Shares of popular toymaker Mattel Inc jumped 2.4 percent in premarket trading, on Tuesday, after the company announced its new partnership with Alibaba Group Holding, Ltd. This deal will bring Mattle toy sales into China through Alibaba’s’ Tmall.com online marketplace. In addition, Mattel will work directly with the retailers Alibaba AI lab to develop new toys designed to specifically appeal to Chinese consumers.
“By combing Mattel’s unmatched expertise in childhood learning and development,” explains Mattel Chief Executive Margo Georgiadis, “with Alibaba’s immense reach and unique consumer insights, our goal is to help parents in China raise children to be their personal best.”
Of course, Mattel is the label behind such popular American brands as Hot Wheels cars, DC Universe toys, Monster High toys, and, of course, Barbie.
Georgiadis makes sure to also add that the Chinese toy is currently quite fragmented. This means, of course, there is also quite a bit of room for growth. She notes, “Working with Alibaba, we see a terrific opportunity to develop and lead the category.”
Obviously, both companies involved in this merger will need to overcome a cultural barrier—or two—in order to succeed. In China, whenever parents actually have a little extra money—which could be spent on toys for their children—they tend to put that excess towards education. However, Mattel argues that this puts the company in a very actionable position to pursue the development of more educational delights that might encourage parents to spend that money on their brands (through the Alibaba Tmall.com marketplace, of course).
With that, Mattel Vice President of China growth, Patty Wu, comments, “Toys and play are an important part of a child’s early development, helping to drive IQ and EQ [emotional intelligence ] development.” She further explains that parents in China buy fewer “toys” for their children (than parents of children in other countries) because they are concerned that playing with toys will hinder academic performance. And this is the mindset that serves to explain why China—despite being one of the largest economies in the world—has a baby formula market three times that of the United States but a toy industry less than one-third the size.
Indeed, both companies hope this new relationship will impact Mattel’s push in China, as well as improve toy buying in China through Alibaba’s Tmall.com, which has grown steadily and markedly since opening its digital doors in 2011.