Growth Strategy for Sembo Block
in Mainland China
2023 Oliver Wyman Case Competition
Team Algebraist
Executive Summary: Sembo should catch up with products, channels and branding
for further expansion
Notes: VM=vending machine DSS=direct-selling store
Source: Algebraist analysis
2
Market Analysis
-
Market overview
Customer profile & KPC
Competitor landscape
Competitor analysis
Witnessing the innovation of the toy market, the building block market is more stable
than the emerging blind box market and generally shows an upward trend
Notes: BB: building blocks
Source: POP MART annual report ;Tmall white paper
4
The target customers of Sembo are concentrated the youth in newT1-T2 cities, who
regard product, audience and after-sale as the main reason for purchasing
Notes: POS: point of sales
Source: Questionnaire survey report
5
Driven by the market for trendy bricks, Sembo is competing with local building block
companies in China while being absolutely outsmarted by LEGO
Notes: BBM: building block markets
Source: Algebraist analysis; Mojing research report
6
After comparing with LEGO and POP Mart in all aspects, Sembo could learn some
experience from POP Mart
Source: Algebraist analysis
7
Internal performance Evaluation
- Products design and production
- Channels laying
- Brand building
Products: Sembo has established a relatively complete product matrix, but it is still
short on top-selling items and its user experience is not high
Source: CFO-Summary interview ; Mojing research report
9
Channels: Sembo has a low # of POS in Tier1 cities, with weak terminal control ability,
which has been embodied in high DT proportion, and cluttered online sales channel
Notes: KA=Key account DSS= direct-selling store DT=distributor POS=point of sale OPC=online purchase channel
Source: POP MART annual report
10
Branding: Sembo's reputation is weak, far inferior to LEGO, and the brand concept
is not incomplete
Source: Algebraist analysis; questionnaire
11
Attractive: .. should optimize the production chain with intelligent manufacturing and
improve the user experience of products to attract more buyers for the brand
Notes: MES= Manufacturing Execution System
Source: Algebraist analysis; official website of SOFTERWARE TECHNOLIGY
13
Attractive: Sembo can create a whole new universe story themed ‘Rainy Forest,
Building Space’ to make products more attractive and Expand the adult market
Source: Algebraist analysis
14
Autonomy: Sembo should expand the sales proportion of T1 cities by purchasing and
setting vending machines, and lay the foundation for DSS location at the same time
Notes: VM=vending machine DSS=direct-selling store
Source: Algebraist analysis ; POP MART annual report
15
Autonomy: Sembo should shift some of its distribution to direct sales, with medium
cities as a pilot and plans to expand to 230 DSS in the next five years
Notes: KA=Key account DSS= direct-selling store DT=distributor
Source: Algebraist analysis POP MART annual report
16
Autonomy: For e-commerce, Sembo should expand the official purchase channels
and deliver products at fixed points concerned price and festival
Notes: MAU=monthly active users
Source: Algebraist analysis
17
Affective: Sembo need to constantly expand brand influence, implement brand
concepts, and ultimately endow products with added value
Notes: CSR=corporate social responsibility
Source: Algebraist analysis
18
Financial Projection & Implementation
Under ‘3A’ strategy ,Sembo is projected to grow to 2.2 billion in 2027 in consideration
of the following 3 risks
Notes: MES= Manufacturing Execution System; CP=consumer preference; DSS=direct-selling store
Source: Algebraist analysis
20
Thanks!
