IBISWorld Market Research
While an overall increase in discretionary income has given consumers spending power, the weaker retail market has limited the conversion of demand into revenue
Melbourne, Australia (PRWEB) January 30, 2015
Toy and Game Retailing has endured difficult trading conditions over the past five years. While solid demand for electronic and interactive toys has provided revenue opportunities for operators, trading conditions have been tough due to intense internal and external competition. As a result, revenue is expected to contract by an annualised 2.4% in the five years through 2014-15. According to IBISWorld industry analyst Claudia Burgio-Ficca, “Revenue prospects have been affected by annual fluctuations in real household discretionary income, interest rates, consumer sentiment and the relative share of the total Australian population aged 14 years and younger.” Industry revenue is expected to post modest growth over 2014-15, rising by 1.0% to $850.0 million. The tough trading environment has affected industry profit, with strong price-based competition putting downward pressure on margins. The retail market for toy and game products has been constrained over the past five years. While an overall increase in discretionary income has given consumers the necessary spending power to drive revenue, the weaker retail market (stemming from the global financial crisis and volatile consumer sentiment) has limited the conversion of demand into revenue. Industry operators have faced mounting pressure from e-tailers, auction websites and other external players (such as traditional and discount department stores) that have been offering competitive pricing, an extended range of products and an alternative avenue for buying toys and games.
Toy and game retailers are projected to post steady growth over the next five years. “Despite continued competition from external players, industry operators are expected to benefit from an upturn in retail trading conditions,” says Burgio-Ficca. This trend is projected to be supported by growth in discretionary income, an increase in the relative share of Australian consumers aged 14 years and younger, and consumer demand for the latest tech toys. However, retail spending on toys and games is likely to be hindered by volatility in consumer sentiment and interest rates. As a result, industry retailers are expected to diversify their operations by reviewing their product ranges, entering niche markets or placing greater emphasis on customer service.
The Toy and Game Retailing industry is characterised by a medium level of concentration. Despite this, almost half of all enterprises in 2014-15 are expected to be small, non-employing operators. Barriers to entry are moderate and include medium competition, weak product differentiation and the industry's mature life cycle. However, these factors do not significantly hinder the entry of new players. Despite annual fluctuations, industry concentration has remained unchanged over the past five years. A lack of growth in concentration levels can be attributed to the difficult trading environment exhibited by the industry following the collapse of global financial markets and subsequent slowdown in retail spending.
For more information, visit IBISWorld’s Toy and Game Retailing industry in Australia report page.
Operators in the industry primarily sell a broad range of toy and game products including dolls, hobby equipment and board games. Retailers operate as part of a chain-store network, are franchised businesses or independent players. Store merchandise is purchased from domestic manufacturers and wholesalers or imported into Australia from overseas suppliers.
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