Danish toy maker Lego is speeding up the expansion of its physical footprint in China after recording revenue increases of 17% to 27 billion Danish Krone ($3.17 billion) and double-digital growth in retail sales too by 13% year on year, as per the group’s first half-year report.
The Chinese market once again has made a “huge contribution” to the company’s overall strong performance, which was described as “above expectations after an exceptional 2021”, according to Niels B. Christiansen, CEO of Lego group.
Out of the 165 new offline retail stores Lego opened across the globe in 2021, 90 were located in China. The company’s global store network has seen a further expansion this year with a further 66 openings in the first six months, 46 of which were installed in China, showing the continued significance of the Chinese market to Lego’s global growth.
As a result, the group is set to further penetrate the lucrative market by bringing a total of 80 new stores to the country by the end of 2022, with the focus shifting to China’s Tier-2 and Tier-3 markets. These additions are on top of the existing 360 installations in the country, 40% of which are reported to have already been serving consumers in lower-tier markets.
Earlier in July, a new Lego flagship store was opened at the Henglong Plaza in Kunming, a Tier-2 city and capital of the Southern province of Yunan. And another one arrived soon after in the same month in Lhasa, the capital of the Tibet Autonomous region, striving to entertain children and families in these relatively disadvantageous areas with its “creative” play experience, which also “demonstrates Lego’s confidence in the market in the long term”, as said by Huang Guoqiang, General Manager of Lego group China.
Such confidence is backed by consumer preference, especially amongst China’s parents who believe these building toys would be more beneficial for their children’s cognitive development than Barbies. This is reflected in the market size of building toys which is six times larger compared to that of general toy figures in China, according to The Economist.
Lego’s rapid expansion in China is despite the stringent COVID restrictions in the country, which has undoubtedly caused disruptions to its supply chain. Rather than pulling back, Christiansen revealed that the company is making a “quite significant investment” in building a factory in China. “Right now, we are expanding our moulding and packing and warehousing capacities there to sustain growth coming forward,” as quoted by CNBC.
Additionally, the world’s second-largest entertainment conglomerate after Disney is also reported to be bringing several LEGOLAND theme parks to Chinese cities including Chengdu, Shenzhen, and Shanghai in the coming two to three years.