Lego: The Chinese Market has Become A New Growth Point

From the perspective of LEGO's growth and development, it has experienced early rapid development and growth over the past 90 years. It has also faced external challenges and successfully survived crises. It has maintained steady growth in recent years. The financial report for the first half of 2022 shows that compared with the same period in 2021, the group's revenue in the first half of the year increased by 17% to 27 billion Danish kroner, and retail sales increased by 13%; operating profit remained stable at 7.9 billion Danish kroner and net profit was 6.2 billion Danish krone.

From the perspective of regional performance, the Chinese market has become an important growth pole. From 2017 to 2021, the company emphasized the importance of the Chinese market in its annual report, and its performance showed a growth trend. Lego plans to open 80 retail stores in China by 2023 amid rapidly growing demand, said Julia Goldin, the company's global product and marketing director.

Regarding the layout of offline stores, most of Lego's stores are concentrated in first- and second-tier cities, and most of them are located in large supermarkets. For the sinking market, Lego is not expanding blindly, but choosing cities with relatively good economies. According to CITIC Securities, as of June 28, 2022, a total of 41 third- and fourth-tier cities across the country have various offline Lego stores. Among them, cities with more than 5 stores include Changzhou, Shaoxing, Jiaxing, Shenyang, and Changchun, all of which are cities in the Yangtze River Delta or provincial capitals, and their per capita GDP is higher than or equal to the national per capita GDP.

In addition, in 2016, Lego built a production plant in Jiaxing, and there are only five in the world; in 2017, Lego Authorized Stores (LCS) opened in Beijing and Shanghai respectively, and Lego products can be sold in mainland China first; in January 2022, Lego announced Expansion of Jiaxing factory.

The reason for attaching great importance to the Chinese market is that in recent years, the fertility rate in European and American countries has declined year after year, the demand for children's toys has decreased, and the growth of the European and American markets has encountered bottlenecks. From the point of view of the plug-in building blocks themselves, this category has the advantages of all ages, and its penetration rate is low, especially when it is still in the growth stage when it is promoted in China, it has not yet become popular among the first generation of consumers. It can be said that whether it is the expansion of Lego's factories in China or the pace of store expansion, they all value the vast market space in China.