'We started in India in the early 2000s; Funskool came on board and we started our distribution.'
Toy major LEGO has changed its image from a premium brand to a mass one in the last couple of years. Amit Kararia of LEGO, over a conversation with Meghna Sharma, shares that the company aims to double its value every three years and outpace the overall toy industry growth in India which currently stands at 10%.
How has LEGO’s journey — from a premium brand to a mass one — been in India so far?
We started in India in the early 2000s; Funskool came on board and we started our distribution. But for us, the business model for the country that time was managed from Europe, so we did not have enough on-ground information. Back then, we were known as the Gucci of toys in India and were treated as a premium brand.
Over the last two years, we have come closer to the market and have opened our main office in Singapore for Asia. India is a part of emerging markets which comprise 11 countries. Last year, we test marketed ‘My first LEGO’ which was a set of 29 SKUs across themes — from Friends to Classic. With this, we wanted to break the entry barrier so we started with the price point of Rs 399. It was a surprise for most consumers and it was so well accepted that 40% of the absolute number of boxes sold in India were from these 29 SKUs. This year, our campaign has gone global with the theme of Building bigger thinking.
We want to go mass because of the growth ambition of LEGO — we need to reach 300 million children globally by 2032 and there are 35 million addressable children (0-14 years) in India. We want to target that audience and bring LEGO closer to as many hands as possible.
How is the brand building on its reach?
We have four different pillars for distribution. It starts with toy specialist stores; as you know Hamleys is expanding in India too. Second, there are the department stores which are very important to us where the price point plays an important role. The third is e-commerce which gives us the reach across the length and breadth of the country. The last pillar is traditional trade. We are doing specific activities across channels to ensure that we taste success. For example, we have shop-in-shops on Amazon, Flipkart and FirstCry, and toy specialists have a dedicated space for LEGO. In general kirana stores, we are reducing prices and it is true for department stores as well. We are also making tailor-made promotions for these channels and we are launching SKUs which suit a particular channel. For Amazon Prime Day, we launched 16 SKUs including the famous Taj Mahal which came back after a gap of nine years.
Can you elaborate on the sales ratio from each of these four channels?
E-commerce and toy specialists are both important to us. Sales contribution from both would be 25% each. As far as kirana stores go, it would be another 30-35%; and hypermarkets, where we are just starting, contribute the rest.
Which markets — metros or tier II — contribute most to LEGO’s growth?
There are fans of LEGO in smaller cities also. For instance, there are many NRIs in a village in Punjab and hence have the brand knowledge of LEGO. Obviously, they will not get a LEGO in that village and this is where e-commerce comes into play. E-commerce is giving us the reach but at the same time, toy specialists are also expanding in tier I and II cities because of the demand; they have already captured premium spaces in the six metros. In tier I and II cities, we are generating trials/sampling exercises for kids to experience our products. We want to go deeper with our distribution model here. We have just got aboard TruCare in India, one of the biggest distributors in the Middle East which has branched out in India, and we have built a dedicated team to work with distributors to service the market.
Toys“R”Us shut its stores permanently; is this indicative of a struggling industry? What is the brand’s plan to counter the unbranded and unorganised toy/games market in India?
It is a misconception that whatever happens in the US will have an impact across the globe. In this part of the world (Asia), most of these stores are franchisee based. They are absolutely safe from what is happening in the US or Canada. In India, 70% of the toy market is unorganised and will remain like that. The transition from unorganised to organised will happen at a normal pace. Look at how FMCG has evolved over time. People are becoming more aware of brands and know about good quality.