China’s toy industry is in serious trouble

China Toy IndustryIt’s a very difficult winter for the toy industry in Guangdong province. You could say it is an extremely harsh winter, if such occurred in the southern province of China. But more than 50% of all Chinese toy factories are there. And here, ends the jokes.

Toy manufacturers in China are fighting with all their strength to survive. One way is to reduce employment. The average toy factory in the province has decreased their workforce by about 50% this year.

All small and medium-sized companies belonging to the sector have been  plagued by exactly the same problems: declining orders and rising costs of production.

Some companies are trying to survive during the crisis by reducing costs and, above all, the number of workers. Others seek help by increasing the prices of finished products. Of course they try to do it carefully, within the limits of 5-6% compared to last season orders.Raising prices is a double-edged sword, of course. This allows companies to keep profits from production, but also discourages a large proportion of customers who are afraid of further, significant price increases.

It is a strategy that matches the flexibility of a large internal market. In the case of an increase in exports, it is a less resolute practice. Importers can simply start searching for cheaper sources of goods, and more competitive suppliers. What’s more, many Chinese toy manufacturers have production facilities, but are unprepared for the tough price negotiations. This is very important given the low level of technological advancement and technical background of toy factories.

Very large toy companies do not have such problems. They can maintain the level of profitability of their operations, not only by the scale of operations, but mainly due to their technologies, skills and knowledge of quality control techniques, and negotiation.

The increase in prices of Chinese toys is in the data on Chinese exports. In the first half of 2012, it reached $9.38 billion, an increase of 30.5% compared to the previous year.

One of the members of the society of toy manufacturers from Guangdong province, who asked to remain anonymous, stated that the generally observed increase in value of exports of toys does not necessarily mean actual increase in the number of toys exported. He says that the actual interest in toys can only be described as lukewarm. To confirm, he  cites data on bankruptcies toy factories in the last 12 months.

China’s toy industry experienced a golden period between 2005 and 2010, but since then the number of companies involved in the production of toys in Guangdong province fell from 1,899 in 2010 to 1,172 this year. Many of these companies have survived, by setting up factories in cheaper parts of China, or in cheaper countries of Southeast Asia.

Companies that changed early on the internal market are not afraid of the global crisis. Some of these companies liquefy more than 70% of production for the Chinese market. The activities of the internal market are not so easy in comparison with the export business. To exist in the internal market, companies need their own brand factory, must be promoted, and rely on sales from the internet, as well as  department stores and shopping malls.

Today, the toy industry has to adapt to changes in customer preferences. This means paying attention to the area of computer games, board games and logic, as these represent the largest share of the consumer market for all age groups.

Source: chiny24 “Chiny: Przemysł zabawkowy w poważnych tarapatach”

Categories: Manufacturing & Industry

Tags: , , , , , , ,

3 replies

  1. Reblogged this on Okonomibloggy and commented:
    China Daily Mail article on hard times for China’s toy manufacturers.


  2. Reblogged this on Shade Tree Economist and commented:
    Am experimenting with “reblogging” an article by linking to an article I wanted to talk about anyway. Looks like the toy industry in China is suffering from the same problems that the rest of their economy is.


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