into consideration".
To be able to follow this very sensible recommendation, the three companies need to first realize that they cannot ignore Asia and Africa even if these places are not particularly comfortable for a California or Rhode Island-based group of executives. The second is that they need to develop local managers attuned to the culture or religion of the country in which to tap business opportunities. And the third, and probably most important is that they then listen to these people very carefully when creating toys for these market places.
Lutz Muller is a Swiss who has lived on five continents. In the United States, he was the CEO for four manufacturing companies, including two in the toy industry. Since 2002, he has provided competitive intelligence on the toy and video game market to manufacturers and financial institutions coast-to-coast. He gets his information from his retailer panel, from big-box buyers and his many friends in the industry. If anything happens, he is usually the first to know. Read more on his website at www.klosterstrading.com. Read more articles by this author
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