China is a big toy manufacturing country: about 75% of the world’s toys are manufactured in China, and six toy production bases have been formed in Guangdong, Shandong, Jiangsu, Zhejiang, Shanghai and Fujian, with a total of more than 12,000 manufacturing enterprises and 600 employees in the industry. Ten thousand, 20 industrial clusters and 7 A-share listed companies. However, Chinese toy companies are still weak in terms of innovation, R&D, and branding. One of the problems is that it has a single profit model and relies heavily on traditional physical sales. In this case, there will be many hidden troubles.
First, toy companies have low gross margins and overall profits are thin. Can be described as selling white powder, earning money selling cabbage. Many bosses are struggling. In this case, the homogeneity of the products will inevitably lead to a price war. The result will be a vicious circle and many companies will be killed.
Second, the risks are high and face bankruptcy at any time. Because the profit model is single, there is a great deal of trouble in the outside world, and toy companies are faced with huge risks. If they do not respond properly, they may go bankrupt.
Third, there are customers and no users. Only physical sales, toy companies do a lot of one-time trading, it is difficult to have continuous contact with customers, lack of data accumulation.
All in all, the traditional single profit model of toy companies is very fragile, and it is urgently needed to carry out transformation and upgrading, broaden the sources of profit, and reduce the business risks.
The AR augmented reality toys that began in 2015 have developed rapidly in just a few years and have occupied a place in the toy industry. The diversity of profit models for AR smart toys is worth learning from traditional toy manufacturers.
1, sell authorization
The biggest difference between AR toys and ordinary toys is the combination of their actual and actual features, both physical and software applications. The App that matches the AR toy can be made into a universal one that fits many of the same toys. In this way, AR toy developers can not only sell their own toys, but also can license the software to other toy manufacturers. Other toy manufacturers can upgrade their traditional toys to AR toys without much change. Both parties are happy that the authorized party delivers a certain authorization fee, and the authorized party provides installation and subsequent maintenance of the AR application. Authorization fees can be flexible, counted by the number of toys, or by a period of time. In this way, the initial investment cost of toy manufacturers is very low, which greatly reduces the risk. As long as toy sales are done, both parties will benefit.
Case: The AR solution provider Mirage Technology licenses the AR globe to the world-famous friends Chen Pinchen, and Pengchen distributes goods in the existing mature sales channels, complement each other, and win-win cooperation.
2, selling content
AR toys usually require 3D modeling of some animals and scenes, or some animations, which are very valuable. For other manufacturers who want to do similar content, there is no need to re-make it again and buy it directly. Then you can develop many new products on the basis of these contents. Magic Encyclopedia was originally an AR card for children's English learning.
Case: A player manufacturer purchased AR content from a magic encyclopedia developer and then produced AR calendar, AR comic book and other products.
3, advertising
If there are more than tens of thousands of users, AR App’s App will have advertising value. These users are very precise and attractive to advertisers. The AR application background can also perform accurate data recording and tracking functions, and it can digitally evaluate the effectiveness of advertising. However, this profit model must have a large amount of app installs, and it does not affect the user experience. At present, there are few AR manufacturers trying.
4, electricity supplier
After a relatively large user base has been applied to AR toys, not only advertising can be launched, but also direct e-commerce platforms can be introduced to guide customers to purchase products that may be of interest to them. AR toy manufacturers can get rebates on sales of goods.
Case: AR Toy Limit The Rubik's Cube is trying this profit model. Because of its precise target users, the current distribution of the Magician e-commerce sales platform is good and the conversion rate is high.
5, solution
Some AR toys are integrated into software and hardware, and can be packaged into a total solution. They not only provide product or content sales, but also provide related technical services, maintenance and upgrade services, and use of training services.
Case: The domestic AR game makers Fantasy Technology integrated Bluetooth modules, motherboards and AR games, packaged into a whole AR gun solution, sold to toy manufacturers. For toy manufacturers, this "one-stop" service is very complete, simple, and convenient. It can upgrade products at the lowest possible cost at the lowest possible cost.
Under the trend of consumption upgrades, people's spiritual consumption demand has been rising. The mere hardware and physical value and attractiveness are getting lower and lower. The combination of physical software and content has grown faster and more attractive. The toy object in the future will only be an entrance. The key is its supporting software and content. These parts can bring about repetitive and continuous consumption, and at the same time, it has a diversified profit model. Once it is measured, it is just lying down to receive money.
Take Apple as an example. According to estimates of Apple analysts, from now until 2021, the annual growth rate of Apple's service revenue is expected to be 17%, of which the App Store revenue will maintain an annual growth rate of about 30%, but the annual growth in hardware revenue is only 2.4%. . By 2021, about 75% of Apple's gross profit will come from service business.
It can be seen that toy manufacturers need to conduct in-depth reflection on the traditional single profit model, build a more innovative, risk-resilient multiple profit model, change from "hard" to "soft", establish a deep stickiness through various digital means and users, and seize the future High ground.
Source: Chinese and Foreign Toys Media Center - Toys Network
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