Ma­te­ri­als: Her­culean task ahead for toy­town as ex­ports nose-dive

China Daily (Canada) - - BUSI­NESS -

Ad­min­is­tra­tion of Qual­ity Su­per­vi­sion, In­spec­tion and Quar­an­tine show that China’s toy ex­ports were worth $24.73 bil­lion in 2013, down 1.64 per­cent from 2012, as the global mar­ket for their goods stag­nated.

“Overseas cus­tomers are much more cau­tious. Pre­vi­ously they would take a fixed num­ber of prod­ucts ev­ery year and of­ten over-or­der, happy to cover that cost. Now they would place or­ders only for what they know they can sell,” said Lin, whose com­pany man­aged to main­tain its nor­mal ex­port level in 2013, about 30 mil­lion yuan. But many firms have not been so lucky. The ma­jor­ity of the coun­try’s wooden toy-mak­ing com­pa­nies are orig­i­nal equip­ment man­u­fac­tur­ers — those that make parts or prod­ucts that are used in an­other’s end prod­ucts — which means low added value, or the dif­fer­ence be­tween the price of their fin­ished prod­ucts and the cost of mak­ing them, said Mao Feng­ming, sec­re­tary-gen­eral of the Yunhe toy as­so­ci­a­tion.

For a toy that is sold at $8 in the US, for in­stance, a pro­ducer in Yunhe is now likely to make around 20 cents.

“They have to up­grade their fa­cil­i­ties and tech­nolo­gies to keep com­pet­i­tive on the in­ter­na­tional mar­ket,” Mao said.

To move fur­ther up the value chain, many of Yunhe’s toy pro­duc­ers have started to re­al­ize the im­por­tance of build­ing their brands.

A decade ago, the coun­try had just 11 rec­og­nized wooden toy brands; now there are more than 240, ac­cord­ing to the toy as­so­ci­a­tion. But brand­ing can be ex­pen­sive.

Liao Fuxin, vice-pres­i­dent of the China Toy As­so­ci­a­tion and pres­i­dent of Zhe­jiang Xinyun Wood In­dus­try Group, Yunhe’s largest wooden toy pro­ducer, said his com­pany has 70 per­cent of its prod­ucts made through OEMs, with 30 per­cent be­ing its own brands. It is tar­get­ing par­ity in the two cat­e­gories in the next two years.

Liao said com­pared with the com­pany’s own brands, OEM prod­ucts bring about much higher mar­gins. It also func­tions as an orig­i­nal de­sign man­u­fac­turer for re­tail­ers such asUS re­tail gi­antsWal-Mart Stores Inc and Costco Whole­sale Corp. “We are in charge of the de­sign and man­u­fac­tur­ing process. But prod­ucts have to be re­branded for spe­cific tar­get mar­kets,” he said.

Liao con­cedes that the busi­ness model might not be sus­tain­able long term — but “we are try­ing to pitch our own brands to con­sumers when­ever pos­si­ble”, he said.

Also vex­ing many of the toy­mak­ers are the fre­quent changes in tech­ni­cal stan­dards of some of their tar­get mar­kets.

“The tech­ni­cal bar­ri­ers to trade in the de­vel­oped mar­kets, es­pe­cially, are adding hefty fi­nan­cial pres­sure. All the com­pa­nies here are work­ing hard to keep up, rais­ing the safety stan­dards of prod­ucts,” Liao said.

The EU makes the most fre­quent changes, ac­cord­ing to Yao Ting, an of­fi­cial with the Lishui En­try-Exit In­spec­tion and Quar­an­tine Bureau.

The stan­dards on the sounds pro­duced by toys, for in­stance, have been re­vised twice in re­cent years. But de­spite the chang­ing stan­dards, the county has main­tained a record on prod­uct safety, with not one sin­gle alert on qual­ity is­sued from the EU or US for 60 con­sec­u­tive months.

Yunhe is one of nine na­tional qual­ity and safety demon­stra­tion zones now cer­ti­fied by the AQSIQ prod­ucts.

“The chang­ing stan­dards and high re­quire­ments ac­tu­ally of­fer com­pa­nies the op­por­tu­nity to im­prove prod­ucts qual­ity,” Liao said. “Without the tech­ni­cal bar­ri­ers, Yunhe’s toy in­dus­try would not have pros­pered as it has.”

The stan­dards ex­pected of this of­ten la­bor-in­ten­sive in­dus­try also mean that com­pa­nies con­stantly re­main un­der pres­sure to up­grade their equip­ment, an is­sue be­com­ing all the most ur­gent as la­bor costs rise, and staff short­ages grow.

More than 20,000 peo­ple, or one-fifth of the county’s pop­u­la­tion, are em­ployed in the toy in­dus­try, but fewer re­main will­ing to do the work due to its of­ten-te­dious na­ture.

“Young peo­ple would not do this job. In most cases we can only re­cruit women in their 30s or 40s,” said Lin Hong­bing from Zhe­jiang Hongyuan Toy.

Many toy­mak­ers, in­clud­ing Lin’s com­pany, have au­to­mated some of their pro­duc­tion, on paint­ing, for in­stance.

Mike Sa­gan, sup­ply chain di­rec­tor for the US-based toy­maker KidKraft, which buys more than 2 mil­lion sets of toys from the county an­nu­ally, be­lieves Yunhe’s com­pet­i­tive edge re­mains in the skill of its work­ers. But he also warns that its com­pet­i­tive­ness could be lost with­out ad­e­quate in­vest­ment in ma­chin­ery and tech­nol­ogy.

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in­dus­trial Con­tact the writer at xuwei@chi­nadaily.com.cn

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