1 Market Trends of Children’s Toys in China & Opportunities for Licensing Pansy Yau Deputy Director of Research

2 Market Trends and Characteristics

3 Overall Age of child Average annual total spending on toys (Rmb) 1,069 (799) 895 (598) 1,094 (876) 1,200 (846) 1,101 (801) 1,058 (873) Average annual frequency of toy purchase (times) 8.8 (10.5) 9.9 (13.9) 10.5 (11.9) 9.6 (12.5) 7.8 (8.2) 6.1 (6.1) Most expensive toy bought (Rmb) 269 (326) 217 (211) 234 (298) 281 (295) 295 (289) 322 (540) Price level requires more serious consideration 432 (385) 364 (307) 419 (333) 438 (373) 429 (368) 510 (546) Total retail sales of toys and games in China grew by 14% annually since 2010 to Rmb 69 billion in 2013 Frequency and price of toy purchase in 2010 and 2014 (HKTDC Research Surveys) Remark: Red italic figures in brackets are data from 2010 survey Base: All surveyed parents (1600) in eight mainland cities – Beijing, Shanghai, Guangzhou, Chengdu, Wuhan, Shenyang, Nanjing, Xian

4 Online shopping emerges as a new trend Reasons for buying toys online Lower prices68% More choices56% Convenience56% Average purchase price (Rmb) Toy mart161 Department store 179 Online112

5 Only 4% of the surveyed parents could not name any toy brand in 2014, as compared with 31% in 2010 Brand awareness on the rise (% who totally agree or quite agree) Overall Beijing Shanghai Guangzhou Chengdu Wuhan Shenyang Nanjing Xian I buy more branded toys now than a year ago I would pay more to buy branded/higher quality products Trend of buying branded toys in 2014 Base: All surveyed parents (1,600)

6 Parents buy toys to make their children happy, but prefer toys that help their children get smarter Base: All surveyed parents (1,600)

7 Parents’ influence in toy purchase drops when their children enter kindergarten at age 3 Overall Stimulate interaction & exchanges with friends As gift rewarding the child Reasons for toy purchase

8 When children have their own social circles, they want the same toys as their friends to gain peers’ recognition Overall Age of child Toys of other children Shopping malls/toy stores TV programmes/commercial Comic books Internet Electronic games Children’s channels for obtaining toy information Base: Surveyed parents whose toy purchase decision is influenced by their children (1,025)

9 Children start playing mobile/computer games at younger ages Overall Age of child Parents with children playing mobile/computer games (share) 788 (49%) 75 (23%) 191 (60%) 256 (80%) 266 (83%) Mobile phone (% share) Tablet computer (% share) Desktop/notebook computer (% share) Media for playing mobile/computer games Under 5 games (% share) games (% share) Over 10 games (% share) Number of mobile/computer games played by the child

10 Licensing Opportunities

11 Boys and girls’ preference for toys varies at different ages Girls in different age groups all like plush toys and dolls Boys like remote-control/electronic toys and model toys Cartoon characters are the most common licensed property in toys As interest in mobile/computer games becomes stronger, spin-off products from game apps/software have become popular. 46% of surveyed parents have bought such spin-offs for their children Toys most preferred by children

12 Retail sales of licensed merchandise grew at a CAGR of 13.9% in % change 2012/13 CAGR 2008/13 Mkt share 2013 Japan13,27610,1350.2%-5.3%53.9% Chinese mainland2,8705,4999.2%13.9%29.2% Taiwan %7.7%2.7% Hong Kong %1.8%1.5% Macau-659.0%-0.3% Asia Total18,95018,8203.2%-0.1%100% Selected licensing markets in Asia, (US$ million) Source: International Licensing: a Status Report, EPM Communications

13 International and home-grown characters are making inroads into China through online and offline channels

14 Chinese demand for toys incorporating popular licensed properties is keen

15 Transforming and upgrading of toy manufacturers to improve product design and competitiveness Business activities for seeking business partners overseas *** Including business activities related to trademarks and licensing n = 223 (Multiple answers were allowed) Figures in brackets are from the Guangdong survey results in 2013 Source: HKTDC survey

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