^{As an early-stage investor, I have free rein to imagine categories in their ‘full glory’, say, 10yrs out. We recently spent some time on ‘Toys’ - a relatively small ~$1B market, but with some real potential and a clear “why now”. This mental exercise was both fruitful and nostalgic.  
Growing up in Cochin, I spent countless hours playing ‘GI Joe’ - imported courtesy my uncle’s suitcase. Spoiler alert, ‘Flint’ always won against ‘Croc Master’ – there was a particularly intense battle where Croc Master recruited 3 evil Barbies (who cumulatively only had 4 eyeballs, 5 hands and 4 legs) from my sister’s toy division. The matchup ended with some Barbies getting buried in the backyard (hope my sister isn’t reading this).}

^{FF to present day: I scan around my 5-year-old son’s room and a plethora of toys form an obstacle course. Dinosaurs, Magna Tiles and what feels like a million plastic balls, 2 tons of PlayDough, and a trillion Hot Wheels have taken over the room, hiding what should be a bunk bed and a study table. Juxtapose this with the grades I had to get as a kid to deserve a Rs. 100 plastic cricket bat. For kids & privileged parents today, the times, and the toys, they are a-changin’.}

_{Building Our Own Playground}

_{The $1-2B Indian toy market is small and highly fragmented. Representing <1% of the $100B1 global market India has never been a top priority for Global majors. Numerous subcategories cater to different age groups, interests, price points. Domestic players like Funskool and international ones like Hasbro, Mattel, Lego are around Rs. 100-300 cr in annual domestic revenue. Why, then, am I excited about the space? I make a 3-fold argument below.}

^{Timing is everything: 3 Macros Making Toys a Lucrative Business Opportunity in India –}    

_{1. ‘Atma-nirbhar’ and Govt support: China produces >50%3 of the world’s toys. The Indian government is incentivising supply creation through measures like increased import duties on toys (from 20% to 70%4) while mandating a customer-friendly BIS certification, creating a favourable environment for domestic toy manufacturers. This has been the key to rein in Chinese toy manufacturers who held 80%5 share in India, till recently. The interim budget in 2024 has allocated ₹3,489 crore for the toys industry.}  

_{2. Untapped consumer potential: With a low per capita spend on toys in India ($3 compared to $300 in the US7), rising incomes, and a growing appetite for educational and STEM toys, the Indian toy market presents significant value creation opportunities. "Cash-rich, Time-poor" parents willing to spend more on high-quality toys that offer educational or developmental benefits for their children. When both parents work and have limited time to engage with their children, toys that can bridge this gap by providing engaging and enriching experiences will be in high demand.}  

_{3. India-to-Globe GTM Playbook: India’s toys exports have gone up over 250%8 in the last decade. Skillmatics & Shifu have demonstrated that Indian toy brands can gain product-market fit globally. Skillmatics has successfully gone where no Indian toy company has gone before, selling to the world by leveraging cross-border sales via an Amazon-first GTM, and capitalizing on the cultural and language advantages Indian entrepreneurs may have over Chinese counterparts.}

_{Based on our research, a framework is emerging that can gear Indian companies to play to win in the global Toys Market.}  

_{1. For the domestic Mass Market Segment: Maximise control over the value chain to service the vacuum left by Chinese players – ride the wave while the rising TAM lifts all boats}  ^‍

^{a. focus on vertical integration to create a competitive advantage
b. choose categories where you can leverage backend capabilities for both cost-effective design AND iteration.}  

_{2. For the Premium customer: Build trust through scalable IP and/or tech-enabled product offerings.}

_{‍c. Focus on STEM, content, and innovating on unique formats that are repeatable or can be upsold.}

_{d. Differentiate via content-led strategies, on YouTube, or app downloads.}  

_{3. Perfect in India and sell to the Globe:  ‍}

_{e. Starting in India allows you to iterate and fail fast while you build PMF for the premium ‘India 1’ while building a robust supply chain.}

_{f. Similarities between ‘India 1’ and the western markets allows for some inherent “translatability”. The global play will require modifications but should result in faster PMF as you test over 2 OND cycles.}  

_{4. Find Your Go-To-Market Edge: The answer will change by sub-category}  

_{g. For low ASP focus on a strong SKU-width strategy and cracking the code on Amazon / marketplaces.}  

_{h. For high ASP or IP led products leverage content distribution for awareness. ‘Content’ moves ‘further and faster’ than Ads – especially in toys. Think Peppa Pig and Chhota Bheem}  

_{5. Build Low-Cost Innovation capability: The ability to design and experiment with multiple products at low minimum order quantities (MOQ) goes a long way. New product development (NPD) is table stakes – a feature, not bug, of the category.}  

_{Looking for the Next Heroes in India’s Toy Story}  

_{The writing is on the wall, like it is in my son’s bedroom. Indian start-ups like Skillmatics, Miko and PlayShifu have led the way, building credible Global and domestic businesses. As our GDP/capita increases, we will see more winners. As we clean-up my son’s room, I wonder what other start-ups are vying to take over what’s left of our 3BHK.}  

_{At Matrix India, we are keenly watching this space. If you’re building in this space, write to us consumer@matrixpartners.in, and we’ll whiteboard over coffee.}