LEGO Group’s recent 2024 financial report shows record-breaking revenue and profits. Although LEGO’s market share in China has declined in recent years, it remains an undisputed giant in the building block industry. Beyond manufacturing and selling building toys for all ages, LEGO has expanded into movies, video games, education, and theme parks.
As the toy industry enters an era of competition in a saturated market, LEGO has maintained steady growth through product innovation and global supply chain expansion, offering valuable insights for the development of domestic toy brands. What can Chinese toy brands learn from LEGO in the face of industry giants?
IP-Driven Attraction
In the crowded toy industry, LEGO stands out with its strong market performance and diverse product range. As the pioneer of interlocking building blocks, LEGO has redefined toys, not limiting them to children but targeting consumers of all ages. Whether it’s kids building dream castles with LEGO blocks or adults recreating classic scenes, LEGO serves as a platform for creativity. Especially with its small-piece sets designed for adults and various IP collaborations, LEGO continues to attract an increasing number of adult players, broadening its global audience.
In terms of brand, LEGO’s unique interlocking mechanism and the results it delivers are unmatched by other brands. Moreover, LEGO’s profound cultural influence and continuous innovation enhance its competitive barriers. Every LEGO brick is produced to high standards, ensuring compatibility and durability, with over 915 million possible combinations—even bricks from 50 years ago can still fit with new sets.
In many ways, LEGO has become synonymous with building blocks, meaning the brand is deeply embedded in people’s minds. The exploration and continuous development of “Building Blocks + IP” has been key to LEGO’s growing appeal. For instance, the Taj Mahal model, which set a LEGO record in 2008, now fetches high prices in the second-hand market. Collaborative sets based on well-known IPs like Star Wars and Harry Potter have attracted massive fan followings. According to market research from NPD, since 2012, the number of adult LEGO fans purchasing sets for themselves has increased by 65%, further expanding LEGO’s audience base.
Other building block brands, both domestic and international, are also heavily investing in IP products. For example, the Buruco brand, which gained attention for its character-based building toys, has about 50 well-known IPs, including Ultraman, Transformers, and Naruto. The Ultraman IP alone contributes to nearly half of its revenue. Many other brands, whether focusing on animated IPs, movie IPs, or landmark building IPs, are using these to shape their brand image.
Offering Innovative Ideas Through Diverse Series
Founded in 1932, LEGO Group once dominated the international stage but was also close to bankruptcy at one point. Having weathered the storm, LEGO is now the largest player in the global building block market, and innovation is seen as its secret weapon.
From its early “dot-to-dot” blocks to the 1970s introduction of LEGO figures, and then to later sets like the “Spaceship Series,” “Pirate Series,” and “Castle Series,” LEGO’s revenue reached $500 million by 1990. In the 90s, LEGO sought new growth by expanding its product lines, launching many new building sets and venturing into video games, TV shows, and theme parks. However, these expansions didn’t achieve the expected results and distracted from its core business of building blocks.
Realizing the issue, LEGO refocused on its core business and embraced open innovation, interacting with customers, particularly adult fans, to inspire new ideas and creativity. Collaborating with popular IPs to build the LEGO universe was an important step in LEGO’s global influence. In 1999, LEGO launched the groundbreaking Star Wars series, which remains one of LEGO’s best-selling collections. Since then, LEGO has released successful series like Avengers, Batman, Lord of the Rings, and Jurassic Park, driving its flagship business forward.
LEGO’s 2024 financial report shows that it introduced its most extensive product line ever, featuring 840 products that cover consumers of all ages and interests. Popular themes include both original IPs and entertainment IPs, like LEGO® City, LEGO® Star Wars™, LEGO® Technic, LEGO® Icons, and LEGO® Harry Potter™. Notably, the LEGO Fortnite series, launched at the end of 2023, has already attracted over 87 million players.
Domestic toy brands are also actively learning from LEGO’s experience. For example, Buruco building blocks have risen in prominence through precise market positioning and unique product design. Buruco’s sets for younger children use larger blocks that are easy to grip and safe to play with, while also ensuring fun and educational value. They’ve also introduced building sets based on popular animated IPs, such as “Ultraman,” combining beloved characters with construction play to ignite children’s imagination and creativity.
In terms of product line expansion, Chinese brands are continuously making efforts. For example, a certain brand launched an intelligent early education robot that not only interacts through voice, tells stories, and teaches English, but also reacts to the surrounding environment with sensors, offering a more immersive play experience.
