Lee Chung-nam, 63, has produced children’s water toys and equipment in South Gyeongsang Province, South Korea, for 36 years. This year, he has cut production to half of last year’s level, blaming the influx of cheap toys entering Korea through Chinese e-commerce sites such as AliExpress (Ali) and Temu for reducing sales. His workforce has decreased to just ten employees, down from 45 before the pandemic.
“The demand for toys continues to decline due to the falling birthrate, and with the surge of Chinese direct-to-consumer companies, I don’t see any hope in the domestic market,” he said. “It’s hard to keep the company going unless we find new markets overseas.”
Small and medium-sized Korean toy companies are struggling due to the competition from Chinese e-commerce companies. With the market shrinking rapidly because of low birth rates, consumers are increasingly turning to Chinese direct sales companies for their competitive prices, threatening the survival of local businesses. In response, some small and medium-sized toy companies are looking to capitalize on the popularity of Korean-made characters such as ‘Pororo’ and ‘Pinkfong’ to expand into overseas markets.
According to Statistics Korea on Jun. 3, Korean consumers’ purchases of children’s and infant products from Chinese online shopping malls like Ali and Temu totaled 53.5 billion won ($39 million) last year, up 25.3% from 42.7 billion won ($31.2 million) in 2022.
“Demand for in-store purchases has dropped dramatically, and even occasional customers leave empty-handed, asking, ‘Why is it so much more expensive than online?’” said Song, 68, who has owned a toy store for 42 years on Changshin-dong Toys Street in Jongno-gu, Seoul. He added that he plans to lower prices by 20% starting next month, leaving little margin.
Kim, 49, who buys Chinese-made toys and accessories in bulk from Ali and sells them online, said, “An accessory that costs 2,000 won wholesale in Korea costs less than 200 won on Ali.”
An official at the Korea Toy Industry Cooperative (KTIC) said, “Since last year, when Ali, Temu, and other Chinese direct imports began to arrive, sales at toy wholesalers, which were already struggling, have dropped by about 30%.”
The influx of cheap toys from China has also led to an increase in the number of toy companies that are going out of business. The number of KTIC members dropped from 150 in 2022 to 133 last year. “Most of the companies that are going out of business say that their sales have plummeted due to direct imports from China,” said a KTIC official. “Some companies with annual sales of less than 1 billion won cannot afford to pay the annual fee of 30,000 won, so they leave the organization.”
A local toymaker said, “Korean companies have to pay millions of won for safety inspections every five years for each product, which further widens the price gap with Chinese products that are not subject to such inspections.”
Park Jin-hyun, 51, who has been running a toymaker in Gwangju, Gyeonggi Province, for 15 years, has recently expanded into the European market. He received an OEM (original equipment manufacturer) quote from a German toy company looking to diversify its production lines outside China. “We will be exhibiting at a toy fair in Nuremberg, Germany, next February,” said Park, whose domestic sales have dropped by more than 40% in the past two years.
According to the Korea International Trade Association (KITA), the total export scale of Korean companies’ toys to Europe jumped from $191.67 billion in 2022 to $234.58 billion last year, an increase of about 22.4%. The industry attributes this growth to Europe’s growing interest in intellectual property (IP)-based character products and educational toys.
