ZWC Insight|Fashion & Fun Entailed in Art Toys
October 27, 2021

Are you aware of art toys? Have you ever bought any blind boxes for collecting model toys?

KAWS co-branded art toys are often priced tens of thousands of Yuan, Wang Ning who made a fortune in selling blind boxes makes his foray into LP investment…Art toys are literally gaining momentum under fund support, embodying all manner of mind-blowing ideas. What makes art toy industry boom at the moment? As the saying goes, “stones from other hills may serve to polish our jade”, are there any chances that we may predict the future of China’s art toy market from Japan’s history of art toy development? We did some researches on the art toy market and consumer feedback therein. We expect to open this “blind box” with you to uncover the market in vogue.

Let’s start with the definition of art toys:

Frost&Sulivan, a famed market research firm, defines art toys as ones infused with trendy culture and contents in its research report. Art toys encompass a vast variety of products, are mostly IP- or pop culture-based and designed for fun in diverse manners. Blind boxes and capsule toys feature draw gameplay; assembled models engage consumers in hands-on pastime; statues lead players to an immersive interaction with their favorite IPs with fun and value of collection.

What makes fans buy art toys of their own accord?  When Gardener dolls saw the light of day at Hong Kong market in the 1990s, they soon became a blockbuster. Meanwhile, the term “art toys” was coined to describe neotype toys different from children’s toys. And as most art toys are created by independent artists or designers, art toys are also known as designer toys.

As a mentally self-contained niche, art toys stayed in “seclusion” for a long time. But in the wake of a surge in Chinese market, art toys have become a symbol for Gen Z pop culture in recent years.

Among over 800 art toy enterprises incorporated in China, Pop Mart is an industry leader which has successfully entered capital market. Nonetheless the entire art toy industry remains under full competition. New sectors arise out of novel gameplay and new IPs are leveraged to cover more potential customers. In this blue ocean market, vast space is left for unicorns.

The craze for art toys can be justified from the following perspectives:

Pan-ACGN user population explosion comes in the first place, and this population has already hit 400 million by 2020. They forge an innately emotional bond with virtual world. Apart from viewing ACGN contents online, they also take delight in bring cute garage kits (GK) and blind boxes among other ACGN elements into their daily life. They are willing to pay for what they love.

As the threshold has been lowered, more are willing to give it a shot. Blind boxes and capsule toys are moderately priced to within one hundred Yuan on average, which is indicative of lower decision cost for initial ACGN users in quest for novelty. Naturally the purchase rate of relevant products rises.

Owing to social attribute implied in art toy industry, industrial circle culture takes shape step by step, delivering a sense of group identity. Modern young people advocate “self-pleased” consumption. Gen Z is keen on trying new products and following trends, and willing to spend on their interests, iiMedia Research said. Besides, as a vast majority of post-80s, post-90s and Gen Z population are the only children who lack company, they take comfort from take-along fun art toys in spare time.

Art toys are aesthetically valuable and worthy of collection in nature Under the banner “youngsters’ first-ever collection”, art toys suit aesthetic taste of the young people by virtue of stylish design and unique designer IP. Those rare hidden editions and IP-based model portfolios seem irresistible to senior art toy collectors. Second-hand art toys in scarcity may be valued dozens of times of their original value.

And some art toy enterprises discover and develop art toy artists/designers and unveil art toy peripherals through IP incubation system; meanwhile, the enterprises host theme shows and co-branding roadshows among other events and hereby establish ecosystems to draw the attention of more consumers.

Against the backdrop of cultural prosperity and gameplay upgrading, what are prospects for the art toy market? When “leading performers” and “audiences” are already in place, will art toy market become a long-lasting “classical play”? We may draw lessons from Japan’s art toy market development.

  • Pivotal in booming art toy market is culture industry prosperity

Take Bandai, a typical Japanese art toy enterprise, as an example. A critical node along its 70-year timeline development is 1970 when Japan’s animation industry began running on the fast track. As a derivative maker of The Mighty Atom, it made its presence felt in the art toy market. In 1980, it made its foray into upstream IP industry and acquired Gundam. Leveraging its supply chain advantages, it delivered a continuous stream of quality products and spent on building more IPs. In 1980-1995, Japan made big strides towards international market. Seizing the opportunity, animation IP-based derivative maker Bandai went global.

