How China's Toy Factories Need To Adapt & Evolve To Stay In The Game

China has been the dominant force in toy manufacturing for the last 20 or 30 years. For most people in the toy business, China is all they have known for sourcing toys, as an industry in fact we have taken for granted a massive toy production capacity and capability which has been very reliable over time. But the role of China's hugely reliable toy manufacturing hubs has inevitably changed and will continue to change because of the amazingly quick rate of economic development in China.

Don't just take our word for that - the South China Morning Post reported the same:

"foreign firms drawn to China for its low-cost production are most likely to redirect their supply chains to cheaper locations, as China’s cost advantage has been eroded over time by rising wages, higher land costs and increased tariffs."

The reality (whether we like it or not) is that China no longer offers the same low cost toy manufacturing as it did 20 years ago. China's toy factories are very experienced and capable, but the reality is that due to a). Economic trends and b). The way political winds are blowing right now that manufacturing toys for other people on a slim margin is unlikely to be a winning formula going forward. The toy business has a huge product churn each year - as much as 70% of products are new each year. This means that it is hard to introduce automation, because most toys don't stay in market long enough to merit the investment needed to automate. The only alternative to automation is labour, which is an issue now in China due to higher wages.

Overall, this should be seen as a good thing for China's citizens because living standards have risen so far so quickly, the reality though is that this means that toy manufacturing companies in China and Hong King need to review their mid to long term strategy to stay (profitably) in the game.

Other Asian countries such as Vietnam, Indonesia and India will gain much of China's low cost toy manufacturing. Some Chinese businesses have already established manufacturing plants in these countries. However, we have found that many toy manufacturing companies in Hong Kong & China have taken to building their own toy brands to step up the value chain and to work on much higher margins.

The issue for many of these companies is that while they understand the toy manufacturing business to it's finest details, they are often not that commercially or culturally aware, which means that many fail to establish a foothold for their own products, or fail to develop and build their own brands. Without your own brands you are seen as generic product suppliers, and this business is if anything even tougher than manufacturing toys to order for other people. The key success factor then is to work with the right distribution channels and to develop and nurture brands which have a chance of success in international markets.

Our company helps manufacturing businesses to find customers for OEM manufacturing. But we also help toy companies around the world to develop and grow their businesses. We have Consulted for more than 100 toy and game companies, and we have delivered $tens of millions in incremental revenues for toy businesses across the globe - from Mexico to Malaysia, from China to Canada, all across Europe, the USA, Oceania and beyond. Our approach is a Consultancy approach, because there are so many factors and functional disciplines needed to build successful toy brands. Our team has managed global iconic toy and game brands, worked with licensed brands including Disney & Star Wars, and have built new business revenues of more than $100m (USD) over time.

Our approach to helping toy manufacturing clients is to work out strengths and opportunities and to develop a strategy and then sales plan in partnership with the client. We then help to execute the plan by making sales approaches all around the world as required. We also work closely with product development teams to find gaps where we can add incremental revenue opportunities - on recent projects we have identified clear opportunities worth $several millions (USD).

So, if you are a Hong Kong toy company or a toy factory group in China, you need to look at your future strategy. The growth of China's domestic toy market offers future opportunity, but demand for your export business is quite likely to change in the coming years. Our company can help you stay ahead of the curve. For more information, get in touch via the Contact page of this website:

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