Toymakers are adopting new strategies to tackle sluggish sales in the past year induced by a combination of increased Goods and Services Tax (GST), implementation of new testing standards which pushed up costs followed by a spike in custom duties. The increasing inclination towards digital gaming on smart phones and other gadgets is also adding to their narrowing sales.

Brands such as Funskool, Lego, and Mattel (which owns labels like Barbie, Fisher-Price and Hot Wheels in India) are widening their market share by launching new and affordable product ranges. Mattel is offering toys starting from as low as 85 for a mini engine of Thomas and Friends, a popular kids TV show. To cater to the low-income groups in smaller towns, home-grown brand Funskool has identified a few products between 149 and 499. “Awareness is low, so high-priced toys are difficult to sell. In a couple of years once we’ve tested these markets with low-priced products, we will be able to sell even high-priced toys," said R. Jeswant, senior vice president-sales and marketing, Funskool.

The company has also launched 16 single-brand retail outlets in tier two cities like Udaipur, Indore, Amritsar, and Thane and is planning to expand further. Jeswant said the intention is to take their products to tier two cities and smaller towns like Burhanpur in Madhya Pradesh and Kozhikode in Kerala that have a dearth of branded toy retailers. “Single brand retail stores have become important for toy brands to increase their market presence and reach out to the right target audience," said Amit Kararia, senior regional sales manager, South Asia, Lego.

Lego, too, is looking at newer ways to attract customers and overcome the turmoil in the Indian toys market. The brand will assign sub-distributors to expand its footprint in more cities. “Keeping in mind the psyche and demographics of the market, we have tailor made an assortment of 30 stock keeping units across themes to cater to the Indian audience across age groups and gender between the price range of 500 to 3,000," said Kararia.

Owing to the increased internet penetration in the country, Lego is largely positioning its toys as ‘play and learn’ products by integrating its offerings with online versions to enhance the experience for today’s digitally inclined children. “Lego Boost is an example of such integration. Powered by an application, Lego Boost is a supercharged 5-in-1 building and coding set which empowers children to bring their Lego creations to life by adding movement, sound, agility and personality," said Kararia.

Apart from pushing its sales through e-commerce, Mattel is also targeting schools in tier one cities by launching Hot Wheels labs to escalate children’s interest in subjects like Physics.

Toymakers in India experienced a fall in sales after demonetisation in November 2016. “Demonetisation brought down discretionary purchases, especially in our industry. Very high priced toys took some beating," said Jeswant. The cost of production was affected after the introduction of GST in July last year. GST on toys went up to 12% for non-electronic toys and as much as 18% for electronic toys, up from an average of 6-8% earlier. Further, sales went down due to the hike in custom duties to 20% from 10%. “All this together was a dampener. So for the last 12 months sales have not been great but things will get back to normal," said Jeswant.

Rajat Wahi, partner at consulting firm Deloitte India, said that the easy access to smart phones and increased popularity of online gaming is also eating into the sales of traditional games in urban spaces. Though the trend has not yet reached tier two towns, brands must add interactive and digital elements to traditional toys in order to keep pace with the changing trends.

According to Euromonitor International, the country’s per capita toys consumption is among the lowest in the world with a market size of $485.1 million as of 2017. China, on the other hand, boasts of a market size of $11.012 billion.