China's children's park market is welcoming a new opportunity under the motivation of the two-child policy and upgraded consumption.  In 2017, the scale of China's children's parks approached CNY 300 billion in revenue.  Indoor children's parks are a market segment of the amusement park industry.  In recent years, this segment has developed rapidly and the industry is gradually maturing.  Nevertheless, the whole amusement industry is still in its infancy and has not formed its leading companies. “There is a large population of children and teenagers in China.  Under the advantage of the two-child policy, the indoor children's theme park industry will usher in explosive growth,” said by Chen Ye, analyst for the Forward Industry Research Institute.

Last year, Alpha Group Co., Ltd. created a novel business – children's park market, and wishes to stimulate the performance growth by it.  According to its schedule, Alpha hopes to follow the asset-light model and align with mid-to-high-end chain commercial real estate.   At the same time, it plans to open 50 parks within 3 years and expand to second and third-tier cities.  During the proposal of the plan, the park, under the self-operation mode, will cover an area of 2,000-3,000 sq.m.  The investment of each shop will be controllable.  And shops can cooperate via methods such as offering free rent, low rent and the like, to decrease the risk caused by the expansion in the early stage.  In the future, Alpha will consider changing into franchises when the self-operation mode becomes mature.

In 2017, the income of Wanda Kids Place Group reached CNY1.44 billion, which is far away from Wanda Media Group’s 53.2 billion.  There are 60 parks and 50 early learning centers under Kids Place.  Kids Place plans to open 200 shops in 2020, or even be equipped in every Wanda Plaza.

To some extent, Alpha's children's park is similar to Wanda’s.  For example, both of them are combined with IP.  They are not just the amusement park, but an edutainment park.   However, the biggest difference between them is the real estate advantage.  Wanda Kids Place can sets rigid demands that it must enter into its own commercial real estate, so that it can expand more quickly, while Alpha must think a lot about the location such as the rent and the rate of return.  Fortunately, Alpha has lots of self-owned IP, including Pleasant Goat, Big Big Wolf, Armor Hero, Balala the Fairies and Backkom, which have been examined by the market.

As the impact on the retail industry from E-business, the experiencing business format such as children's amusement centers catch more and more attention.   Some indoor children's amusement brands such as Molly Fantasy, Beluga World, Tom’s World, Super Player, and Meland gradually attempt to transfer into the family consumption pattern so that they can expand the age range of consumers and no longer provide only children's amusement equipment content.  And some developers especially the commercial property developers, greatly increase their demands on the children's amusement format, or even make it become the standard facility.  Wanda Kids Place and Vanke Octopus Park are good examples.  They have lots of advantages that others do not have such as the brand advantage, cost advantage, and scale advantage.

Amusement projects depend on not only IP but also mature operation experience.  Can Alpha successfully create an “Alpha Amusement Park” pattern like Disneyland, and transfer its IP into revenues and produce performance growth?  It also needs to wait for the market's examination.  The winner from competition between real estate and IP will be decided in time.
※The article is published in the GTI Magazine Issue No. 167 in August 2018