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Lego Group to Step up Investments in China

Leading global toy producer Lego announced plans recently to accelerate its investment pace in China by increasing the number of its retail stores to 300 in total by the end of this year while enhancing digitalization in the market.

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On Oct 1, the company opened its largest global flagship store in Guangzhou, Guangdong province. Located at Grandview Plaza, one of the most popular commercial high streets in southern China, the 721-square-meter two-storey flagship store is based on its newly designed "retailtainment "concept.

China is a strategic growth market for the Lego Group, which has posted strong growth in recent years, the company said. Lego has so far opened six flagship stores in China. Prior to the Lego flagship store in Guangzhou, the five other flagship stores were launched in Shanghai, Beijing, Hangzhou, Zhejiang province, and Shenzhen, Guangdong province.

Paul Huang, general manager of Lego China, said the company is opening more retail stores to increase the number to 300 in total by the end of this year, with expansion accelerated each year since the first outlet opened in 2017. Currently, there are 291 branded stores in China.

The priority of expansion efforts in retail is penetration in lower tier markets, such as Zunyi, Guizhou province, to strengthen its branding exposure and get more access to consumers in the country, the company said.

Meanwhile, the company is doubling down on digitalization and e-commerce in the Chinese market by building an ecosystem that can not only lead globally but also get engaged with Chinese consumers on all fronts.

During the second half, the company said it will accelerate investments in a multi-year, enterprise-wide global digital transformation. New digital platforms, products and ways of working will support a long-term ambition to digitally-enable the brand to create better experiences for shoppers. The company has a digital talent hub in Shanghai.

The group reported first-half earnings with revenue growing 46 percent to $3.57 billion compared with the same period in 2020.Operating profit increased 104 percent compared with the first half result in 2020.

The company also launched a new retail store format which will be introduced to around 60 stores during the second half. The company continued to expand its global retail footprint by opening more than 60 new Lego branded stores in the first half of this year, with more than 40 located in China. This brings the total number of Lego retail stores as of June 30 to 737. E-commerce sales grew 50 percent compared with the same period last year.

Niels B. Christiansen, CEO of the Lego Group, said their year-on-year growth benefited from fewer COVID-related restrictions compared with 2020 as their factories operated uninterrupted and the majority of retail stores reopened.

The group's multi-year investments in e-commerce, product innovation and a global supply chain network have shown results. The strong financial performance also has accelerated the group's strategic investments in sustainability and digitalization.

"As we look ahead to the second half of 2021, we continue to see strong demand for our products. Longer-term, we expect top-line growth to stabilize to more sustainable levels as people return to pre-pandemic spending patterns," Christiansen said.