HONG KONG — Manufacturers at the recent Hong Kong Toys & Game show say plummeting oil prices have had negligible effect on toy makers' bottom lines.
“There's only a small relationship between the price of resin and the price of the finished toy,” said Emily Cheung, executive director of leading Hong Kong manufacturer Tsuen Lee Metals & Plastics Toys Co. Ltd.
“Even though the price of plastic is going down a little, other factors are driving up our prices,” said sales representative Christy Lee of Hong Kong's Plastmetic Manufactury Ltd., which has 180 workers in Dongguan, Guangdong province.
“The workers' salaries keep going up and up, about 5 to 10 percent a year,” said sales manager Suki Chen of toy gun manufacturer Ze Cong Plastic Toys Factory, which employs 100 workers in Shantou, Guangdong.
Both companies' factories are in the heavily industrialized Pearl River Delta, which has rapidly become a seller's market for labor.
“After the Chinese New Year, we'll have a fairly high labor shortage — over 100,000 workers in the Pearl River Delta region,” predicted Chuck Fung, a senior consultant with the Hong Kong Productivity Counsel. “You are paying four or five times the minimum wage required by the Chinese government.”
Automation is one solution to mounting labor costs, but difficult to implement in the notoriously cyclical toy industry, said Emily Cheung, who also is vice chairman of the Hong Kong Toys Council trade group. Products also need to be designed to be easily put together by robots.
“We are encouraging our members to talk to their customers, so products can be optimized for production,” Cheung said.
Another challenge is a wildly complicated international regulatory landscape, which often requires sizeable upfront testing costs for entering a new market. It's a particular challenge for small players like Guangzhou-based Jargeon Group, which began exporting its Snug-brand breast pumps and bottle warmers three years ago.
“At the beginning, we may not sell much in a new market, but we need to pay, say 50,000 RMB (about $8,000) to have our products tested [in the United States]. Then we need to pay every year for testing,” said export manager Salina Lin.
Other vendors said they were hurt by the gloomy European market.
“The European economy is down, so are our sales,” said sales manager of Bubble Cai of Shantou, Guangdong-based games maker Action Toys Co Ltd. “Or the Europeans ask for a lower price.”
Still, opportunities beckon — especially in these companies' own backyards. This year, the Asia Pacific region will pass North America as the world's biggest toy market, said Utku Tansel, head of toy and games research at London-based consultancy Euromonitor International.
Tansel sees sales in the developing world rising sharply — 9 percent growth per year through 2018 in China, which is second only to America as the world's second biggest toy market. Tansel is especially bullish on Brazil, which he said will pass France in 2017 to become the world's fourth-largest toy market, behind Japan.
Other fast growing markets are India, Thailand, the United Arab Emirates and Indonesia, Tansel said.
“In the emerging economies, such as Brazil, birth rates are stagnating. However, rising affordable income is giving rise to even better sales for toys and games,” he said.
“Middle class people are willing to spend more on toys,” Cheung said. “‘In the toy industry, if you have a good product, you can succeed.”