2023 Oliver Wyman Case Competition
Team Algebraist
Appendix 1: 2017-2026 China Plastic Building Block toy industry
market size Retail volume (RMB 100 million)
Source: Algebraist analysis
23
Appendix 2: Building block market size
2021market share
Average price per
piece(Yuan)
BanBao
QMAN
LEGO
Sembo
BLOKS
Dream Start
LOZ
KUB
PANTASY
XINGBAO
JAKI
WeKKi
4.5%
4.2%
43.6%
3.3%
1.7%
1.2%
2.0%
1.6%
1.0%
1.5%
4.0%
1.5%
281.0
105.0
464.0
180.0
224.6
117.8
45.1
170.0
450.0
122.9
90.0
150.0
The New
Color
1.0%
300.0
140
130
120
118
120
98.7
100
80
74.31
67
2020
2021
2022
60
40
20
5.91 7.69
10
0
SemBo
Source: Algebraist analysis
LEGO
Others
24
Appendix 3: High sales volume brand IP
Revenue breakdown of Sembo in 2022
Percentage
Children Series
Brand
Quantity Volume of sales
Volume of
interaction
15%
Technology Series
20%
Creative Series
30%
China-Chic IP
35%
Source: Magic Mirror Market Research Report
Brand comparison
LEGO
20+
72000
1.65million
keepley
15+
48000
0.22million
Sembo
7+
524000
0.17million
25
Appendix 4:Building block Sales by Channel
Building block Sales by Channel (Sales %,2022)
Sembo
Pop mart
15%
1%
0%
40%
65%
10%
15%
40%
E-Commerce
5%
5%
others
1%
9%
Modern-trade
Traditional Trade
Source: CFO-Summary interview &POP MART annual report
Brand of POS (in thousands，2022)
Sembo
POP Mart
9375
100
0
329
40625
100
4500
100
E-Commerce
1500
100
others
403
2067
Modern-trade
Traditional Trade
26
Appendix 5: Customers' selection of a brand for building block toys
Brands of toys purchased
brand
proportion
LEGO
83.1%
SemBo
14.8%
Keepley
15.3%
BanBao
3.7%
JAKI
2.0%
BLUkS
1.6%
PANTASY
3.7%
Others
21.2%
Reason for purchasing blocking toys
Reason
proportion
interest
73.5%
gift
29.1%
to family
24.9%
collection
23.8%
The proportion of toy population in the building block toy market
Age
Proportion
<18
12.2%
18-25
74.6%
>25
13.2%
Source: Questionnaire survey report
Whether the public heard of this brand or not
proportion
YES
26.46%
No
73.54%
27
Appendix 6: The expansion of sales channels
2022
82%
18%
0%
DT
KA
DSS
2023
71%
19%
13%
2024
63%
19%
20%
2025
56%
20%
27%
2026
50%
20%
30%
The number and coverage of Sembo's stores in the next five years
T1
New T1
T2
T3
T4
Quantity
35
100
95
50
20
Coverage rate
75.00%
83.00%
80.00%
29.80%
14.43%
Number planning of T1-T2 urban stores and
automatic sales machines
Overview of store laying at all levels of Sembo City (Unit: Home)
2023
2024
2025
2026
2027
T1
9
15
20
27
35
2023
2025
2027
Vending
machine
100
230
350
new T1&T2
67
88
115
150
195
store
76
135
230
T3&T4
27
35
45
56
70
Source: Algebraist analysis
28
Appendix 7:Revenue Forecast 2022-2027
Bear case
29
27
+19%
19
9
10 11
2022
Source: Algebraist analysis
12 13
2023
15
23
18 19
21
22
Base case
Bull case
22
24
16 16
2024
2025
2026
2027
29
Appendix 8: E-commerce retail data platform
Proportion of traffic on mobile shopping and e-commerce platforms in 2022 (unit: ten thousands)
Platform
Quantity
Proportion
TaoBao
99000
32%
JB
58100
19%
PinDuoDuo
71990
24%
Tik Tok
49000
16%
Poizon
8100
3%
Little Red Book
20000
7%
TOTAL
306190
100%
E-commerce platform keyword retrieval
Platform
Trend-following Price-sensitive Normal Price sovereignty Accomplished Enjoyment Traditional
Excessive
consumption
Fashion Total
TaoBao
4.5
3
4
3
4
3.5
4
4
4
3.4
JB
4
2
3
1
4
4
4
4
4
3.0
PinDuoDuo
3
5
2
5
2
1
1
2
1
2.2
Tik Tok
2
2
2
3
1
2
1
2
2
1.7
Poizon
5
2
2
2
4
3
4
3
4
2.9
Little Red Book
5
3
2
2
3
3
4
3
4
2.9
Source: YiGuan Analytical research report
30
Appendix 9: Hot IP sales volume predict
China_chic IP
Creative series
Technology series
Children series
Sum
Total increase rate
130%
107%
140%
96%
100%
2022
3.5
3
2
1.5
10
2023
8.05
6.21
4.8
2.94
22
2022
2023
2024
2025
2026
2027
Annul rate
China_chic IP
3.5
4.1
4.9
5.8
6.8
8.0
0.2
Creative series
3.0
3.5
4.0
4.7
5.5
6.3
0.2
Technology series
2.0
2.4
2.8
3.4
4.0
4.8
0.2
Children series
1.5
1.7
1.9
2.2
2.5
2.9
0.1
Sum
10.0
11.7
13.7
16.1
18.8
22.0
1.0
Source: YiGuan Analytical research report
31