China’s animation industry is now embarking on its heyday along with a thriving culture industry, upon embryo stage and growth stage. “Monkey King” is a signal suggesting the rise of Chinese animation. Its successor Bigfish & Begonia became a hit film with box office of over RMB 550 million; in 2018, Bilibili typifying pan-ACGN culture went public at the U.S. stock market; in 2019, Nezha: Birth of the Demon Child overwhelmed the summer film market as the highest-grossing animated movie in China’s film history. Pan-ACGN has now been mainstreamed and is been accepted by most audiences.

As evidenced in data, China’s art toy market expanded from CNY 6.3 billion in 2015 to RMB 22.9 billion in 2020 with CAGR of 29.45%; given projected 2019-2024 CAGR of 29.81%, the market will continue to gain momentum and be worth RMB 76.3 billion by 2024. China’s art toy industry is now taking advantage of the user dividend and IP dividend.

  • Constant upgrading in art toy gameplay intensifies market competition

The art toy industry is booming and all enterprises concerned strive for prime market positions by using their own tactics in the industry chain. According to ZWC’s research results, roughly they are structured as follows:

IP operation: Rolife, Finding Unicorn, etc.; channel: M&G Shop, Kulechaowan, etc.; IP operation+channel: IPStar, 1983, etc.; IP operation+supply chain+channel: Alpha Animation, Pop Mart, Sideshow, 52Toys, etc.

Art toy companies with IP operation at the core stand out in design style and typical IP image and are easily acceptable, most of which have their own in-house design teams for originating products in limited edition and product collections. “Finding Unicorn”, for instance, dabbles in the entire industry chain from IP incubation, publication, retail, promotion to curating inclusive.

In many art toy niches, leading players have emerged and made footprints in the entire industry chain by leveraging their first-mover advantage. Pop Mart, a listed company that built up its fortune from blind box sales, is just a case in point, which has built a full IP+channel+community chain barrier:

First-mover advantage built on IP ecosystem: the company has a vast pool of designer resources, developed a standardized design procedures, deeply cooperated with premium IPs; amongst all popular IP-based products, the new offering Skullpanda hits a new record high in history;

Channel-based rapid expansion: the company is seeing faster-growing revenue upon its radiation and penetration in cities of all tiers nationwide; it is launching robot shops in small-town and rural markets at a faster pace, for building up potential users; upholding first-mover advantage in e-commercial channel and lean operation and , it significantly outperforms its peers in scale and conversion of sales;

Community operation: complete online membership system+all new media channel exposure+offline exhibition/pop-up shop; hike in member population; users registered via all channels skyrocket 236% to 7.4 million.

More possibilities are awaiting the art toy industry. Lately Disney rolled out a non-animation IP – Lina Bell. Relevant derivatives became out of stock in Disney stores immediately after being put on sale. They remained in undersupply even though scalpers marked up their prices. Lina Bell is a veritable “Chuansha Daji”, a fox demon from Chinese old myth The Legend of Deification. With broadened influence, IP-based art toys are serving as a new trend setter.

In addition, a distinctive genre of art toys cannot be underestimated–model toys.

Originally termed for “model & toy”, model toys are later proposed to define a complete system, specifically models and toys that relate to animation, film & TV and game IPs and cater to fans’ needs. Step by step, model toys are well recognized and accepted in the industry.

Model toys nowadays have forged a special pop culture integrating appreciation, spiritual ballast, collection and particularity. Model toy consumers are mostly males in their 20s, who buy costly model toys without hesitation.

Sideshow, for example, annually rolls out around 30 co-branded statue model toys and hereby earns nearly USD 300 million. Its 2019 item “Grogu” based on the IP Star Wars has sold 60,000 around the world. Each item is priced at RMB 3,000, so its sales amount to RMB 180 million.

Model toy market is a male world by and large. Due to exquisite workmanship and restricted number of offerings, model toys remain hard-to-get regardless the markup, which is indicative of greater personality and economic value for collection.

How to expand influence of art toys featuring diversity of gameplay?

Art toys varying by gameplay target different types of customers.

Model toys referred to hereinbefore are “men’s Hermes”, then adorable blind boxes are girls’ favorite. In quest for ways to expand influence of art toys of all categories, we delegate ZWFM Consumer Research Institute to conduct one-on-one interview and questionnaire survey on hundreds of users who give us a glimpse of this issue.