LEGO’s All-Age Coverage vs. Domestic Brands’ Focused Approach
A standout feature of LEGO is its diverse product line, covering all age groups from toddlers to adults. For younger children, LEGO’s Duplo series features large blocks, cute animal shapes, and basic numbers and letters, catering to their developmental stage and ensuring safety.
As children grow, LEGO offers Creative Play and Classic LEGO series, which encourage imagination with colorful and versatile pieces to build everything from dream castles to race cars. For teenagers and adults, LEGO provides complex and challenging sets, such as the Technic series and Star Wars sets. The Technic series appeals to tech enthusiasts with its precise mechanical structures and advanced tech elements, while the Star Wars series attracts fans by recreating iconic movie scenes.
While domestic toy brands are increasingly focusing on age-specific designs, fewer brands cover all age groups. Most domestic brands target specific groups, carefully designing products based on the needs and interests of different age segments.
For instance, on e-commerce platforms, the Audi Twin Stars brand offers the “Super Wings” series for 3-6-year-olds, featuring capsule toys, transforming robots, and car puzzles. Similarly, TOP TOY offers products like LEGO-style blocks, Gundam models, and blind boxes for younger crowds, while also offering items aimed at adults, such as space-themed and landmark building sets.
LEGO’s Accelerated Expansion, Domestic Brands Going Global
As a globally recognized building block toy brand, LEGO has successfully expanded worldwide by localizing its designs and marketing strategies to appeal to different cultural preferences. For example, in the LEGO Creative Building series, iconic buildings like the Taj Mahal and Tower Bridge are included, and LEGO’s Shanghai series highlights local landmarks like the City God Temple, Oriental Pearl Tower, and the Shanghai Tower.
Additionally, LEGO has launched products specifically for the Chinese market, such as the LEGO Monkey King series inspired by Chinese culture. It also produces Chinese New Year-themed sets, like the LEGO “Fortune and Luck Lantern” and “Five Blessings Welcoming Spring” sets.
Domestic toy brands are also exploring how to maintain local characteristics while increasing their international competitiveness. Many have already launched Monkey King building sets, with brands like Snaen, Huoshi, and Le’axing leading the way. Furthermore, traditional Chinese-style building blocks, such as the mortise and tenon joint blocks, are gaining popularity, with some brands offering sets to reconstruct ancient Chinese buildings and collaborating with cultural institutions like the Forbidden City.
Supply Chain Management in the Age of Cost-Performance
LEGO’s 2024 report reveals that it has expanded its production capacity in existing factories in Mexico, Hungary, and China, while significant progress has been made in building new factories in Vietnam and the U.S. LEGO’s investment in these new factories enhances its supply chain and reduces costs, ensuring quicker and more efficient production and delivery.
China has long been a powerhouse in toy manufacturing, producing around 70% of the world’s toys. Although many Chinese manufacturers have focused on OEM production, the development of self-branded products is rising. By using its supply chain advantages, Chinese toy companies can create differentiated products. For example, Aofei Entertainment improved its gross margin from 15% to 35% by leveraging the “Pleasant Goat and Big Big Wolf” IP.
In logistics, domestic toy companies can partner with services like JD Logistics and SF Express to offer next-day delivery. Some companies in Shantou have reduced delivery times by using pre-positioned warehouses, significantly speeding up shipping across East China.
When it comes to pricing, domestic brands have a clear advantage in cost-effectiveness. For example, the LEGO Monkey King set with 556 pieces is priced at ¥239, while other brands such as Huoshi, Le’axing, and Snaen offer similar sets at a much lower price, typically below ¥150.
Toys and Education Combined: A Long Road Ahead for Domestic Brands
Building blocks are an essential toy for most families with children, and with an increasing emphasis on education in China, LEGO education is gaining popularity. LEGO Education has a comprehensive curriculum focused on physics, mechanics, and simple programming, integrating educational concepts into toy design to help children learn through play.
For example, LEGO’s robotics programming sets and science experiment kits are very popular among schools and parents. These sets allow children to program LEGO robots and learn about logic and technology while also fostering scientific curiosity.
Chinese toy brands are also exploring the educational potential of toys and are introducing toys with strong educational attributes, even developing corresponding curriculums, lesson plans, and school services. A brand called “Qimeng” has achieved double-digit growth rates each year by focusing on educational building blocks.
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