The epidemic of Chinese toy recalls in 2007 has changed the landscape for U.S. toy makers.
The recalls sparked renewed interest in U.S.-made toys, giving domestic players opportunities to boost toy sales. Meanwhile, testing protocols are becoming more stringent for U.S. and foreign toymakers.
One U.S. firm noted a huge increase in consumer interest after toys from China were recalled due to lead paint and faulty magnets.
``Before the recalls, we had a few consumer inquiries a month. But now it's at hundreds per week,'' said American Plastics Toys Inc. President John Gessert.
American Plastic Toys capitalized on the interest by changing its packaging to emphasize the company's toys are U.S.-made. Several other companies also reportedly emphasized their U.S.-made status, incorporating U.S. flags and red, white and blue artwork in their packaging.
``Customers looked at ways U.S.-made toys were highlighted,'' Gessert said in a telephone interview. ``We played it up.''
Science and nature toy maker DuneCraft Inc. of Chagrin Falls, Ohio, has yet to experience growth directly due to the recall backlash. But the firm's president, Grant Cleveland, expects that will happen in 2008 when toy buyers lay out their plans for the coming year.
``Next year, this trend will show up in many retailers as they are adding many of our items now, and that is when the company's sales growth can be linked to the problems in China,'' Cleveland said in an e-mail.
Gessert expects backlash sales will carry through spring, depending on whether there are more recalls that might prolong the phenomenon. If there are more recalls, domestic firms like American Plastic Toy are well poised to ship toys quickly to fill shelf space.
In the absence of more recalls, consumer confidence in Chinese-made toys could return in time for the next Christmas season, Gessert predicted.
In addition to largely unsullied reputations, companies that make toys in the United States bring other advantages to the table, according to Cleveland.
``There is greater control of all the processes and materials used,'' Cleveland said. ``Local and domestic supply reduces transportation costs, backorders and delays. Since the business is seasonal, having an uninterrupted flow of goods to retailers when they need them is a key performance goal we measure.''
Although he expects some migration of toy production back to the United States, Richard Gottlieb said the trend probably won't lead to much job creation. The New York-based consumer products expert said expanded toy production will rely heavily on automation to keep costs down.
One consumer products consultant expects some companies, especially small ones, will benefit from the backlash against Chinese toys but the largest firms do most of the production in China.
``The toy industry has basically closed its operating plants in the U.S.A. for offshore production for many years,'' said Brian Dobson, president of Dobson Communications Inc. of Ridgefield, Conn.
Regardless of how strong the consumer backlash might prove to be, toys from China will continue to be dominant in the U.S. market, where they hold about 85 percent market share, according to New York-based Toy Industry Association Inc. spokesman Frank Clarke. The domestic producers could not crank up production enough to offset any massive switch from Chinese toys, he explained.
Dobson believes the toy market will return to its previous status quo after consumers shed their skepticism and again believe government regulators and the toy producers are in control of quality problems.
The 25 million toys recalled this year represented less than 1 percent of the U.S. $3 billion annual toy market.
Trade figures show no effect of recalls for the first nine months of the year. In the third quarter during the midst of the recalls, imports of toys from China actually grew 27 percent. For nine months, toy imports rose 10 percent while games jumped 114 percent led by new sales of the Nintendo Wii game console.
The recalls were financially painful to companies directly affected. Mattel Inc. for instance recorded recall-related charges totaling about $45.8 million for the April to September period. Also, the largest toy company in the world acknowledges its recent recalls ``may have a negative impact on both customer and consumer demand for Mattel's products in the future,'' the company stated in a securities filing. In addition to the direct financial hit, El Segundo, Calif.-based Mattel also faces numerous product liability lawsuits in the United States and elsewhere.
When unsafe products were discovered, the toy industry rushed to restore consumer confidence, according to Clarke. Although toy standards themselves were adequate, they were unevenly applied and the industry is trying to right the situation.
Dobson said the recalls underline weakness in the supply chain where manufacturers must take responsibility for the products from design right through to their efficacy in the hands of consumers.
The Toy Industry Association is spearheading industry efforts to repair the safety testing and inspection process and to inform consumers through a hot line and Web site.
The industry, with the help of the American National Standards Institute, is developing standard testing procedures to be used industrywide. How often toys are sampled and which tests are applied will be defined in new ANSI procedures.
In parallel, the industry is setting up criteria to accredit testing laboratories that would use the ANSI protocols.
Third, the industry wants the federal government to come up with legislation that requires all toys sold in the United States to undergo prescribed testing and inspection.
A first draft of the ASNI protocols might be done by the end of the year, Clarke said.
Officials in China have also moved to restore confidence. The country's General Administration of Quality Supervision, Inspection and Quarantine agreed to increase inspections of consumer products going to the United States and to help ensure lead paint is not used in toys for export. Officials also have revoked export licenses for 764 toy plants because of quality problems and ordered another 690 to improve their quality, according to a China Daily news report.
Clarke indicated that part of the reason the recalls created so much publicity was because of China. China industry already had a stigma associated with its central role in migration of U.S. manufacturing to low-wage countries. In that climate, finding fault with the country's toy industry was easy.
Gessert said his firm is not fazed by tighter testing protocols because it already relies on outside laboratories to help ensure it meets safety standards. What would be new is any requirement to retest toys that passed tests several years ago.
``Where we are most affected is in older products that need to be retested if they haven't been tested in the past 12 months,'' he said by telephone from his company's Walled Lake, Mich., headquarters.
While ANSI works with related parties to strengthen test protocols, an activist group has conducted its own tests and said it found lead and other toxic materials in a range of toys.
The Ecology Center of Ann Arbor, Mich., said in early December it tested 1,200 toys and related items and found lead in 35 percent of them.
``Ultimately, consumers need to take action to compel the federal government and toy manufacturers to eliminate dangerous chemicals from toys,'' said Tracey Easthope, director of the Ecology Center's environmental health project.
TIA responded to the report by saying it was misleading about potential hazards. Test methods did not correlate with real life exposure and for many products, toxic compounds are present only in minute amounts, TIA stressed. Federal standards and a consensus among toy producers already limits levels of hazardous substances in toys, according to Joan Lawrence, TIA's vice president of standards and government affairs.