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Fun and games for online toys

building blocks, toysThe past five years have been all fun and games for the online toy sales industry.

According to IbisWorld research, revenue is forecast to grow at an annualised 24.6 per cent over the five years through 2013-14, to reach $86.5 million.

IbisWorld industry analyst, Andrei Ivanov, says this growth has been primarily supported by the increasing acceptance of the internet as a shopping medium for everyday products.

Online sales have grown substantially as portion of total toy and game sales over the past five years. Growth in discretionary incomes and the population aged under 14 years has also boosted industry growth.

The industry has a low level of concentration, with the top three major players, Toys R Us, Wesfarmers, and Woolworths, accounting for a small share of the market.

The advantages of shopping for toys online are plentiful, with the most obvious being the price. Because goods purchased online for under $1000 are exempt from the GST, industry participants can offer their products for a lower price than traditional bricks and mortar retailers.

The high Australian dollar over the past five years has made toys purchased from overseas online stores even cheaper, enough to offset any shipping costs. Although this has not directly helped local online toy sales, it has raised awareness of the Australian online toy sales industry. Other advantages offered by industry participants include wider range and greater specialisation.

“Industry participants specialising in niche markets, such as educational toys and hobby products have been able to reach more customers and grow their sales,” says Ivanov.

Despite all the positive aspects, online toy sales industry are attracting more enterprises and competition is rising. Furthermore, the industry is facing strong competition from video games.

IbisWorld expects that as generation Y comes of age and enters parenthood, demand for online toys will continue to grow over the five years through 2018-19. Because the business model relies on economies of scale, higher volumes of sales are expected to be favourable for profitability.

For more information, visit IbisWorld’s Online Toy Sales report.

 

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