Learning from the past

As we in toy nation navigate our way through these difficult economic times, it is important to note that much of what is happening has happened before.  So, to get a little perspective, let’s pause for a minute; take a breath and look at some toy industry history. 

Much of toy history, though well written,  is about the toys  and not about the underpinnings of the industry.  Last week I was therefore fortunate to come across a serious economic history of the 20^th Century toy industry. It was written by Gary Cross and Gregory Smits of the University of Pennsylvania and is entitled: “Japan, the U.S. and the Globalization of Children’s Consumer Culture.” I think there is much in the paper that bears reading so I am going to be sharing some of what it has to say with you over the next few blogs. 

Today, I want to concentrate on outsourcing. We tend to think of outsourcing as a recent phenomenon but, according to the authors, outsourcing has been an integral part of the toy industry from the very beginning. The authors write:  "The logic of toy making was to make it an early candidate for outsourcing
 . . . Not only did toy making depend on cheap labor to assure low retail prices in a very competitive industry, but manufacturing was seasonal (sales heavily concentrated in the last quarter of the year, coinciding with Christmas).”

In other words, any businesses whose revenues occur primarily in a three month period are going to have a factory that is idle much of the year. That does not make economic sense.  Accordingly, a company either needs to make another line of products during the rest of the year or have someone else make it for them.  Though some companies did try the former (the authors tell us that in the 1920’s and 1930’s the A.C. Gilbert Company of Erector Set fame produced electric fans when they weren’t producing toys) most companies outsourced. 

Outsourcing started domestically but in the 1950’s the U.S. began turning to Japan to make its toys.   In the 1970’s, when Japan became too prosperous to want to make toys,  outsourcing moved to Hong Kong.  Then, when Hong Kong in turn became too prosperous, production moved to China.  Why did these countries, each in turn, become the world’s toy outsourcing centers? That is in the next blog.

*I want to thank my son, Matt Gottlieb, for sending me the paper cited above. Matt is a free lance author whose work has appeared in History Channel magazine as well as a number of other publications.