Share this on

Shanghai and Hong Kong

GDA Staff -- Gifts and Dec, 12/1/2011 2:00:00 AM

I AM FORTUNATE: I get to attend many toy events around the world. The Toy Highway, as I like to call it,Hong Kong presents a familiar vision of the industry takes me to Dallas; New York; Phoenix, AZ; Washington, DC; Chicago; Nuremberg, Germany; Shenzhen, China; Hong Kong and, this year, Shanghai. As I move through these shows I get a feeling for what is happening and where the toy industry is heading.
Going to the China Toy Expo, which I did October 10-14 of this year, was like taking a mysterious new off ramp. This fair was not reminiscent of other toy fairs nor did it seem to have much in common with Hong Kong. It was a road under construction and, like all roads in China, it will be built quickly and it will be big. And like China's real highways, this one will also be filled with confusion, danger and great energy.

The Future as Seen from Hong Kong
The Hong Kong Toys and Games Fair has always been about export. It is where China's enormous manufacturing engine meets the world. Go to Hong Kong and you will feel right at home, because home just followed you around the world. Take a walk down the street and you will see numerous familiar faces. The ferry to the Hong Kong Convention and Exhibition Centre contains droves of South Americans, Europeans and Australians.
This toy future is all about the power of the Chinese export machine. It's also, however, about the ability of China to sustain that machine when confronting rising wage demands and raw material costs.
Where one needs to be careful in assessing the future from Hong Kong is to not be lulled by the familiarity into thinking things are as they have always been. The future from Hong Kong, if you look beyond the familiar trappings, is one of dramatically higher prices and a manufacturing base that will, at least in part, slowly migrate out of China and around the world. Higher prices and more challenging logistics are the future I see from Hong Kong.

The Future as Seen from Shanghai
The Toy Expo in Shanghai, unlike the Hong Kong Fair, is about the consumer side of the Chinese toy economy. The development of the Chinese domestic market and what it can mean for western toy companies has been long talked about but is finally beginning to happen. "Beginning," however, is the key word.
     The fair was robust, with lots of exhibits, attendees, noise and excitement. Unlike other shows I attend, it was almost entirely populated by Chinese exhibitors and attendees. Western toy companies are either unaware of the show or have chosen not to attend. That's okay ... as long as you don't want to sell your products in China.
     While there I Shanghai offers a dramatically new view of the toy business.spoke with the leadership of Chinese distribution and manufacturing companies. Based on those conversations and my research, I see rare opportunities for those willing to get in early.
     Chinese distributors like known brands and quality. I saw Hasbro and Mattel products in the booths of several distributors. For the most part, however, it stops there. Chinese distributors are unfamiliar with or have not been approached by other toy companies.
     As a result, non-Chinese companies with good quality, interesting products and brand equity in their own countries have a chance of finding a distributor partner in China. (There are a number who claim to have national distribution.) They will, however, need to make an effort.
     It was obvious from the Expo that the Chinese, like the rest of the world, enjoy the intellectual property coming out of Hollywood and New York. My excursions through the Expo found me looking at an abundance of Disney and Nickelodeon properties. Again, it seemed to, for the most part, stop there. Again, there is an obvious opportunity for those who make the effort.
     There was also, however, another side to the story in Shanghai. I saw the increasing development of Chinese cartoon shows (for example, "Pleasant Goat," also known as "Happy Happy Sheep" is a powerful new, home-grown, Chinese character license) and the emergence of strong toy companies like Alpha, the first Chinese toy company to go public.
     So what is the future as seen from Shanghai? I believe you will see a rapidly growing Chinese consumer market putting a high value on foreign and some home grown brands. Some non-Chinese licensors will seek to expand the reach of their intellectual properties into China but will at the same time be smart enough to look for some Chinese home-grown properties to pick up and globalize.
     I also see the Chinese distributor network as playing a dominant role in the beginning, as foreign companies get their legs under them and figure out the systems. Every economic system, however, abhors non-value-added costs, so in time some foreign companies will go direct. I think that that, however, is still a long way off.

The View in My Crystal Ball
I have seen two versions of China's future. One is the one you and I have been used to, the one we see every year in Hong Kong. The other is the one that is foreign (yes, foreign is the right word), the one I saw for the first time in Shanghai.
When I put the both Hong Kong and Shanghai visions together, I foresee the gradual movement of toy production (primarily low value toys) out of China, while at the same time, I anticipate the explosive growth in revenue generated by Chinese consumers.

Share this on

Talkback

We would love your feedback!

Sandow Media Acquires Fred Segal Brand

May 3, 2012

Safe Play: A Team Effort

Apr 1, 2010

Toy Industry Veteran Forms New Co.

Oct 6, 2011

China's Growing Pains

Jul 25, 2011

Also by this author

»MORE

Featured Company

FurnitureCore.com

FurnitureCore.com is a dynamic web application aimed at the furniture industry. Retailers and manufacturers alike will find our deep reserve of tools to be exactly what their furniture business needs.www.furniturecore.com... more