From Self-Care to Smart Backpacks: This is the fourth post in a five-part series where we'll highlight product categories with global demand and the regulations and challenges to keep top of mind.
For the first time in human history, half the world's population is middle-class or wealthier, with both the time and money to indulge in hobbies, sports and other leisure activities. Retail industries are benefiting from a wide array of consumer interests, from video games to sports. Personal computer and console games revenue is predicted to increase substantially worldwide before 2022. Global public interest in sports has also increased, and consumers are increasingly buying sporting goods and toys online. In the U.S., e-commerce revenue for toys and hobbies is predicted to increase in 2019; similar expansions are also forecasted in Europe in countries like Germany.
There are significant opportunities in the sporting goods, hobby and leisure spaces, but also pitfalls that include counterfeit product and global restrictions. We've compiled key factors to keep in mind when establishing an international e-commerce presence in these categories.
1. Sporting equipment is strictly regulated.
The days of the couch potato are waning, and consumers are picking up their rackets, balls and weights. Public interest in health and fitness and increasing viewership of global sports events such as the World Cup has inspired more consumers to purchase sports equipment. In China the government is encouraging the expansion of the domestic sports industry and building sports facilities; European and North American teams are heading to China to capitalize on regional interest.
The global sports equipment market is expected to reach USD 89.22 billion by 2025 and is expected to register a CAGR of 4.5% between 2018 to 2023, with Asia-Pacific and North America the biggest market share. E-commerce is a major driver of recent growth in sales of sports equipment, but there are regulations to keep in mind: whether your target market is fitness enthusiasts, high school and collegiate teams, or professionals, you'll want to ensure that your products meet national standards for athletic equipment and are compliant with standards in major global markets. For examples, certain countries may impose restrictions on product testing or may require certification and shipment inspection requirements. These regulatory frameworks are constantly evolving in some countries, so it's important to stay up-to-date on the latest changes.
2. Toy sales are flourishing online, but so are counterfeit toys.
Bricks and mortar outlets like Toys R Us are struggling, but toy sales are growing online. In China, online sales of toys, hobby and DIY products are estimated to reach 173.58 billion U.S. dollars by 2021, almost three times 2015 online sales. In Australia, the toys and hobby category is currently 7.3% of the retail market: the current annual growth rate of 6% is predicted to expand to 9.3% of the market by 2021. In Europe, online sales are similarly healthy: in Spain online sales of toys increased 60% in 2016, for example.
But counterfeit toys are a growing problem, and fraudsters have become more adept at successfully misleading consumers, raising concerns about online sales of unsafe toys. There are also safety regulations to keep in mind. To help consumers understand labels and safety warnings in the EU the 2009 Directive on Toy Safety stipulates that instructions and safety information must be available in local languages or those understood by consumers. NGO's have asked e-commerce sites to enforce stricter rules with third party sellers and the Danish Consumer Council, for example, recently called for more transparency about chemicals in consumers goods, including an obligatory declaration of the chemical content in toys.
3. Both kids and grownups worldwide enjoy gaming, but there are different rating systems globally.
Consumer spending on video gaming in the U.S. reached $19.5 billion in the first half of 2018, an increase of 40 percent compared to Jan-June 2017. In 2018, the global video game market was expected to be worth approximately 115 billion U.S. dollars and surpass 138 billion by 2021. The global VR gaming market is expected to be worth 22.9 billion by the end of 2020, up from 3.6 billion U.S. dollars in 2016. Europe and North America are the two biggest markets for virtual reality video gaming.
It's important to remember that there are regional lockouts imposed by the video game industry, meaning that games intended for the European market won't work in North America, for example. Different countries also have specific regulations that any merchant selling games must observe: in Germany, for example, video games must be rated and classified by the USK (the Entertainment Software Self-Regulation Body.
4. People are still reading books, but the format has changed.
Even with all the other leisure activities and hobbies at their disposal, consumers still enjoy reading, although they are often reading on a different platform. Indeed, these days they might prefer listening to a book: audio book revenue grew more than 22 percent in 2018, with a CAGR of eight percent between 2011 and 2016. In the United States, audiobooks now earn publishers more than mass market paperbacks and are also a fast-growing niche in countries including the United Kingdom and in other global markets. Mega retailers such as Walmart have recently capitalized on the interest in e-books and audiobooks, and the New York Times even recently launched an AudioBook Bestseller list.
Vendors who want to sell audiobooks in the global market should be aware of publishing rights and royalties, as well as regional licenses and lockouts. They should ensure that audiobook standards meet industry requirements, and stay abreast of fast-evolving regulations. For example, antitrust regulators from the European Union recently applauded an agreement between Apple and Amazon to end exclusivity deals for audiobooks, and the EU voted to allow member states to apply lower VAT rates to electronic publications.
To conclude: cross-border e-commerce retailers have much to gain from an expanding global middle class with more disposable income and leisure time to enjoy sports, games and books. But it's important to carefully survey different markets and assess regulatory pitfalls and the prevalence of counterfeit product before establishing a presence in these markets.
