With China's economy growing, some overseas plastic toy makers are starting to seriously explore the country's expanding but sometimes challenging domestic market.
Italian toy maker Italtrike srl, for example, plans to start selling its Italian-made plastic riding toys in China this year. The company sees a market for higher-quality and more-expensive products in some of the wealthier cities like Beijing, Shanghai and Shenzhen, according to President Stefano Gandolfi.
With traditional markets in North America and Western Europe flat, the company is looking to Asia and Eastern Europe for business, he said.
Italtrike is paying to bring two Chinese inspectors to its factory in Paderno del Grappo, Italy, in March to apply for the 3C certification the Chinese government requires to sell locally, he said. The company has lined up a distributor in Shanghai.
It will be a small volume [at first], he said. I expect not in the short-term time, but in the medium term, to have a good result.
In an interview at the Hong Kong Toys and Games Fair, Gandolfi said he sees advantages for his Italian-made toys in China and other developing economies, and he wants to position his products at the top of those local markets.
In emerging markets, people want to buy the best products for their children, and there is space for premium toys, he said. The strategy I am adopting is very simple.
I have design and I have the capacity to do things in the proper way. I can give nice-quality products with 'Made in Italy' on the top.
Judging by other interviews conducted at the Hong Kong fair, held Jan. 11-14, Italtrike is not alone. Other firms believe there's a market now for what they say are their more-expensive, higher-quality, overseas-made toys.
Madrid-based plastic tableware maker Stor S.L., for example, said it opened an office in Shenzhen recently, as part of its process to get approval in China, to sell the drink cups, boxes and small toys it makes. The company makes licensed products for many global toy brands, including Disney and Barbie.
There are certain regions where the purchasing power is OK, like Shenzhen and Shanghai, which is why it is OK to try it in China, said a salesman in the company's booth.
Other overseas plastic toy makers acknowledged they are taking similar steps to get China's 3C certification, but they declined to talk on the record because they said they feared tipping off potential competitors.
Cogozzo, Italy-based injection molder Grand Soleil Igap SpA said it has seen a lot of interest in its toys when it has tested the market at shows in Shanghai and Hong Kong, but it fears the high value of the euro, compared with the dollar, will hurt its ability to sell in China, said company executive Giuseppe Giordano.
China's domestic market has also been attracting more attention from Hong Kong-based toymakers, many with factories in mainland China.
But opinions about the market among those companies are split, with some saying the country's domestic business conditions still pose many challenges.
Hong Kong-based injection molder Galey Industrial Co. Ltd. launched an effort in China last year to sell its branded toys like plastic ovens and robot dolls that kids assemble.
But it's not worked as well as expected, leaving the company and its local partner disagreeing over the terms of their contract, and Galey looking at other marketing strategies, said General Manager Frankie Cheng.
Chinese competitors' toys also are very inexpensive, he said: Especially in Shantou and Ningbo, their prices are incredibly low, so we have to stay competitive.
At the macro level, figures from the Hong Kong Trade Development Council suggest the importance of the Chinese market is growing.
For the first time, official figures illustrate that mainland China was Hong Kong's top destination for toy and games exports in the first 11 months of 2009, nudging past the U.S., where exports from Hong Kong dropped 23 percent.
Officials of the Hong Kong Trade Development Council officials caution that some of what is counted as exports to China are actually parts, not complete toys. They point out that the U.S. probably remains the biggest single market for finished toy exports.
Still, the aggregate growth in exports to China, from about US$1.1 billion in 2006 to US$2.6 billion in 2009, does show that China is becoming a more important market for Hong Kong-based companies, according to Benjamin Chau, TDC deputy executive director.
[The figures] highlight that China is really the emerging market, because of the number of children there, said Wong Tit Shing, head of the TDC's Toys Advisory Committee and managing director of Hong Kong-based plastic and electronic toy maker Jetta Co. Ltd.
Others see more challenges.
Hong Kong firms are interested in the mainland market, but there are significant difficulties, such as selling prices that are too low, lack of clear sales channels and difficulty getting reliable credit information on potential partners and customers, said David Chu, president of the Toy Manufacturers' Association of Hong Kong.
He said Hong Kong factories are unsure how mainland Chinese firms can undercut their prices by 30 percent without skimping on quality. Hong Kong's industry remains oriented toward developed markets like the U.S. and Europe, Chu said, adding that firms that do business with the mainland probably limit that market to 10 percent of overall sales.
The interest level is very high, Chu said. In actual practice, the difficulties we encounter are significant.
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