50 Business The EconomistJuly 27th 2019
O
neofthemostsuccessfuladvertis-
ingtaglinescoinedinGermanyin
thepasttwodecadeswas“Geizistgeil”:
stinginessiscool.Conceivedin 2002 by
Saturn,anelectronicsretailer,it cap-
turedthemoodofthecountry’scash-
strappedshopperstwoyearsafterthe
dotcomcrash,whileplayingtotheir
penchantforparsimony.Butaftera
decadeofeconomicgrowthandlow
unemployment,Germansarefeeling
flushagainandthelocaldiscountgiants
thattheyonceloved,lessso.
Aldi(splitintotwolegallydistinct
companies,AldiNordandAldiSüd,in
1966),Lidl,NettoandPennystillhavea
marketshareathomeofmorethan40%
betweenthem.ButtraditionalGerman
grocerssuchasRewe,whosesalesgrew
by9%lastyear,areoutpacingthedis-
counters.A recentstudybyEdgeofAs-
cential,anadvisoryoutfit,predictsthat
salesatdiscountchainswillgrowon
averageby2%thisyear.AldiNordis
sufferingmore.It lostmoneyin 2018 for
thefirsttimeindecades,andsalesare
forecasttofallin2019.“Germanshop-
persarerethinkingpriorities,”saysBoris
PlanerofAscential.Theyarelessfussed
abouthuntingforthelowestprice,and
nowturntheirnosesupatcheaptinned
fooddisplayedunderfluorescentlight.WhenSaturnreviveditsoldsloganlast
monthwith“Geizisback”,it didsoonly
fora fortnight.
Mightinternationalbusinessmake
upforanaemicgrowthathome?Aldiand
LidlareboominginBritain,wherethe
Teutonictwosomealreadyhasmorethan
13%ofthemarketandexpectstodo
betterstillina possiblepost-Brexit
slump.AldiisdoingwellinAmericaand
inJuneit enteredChinawithtwoshops
inShanghai—forthefirsttimeasan
upmarketgrocerfloggingwinefrom
Bordeaux,milkfromAustraliaandfresh
organicproduce.Butforeignexpansion
isrisky.A monthearlier,Lidlgaveupon
Chinaasunprofitable.It isstrugglingto
runitslarge,costlystoresinAmerica.
Athome,thediscountershopetolure
discerningshoppersbysprucinguptheir
stores.Aldinowsellssmoothiesand
veganfare. AldiNordisspendingpartof
a €5.2bn($5.8bn)investmentona facelift
forits2,300-oddoutletsinGermany.
Bootedoutforupgradingitsshabbier
storestooslowly,thefirm’sboss,Marc
Heussinger,wasreplacedlastyearby
TorstenHufnagel,hisdeputy.ButMr
Hufnagel’srevampingeffortsmayhave
cometoolate.Fearsaregrowingofan
endtoGermany’sgoldendecade.Stingi-
nessmaysoonbeinvogueagain.Stinginessisuncool
GermanretailersBERLIN
AsGermansgrowlessfrugal,itsdiscountgrocersaresufferingintheirhomemarketB
udding engineerscluster around a
table-sized model of the China Art Mu-
seum, a landmark of Shanghai, adding he-
lipads, carrot patches and other improve-
ments with colourful bricks. Prising a child
from Lego’s vast shop near People’s Square
can be like unsticking two stubborn bits of
Lego. Li Yang, visiting for a few days from
Shenzhen, has been waiting for her daugh-
ter for two hours. Zhu Yunfei, watching his
son, marvels at the variety: “Coming here
to play with him is making up for my child-
hood,” he says. They drop by every week.
Lego’s rise in China has been vertigi-
nous. In 2017 it overtook Alpha Group, a lo-
cal giant, to become the country’s leading
toy company (not including video games).
In the past two years it has opened 89
stores. It wants 50 more by December,
which will bring it to 30 cities. Its first Chi-
nese factory started moulding bricks in- The toy industry is growing by 9% an-
nually in the country, but the Danish firm’s
Chinese arm notches up “very strong dou-
ble digits”, says Paul Huang, its boss.
It has done so even as the brickmaker’s
global business has looked shakier. In 2017
Lego cut 1,400 jobs and recorded its first
drop in revenues and profits in over a de-
cade. But last year both ticked up again, by
4% each. Lego has thus retained its status
as the world’s biggest toymaker, snatched
from Mattel in 2014—even as its American
rival last year earned its highest revenues
in five years from its Barbie dolls.
Newly affluent parents in China have
helped Lego recover. “We have not maxed
out there, by far,” says Niels Christiansen,
whom Lego brought in as chief executive
two years ago. As in the West, the educa-
tional merits of bricks appeal to Chinese
parents. Last year 98% of those surveyed by
Lego said that play was essential for their
child’s well-being, even more than Ameri-
cans and Danes.
Lego has also astutely catered to local
tastes. This year the firm launched three
sets specifically for China, the first time it
has done so for any country. Fans were de-
lighted at the attention to cultural detail.
One was a Chinese New Year’s Eve dinner
kit, with tiny red envelopes and chunlian,
lucky couplets on banners pasted around
doorways. A dragon boat race set included a
sticky-rice dumpling, a popular festival
snack. The high-quality kits are pricey,
costing up to 700 yuan ($100) apiece.
With Barbie, Mattel tried to localise in
the wrong way. A former Chinese manager
at the American company calls its promo-
tion of a line of cheaper, flimsier dolls “ar-
rogant”. Because no effort was put into
making her locally relevant, Barbie heldnone of her usual aspirational appeal, even
for spendthrift Chinese. In 2009 Mattel
opened the world’s largest Barbie shop on a
luxury shopping street in central Shanghai,
stuffed with 800 dolls. The six-floor pink
colossus confused Chinese parents by of-
fering mothers a spa, designer fashion and
“Barbietini” cocktails, and their daughters
more age-appropriate attractions. It was a
flop and shut two years later.
It is hard to convince prudish parents of
the creative merits of frivolous dolls, and
grown-up Chinese collectors prefer short
and chubby Molly, a popular local poppet.
The Chinese market for construction toys
is six times bigger than for dolls. In Mr
Zhu’s words, “there is no art to a Barbie”.
Tellingly, Mattel’s most successful brand in
China is a maker of educational baby toys,
Fisher-Price, with a market share of 1.1%,
according to Euromonitor, a data provider.
Barbie, with 0.3%, comes a lowly 31st. By
contrast, Lego’s 4.5% share puts it firmly in
first place: a fortification that will serve it
well, as China’s market for toys and video
games, worth $45bn, overtakes America’s
in the next few years. 7SHANGHAI
Why the toy brickmaker has soared but
America’s favourite doll has stumbledLego v Barbie in ChinaYellow brick road