January 31, 2019
By Jacob Gronholt-Pedersen
NUREMBERG (Reuters) – Danish toymaker Lego plans to more than double the number of shops in China this year to 140 in its most rapid expansion in any market as demand for its colorful plastic bricks remains unaffected by a broader slowdown in the economy.
With declining or stagnating sales in its core U.S. and Western European markets, China is still a bright spot for Lego though copycats remain a problem despite an announced government clamp-down, the head of the toymaker said in an interview.
Lego plans to have around 140 shops in 30 different Chinese cities at the end of the year, up from 60 shops at present, most operated by local partners.
“I’m not really seeing any stagnation (in the Chinese toy market) at this time,” Chief Executive Niels B. Christiansen told Reuters at a toy fair in Nuremberg.
China reported its slowest economic growth in 28 years in 2018, and a trade war with the United States and rising amounts of personal debt have added to concerns about a slowdown in the world’s second biggest economy.
China, whose toy and games market is worth $31 billion, accounts for less than 10 percent of Lego’s overall sales. But the importance of the market is growing after Lego opened a factory south of Shanghai in late 2016 and as Chinese parents shift away from a disciplined focus on learning towards free play.
“Ninety-five percent of Chinese parents want their kids to play more, and they are interested in giving them high quality toys,” he said.
Lego, an abbreviation of the Danish “leg godt” meaning “play well”, plans to open its second flagship store in Shanghai in March and continue its partnership with Chinese internet giant Tencent. It did not give any financial details on the planned 80 new shops.
The privately-owned toymaker has with some success increased its efforts to fight breaches of copyrights in China, but copycats remain a big problem despite an announced government clamp-down, Christiansen said.
“It’s clear that China’s ambition is to do something about this problem, but we haven’t really seen the implication of it yet,” Christiansen said.
Lego has won two court cases over copyrights in China.
“One of the biggest hurdles is that court cases take a long, long time. We would like that when we win a court case, the enforcement would be better and stronger,” he said.
(Reporting by Jacob Gronholt-Pedersen; editing by Emelia Sithole-Matarise)