Time to toy with a new business model
Updated: 2008-02-05 09:18
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| Gaofa toy company workers manufacture toys for the US market. |
Huang Chunman, a Guangdong-based toy trader, was apprehensive about her overseas market ever since the spate of recalls of Chinese toys last year. But she was relieved to find her company still received heavy orders from loyal overseas buyers.
"An influx of orders before Christmas came as a big relief," said Huang, general manager of Bright Spring Trading Ltd.
Toy manufacturers generally think it is difficult to inspire loyalty in this competitive market. However, good quality and smart design always get customer interest.
"Quality and design are now the top priority of our production, it surpasses all other issues like soaring material and labor costs," Huang said.
Rapid growth in material prices and higher wages in Guangdong province have forced the Shantou-based toy group to raise its prices by 10 to 15 percent.
"Higher prices did not affect our overseas business. But what we were concerned about the most was better quality," Huang said.
Like Huang, thousands of Chinese toymakers have been through a turbulent year. In 2007, "Made in China" experienced an unprecedented "crisis of confidence", triggered by the recall of China-made toys by Mattel Inc of the US. This was followed by other similar recalls of Chinese exports ranging from toys to toothpaste and food.
Quality defects weren't the only reasons for the recalls. Disputes over standards, technical barriers and trade protectionism also played a large role.
The industry must be more inventive to survive and cheap toys can't survive competition and trade protectionism, said Samson Chan, president of the Toy Manufacturers' Association of Hong Kong.
"Toy producers should try a new business model; they need to attach importance to more value-added products," Chan said at a toy fair in Hong Kong, which is home to over 3,000 mainland toy company headquarters.
PP Bear Industry Investment Co Ltd brought to the market innovative and hi-tech toys and did far better than it thought. The Shenzhen-based toy manufacturer developed teddy bears that can imitate human expressions, which was an instant hit with customers.
"We have aimed to turn our products from 'Made in China' to 'Created in China'. And our products with independent intellectual property rights have been well received in the overseas markets," said Hu Lantian, chairwoman of the company.
"Only products with exclusive designs can meet the demands of buyers in international markets. Chinese enterprises have rich experience in OEM (original equipment manufacturer) business, but there will be a limited overseas market for simple OEM products."
The company, which began developing the overseas market last year, realized sales revenue of nearly 1million yuan from abroad.
"It is expected to reach 5 million yuan this year since we will strengthen efforts to upgrade design and develop new products," Hu said.
Strong exports
Jeffrey Lam, chairman of the Toys Advisory at Hong Kong Trade Development Council, said despite the toy recalls last year, it was a good year for Chinese toys as industry players adhered to the high standards of product quality.
China exported $7.07 billion worth of toys in the first 10 months of 2007, representing growth of 20.1 percent over the same period of the previous year.
Customs sources said the growth was 13.9 percentage points higher than the year-earlier level despite all the bad press that "Made in China" products got.
The 10-month period saw Chinese toy exports to European and North American markets recover and those to emerging markets grow rapidly.
Between January and October, China sold $3.06 billion worth of toys to the US, up 13.3 percent over the same period of 2006, and toys worth $1.72 billion to the European Union, up by 29.9 percent, according to the National Bureau of Statistics.
The growth rate was 11.2 percentage points higher for the US and 24.9 percentage points higher for the EU. The two markets absorbed 67.6 percent of China's total toy exports.
China also sold $390 million worth of toys to Latin America, up 42.2 percent.
Hong Kong toy exports in the first 11 months of 2007 topped $11.4 billion, up 25 percent over the same period last year. Exports to the two main markets - the US and the EU - were up 4.7 percent and 24.2 percent respectively.
Toy manufacturers on the mainland and Hong Kong have been advised to develop the domestic market, which has very strong business potential.
Local opportunities
"Toy factories should not only focus on overseas markets, the home market offers tremendous business opportunities. There is a growing number of affluent families wanting better-quality and smartly designed toys for their children," the Hong Kong Trade Development Council said in a statement.
"Toy producers should try a new business model, such as developing the domestic market," Huang said. "The domestic market may help them to expand business. They should not only focus on the overseas market since the cost of exports is rising."
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