3 May 2019
Growth of Home Market Buoys China Toy Makers in Face of US Tariffs
Despite narrowing margins, increasing labour costs and the threat posed by escalating US import tariffs, exhibitors at the Shanghai China International Toy Fair were noticeably upbeat, largely on account of currently booming domestic demand.
Suppliers exhibiting at the 17th annual China International Toy Fair (China Toy Expo) may be forgiven for showing a few nerves – after all, following robust growth in sales over the past few years, dark clouds now hover on the horizon. Margins are thin, largely on account of rising wages, and China's ongoing trade war with the US could have a big effect on the industry given that the mainland – the world's largest toy exporter – is the source of 82% of all toys sold in America today.
Still, there are reasons to be cheerful. In 2017, domestic toy sales in China reached RMB64.6 billion (US$9.6 billion), making the country the world's second-largest toy market. This represented a 16.2% year-on-year increase, with industry forecasts predicting the market will be worth $14 billion by 2020. Given the sheer size of the Chinese toy industry, which employs about six million people across more than 10,000 manufacturing companies, the growth in domestic sales is now hugely important to the security of the sector.
This time around, the fair was largely dominated by domestic manufacturers, with Lofea Toys, part of the Wisha Group, a fairly typical representative. The Shantou-based manufacturer was established five years ago and mainly produces dolls. As the company's products comply with US safety standards, it is now attempting to expand its range of exports and already sells on Amazon.
Assessing the value for the company of attending this particular expo, Merchandiser Alin Wang said: "Every year we come to this show and we find it extremely useful in terms of boosting sales within China, especially as it attracts both big and small buyers. In addition, we also attend the HKTDC Hong Kong Toys and Games Fair in January."
One of the most notable trends at the show was the greater prominence of toy construction brick products, with a large number of companies exhibiting their own take on these ever-popular items. Among their number was Shantou-based Wange Educational, a business established in 1999 and a long-time regular exhibitor at the China Toy Expo.
Wange basically produces two types of bricks – a larger-size Dubie range targeted at children aged between three and six and smaller bricks for the older age group. Its ranges are said to be compatible with Lego's Duplo product size and its regular size, respectively.
Introducing one of the company's most in-demand collections, Education Sales Manager Madison Wong said: "One of our most successful offerings is our series of famous architectural landmark construction kits, which feature such historic landmarks as the Taj Mahal. Although Lego, too, has a Taj Mahal model, it's very complicated and is made up of 5,000 individual pieces. By comparison, our kit is much simpler and has just 1,505 pieces.
"In terms of the event, there seems to be more overseas attendees at this year's show, which is good for us. We have been exporting to North America since we started and, earlier this year, for the first time, we attended the toy expos in New York and London. While London didn't go so well for us, as we couldn't find appropriate buyers, New York was much better."
As well as construction bricks, toy guns were also very much in evidence at the event. Looking to take something of a lead here was Guangdong-based Qi Ming Le Toys, which sees itself as serving a more mature clientele, with its replica weapons targeted at the 14-and-above market.
Explaining the company's current focus, Sales Representative Jay Chen said: "At present, South America is our key export market, although we also have strong domestic sales. In terms of the latter, both the Guangzhou and Shanghai toy shows are very useful to us."
Among those offering toy musical instruments – another perennially popular product range – was Quanzhou-based Aiqian, with its new multi-function keyboard proving a clear hit at the show. Sold under the company's proprietary Bigfun branding, the keyboard can be linked to a range of digital devices, including phones and tablets, allowing its notes to be clearly reproduced. It also features an LED display that lights up in sequence when the right notes are played in the appropriate order. Founded in 2016, the company already exports to the US, the Middle East, the EU and Russia.
Detailing her experience at toy expos across the wider Asia-Pacific region, Sales Manager Jane Wu said: "This is the second time we have exhibited at this show and we haven't found it quite as good as last year as there are not as many visitors. We also went to Guangzhou in April and there were more visitors there, while the range of exhibitors was quite similar to this show. We have also tried some overseas shows, but with limited success. We attended a show in Indonesia last year, for instance, and didn't have a good experience."
Stuffed toys is another product category that just never seems to go out of favour, a state of affairs that Sunnytad, a Yiwu-based manufacturer of kid-friendly cuddly creations, has long benefitted from. This year, the company shared a stand with South Korea's Jinyoung Global, one of its key clients. Sunnytad manufactures Jinyoung's Cookie Friends line on an OEM basis, while also producing its own toy range under the Nomo brand.
A debutante at the event, Marketing Director Lynn Su was broadly happy with the reception accorded the company, saying: "This is our first time at this particular show, although we've been going to Hong Kong for eight years and to Guangzhou for five. We have been in business for 20 years and we are here to expand our customer base. So far, it's been quite good, largely because there are so many people here. While Guangzhou has more overseas attendees, this show does well in terms of domestic buyers."
While overseas brands were somewhat thin on the ground this time around, one exception was Lucy & Leo, a Spanish company with manufacturing facilities in China's eastern Zhejiang Province. Introducing the business, Executive Director German Obukhov said: "We produce wooden unisex toys for children aged up to six and, right now, the market is pretty good for us. We've been growing every year and in 2017 our sales doubled.
"We mainly sell to the EU, Eastern Europe and Russia, but we're also targeting China. This is our second year at this show, and we're here to find out more about the local market. While we sell under our own brand name, we are also happy to work on an OEM basis. In fact, we met a European company here that wants to use us in that capacity, while also being willing to distribute our brand."
As well as producers and distributors, there were a number companies attending the event offering toy-manufacturing equipment and a range of ancillary services. One such exhibitor was Avery Dennison, with the California-headquartered manufacturer this year opting to highlight its production-line friendly elastic staple system.
Explaining the utility of the system for toy manufacturers, Sales Executive Ray Chang said: "If they use our stapling system to fasten toys onto a card, manufacturers can considerably reduce their overall level of packaging waste and we can also supply recycled plastic fasteners.
"This is our second time at this event, although the last time we were here was back in 2016. Overall, we prefer the Hong Kong show as it gets bigger every year and there are more decision-makers in attendance – largely because many of them are either based in Hong Kong or travel there from the US."
Another service-provider in attendance was Made-in-China.com, a Nanjing-based b2b portal with a focus on matching Chinese manufacturers with overseas buyers. Founded in 1996, the portal now lists several thousand suppliers and a similar number of clients / specifiers. The company regularly attends tradeshows on a global basis as it looks to recruit additional suppliers and build awareness among buyers.
Giving something of a veteran's view of the Shanghai event, Made-in-China Sales Representative Chen Jing said: "We attend about 100 exhibitions a year all over the world and we regard this particular show as pretty good. We have now been coming here for eight years and there are a lot more suppliers and buyers in attendance this time around."
The 2018 China Toy Expo took place from 16-18 October at the Shanghai New International Expo Centre.
Chen Rong, Special Correspondent, Shanghai