  • Art toys in the eyes of consumers

Non-model art toys–

Buying habit: EC platforms and brick-and-mortar art toy stores form the basis of buying channels, mostly Pop Mart, Miniso, and Kulechaowan; art toys priced at RMB 100-300 are in the majority, and male consumers and college students are more willing to buy prestige art toys; over 50% of consumers buy art toys once per week in the minimum, which is indicative of high repurchase rate, but as consumers get older, they present a decline in the buying frequency.

Buying preference: appearance, IP characters and copyrighted versions are the top three factors for consideration; Japanese animation, games, and film and TV adaptations are the most popular IPs while popularity of game IPs is directly proportional to consumer age; those with a job take greater interest in American animation and original IPs.

Product type: pure IP characters, lucky blind boxes and 3C products top all types of art toys by popularity; bluetooth speaker, illumination and AR interaction are consumers’ most favorite features; Chinese/ancient-styled elements are favored most by consumers; in addition, hi-tech/modern-styled toys are prevailing among male consumers while female consumers are complimentary about cute-styled toys.

Buying purpose: consumers buy art toys mostly for collection, decoration and enjoyment with potential need for functionality thereof; male consumers are more concerned with investment and practical value while female consumers focus on emotional value and process quality of products; those with a job ascribe greater importance to social value of products.

Model toys–

Buying habit: most users buy model toys at least once per month, suggesting high repurchase rate; model toys priced RMB 1,000-10,000 are best-sellers, followed by those priced RMB 10,000-20,000, and medium- and high-end buyers contribute most to the purchase rate; Taobao EC platforms, official applets and agencies are primary buying channels.

Buying preference: IP character-based and copyrighted model toys with painstaking attention to design and process detail merit collection and those with positive word-of-mouth are significantly at a premium at used market.

Buying purpose: buyers have been fans of Japanese cartoons/American cartoons/historical novels since childhood, who have their favorite characters and regard collection of relevant model toys as a manner of expressing affection; buyers grow in the company of vivid model toys which feel like their pals and make them feel not lonely.

  • Think outside the box: competitive differentiation

In light of consumer feedback, art toy market players may seek opportunities for competitive differentiation in the following dimensions

Neotype innovation: Bandai originated assembled model Gundam robots, Hasbro originated soldiers and Lego originated building blocks. Only those that blaze a new trail are entitled to the category dividend, so as to incorporate all manner of IPs. This way, companies can break the bottleneck of subsequent stagnation attributable to single IP restriction.

Dimension of interaction: at present, art toys are largely for show, which are bought and put on shelves. Buyers seldom interact with the toys, so art toy makers are advised to dig into toys’ interactivity and amusement with greater effort. And as evidenced in research results, art toy users are literally in need of social interaction. It may be a potential opportunity to design art toys capable of interacting with users (for play, show, etc.).

Product contents: right now, most art toy IPs attract users by appearance, which have barely no substance and emotion. Few IPs have full persona and storyline. Art toy companies may broaden space for IP’s secondary creation by reference to film, TV, animation and mythology. Gifting art toys with feelings and sentiments, they can deliver new product collections and intriguing contents consistently and secure exposure of products. Bandai’s animation-based IP development and animation design is just a successful case in point.

Product evolution: art toys themselves are a confluence of innovations, such as color change, sound, lighting effects, dynamic effects and even smell. Nonetheless conspicuous homogeneity is seen among art toy products. As consumers prefer art toys with music, recreational and AR interaction features, more movable and singing art toys are expectable on market, engaging consumers in ingenious product experience.

Supply chain: high repurchase rate of art toys sets concrete bars on supply chain. The present art toy supply chain is heavily reliant on labor, indicating ever-growing cost and problem of aging of industrial workers. In this respect, Bandai is a paradigm. With in-depth effort on supply chain, it accelerates delivery while meeting capacity demand regardless soaring sales, which is its core competitive edge. Looking back the history of Japanese art toys relative to that of Chinese art toys, we can make initial determination that China’s art toy industry is in its rapid growth. As market competition turns white-hot, more stunning creative ideas and gameplays will arise and ”wow” consumers for sure.

Next international art toy brand and IP are coming soon. Art toy fans just need to wait and see. We have a great deal to expect from China’s art toys, including blind boxes!

If you boast more trendy and intriguing projects, please do not hesitate to send an e-mail to: yuki.li@zwcpartners.com.