Tag Archives: toy industry trends

The Future Of Toys – Part 4, Toy Manufacturing Evolution

In the final part of our series looking at ‘The Future Of Toys’, we move onto the potentially dull, but nevertheless essential topic of manufacturing.

There are a number of disruptive factors/trends relating to toy manufacturing whiich are discussed below:

FACTORS DISRUPTING TOY MANUFACTURING

China’s Rapidly Advancing Economy – toy business old timers can tell you of the pre-China era of toy manufacturing, but for most of us in the business, the major source of manufacturing has been China for decades. The reason why China originally attracted toy manufacturing was low labour costs. In recent years, China has maintained the bulk of toy manufacturing due to relative ease of doing business, reliability and capacity. Labour costs in China have been rising constantly though, and today we are reaching a point where the living wage in toy manufacturing hubs in China is moving beyond what is viable for cost effective manufacturing. Our prediction is that China will keep a substantial share of toy manufacturing long term, because a). Evergreen items which can be automated will reduce the need for labour b). China will retain a large amount of tech heavy/high end toy manufacturing which supports higher labour costs c). China will retain manufacturing for the Chinese domestic market which is now the 2nd biggest in the world & growing. However, most toy companies need to start to look outside China for low labour cost manufacturing on standard toy items which aren’t suitable for automation/robots on the production line.

Environmental Concerns – The current plastic backlash we are seeing around the world is a major disruptive threat to the toy business and to toy manufacturing. There are tens of millions of jobs if not more in the manufacturing of plastic products globally. It is likely that we will see either a). Reduction in demand for plastic items and/or b). A move towards more sustainable materials for toys. Lego for instance now has some products featuring materials sourced from sugar cane, but the toy business is likely to need to seriously ramp up utilisation of materials which are bio degradable. The other environmental factor to consider is the carbon footprint of the supply chain, manufacturing at home may be more expensive but clearly transportation of goods from Asia has a negative impact from an environmental perspective and this will push some to ‘nearshore’ manufacturing.

Automation, Robotisation and Artifical Intelligence – One of the biggest disruptors of the coming 2 decades as far as the human species is concerned will be the loss of low end jobs to automation, robots and artifical intelligence. Automation has always been a part of toy manufacturing, but what has prevented automated production lines as standard is the uncertainty of the toy business. With around two thirds of all toy items on shelf each year being ‘new’, that means we have a huge product churn each year, and automation tends to need long term production to be justifiable. It is much easier and more cost effective to throw cheap human labour at toy production lines for products which may fail after a brief 3 month production run. Going forward while it is inevitable some parts of the factory will be taken over by non human labour, it is at this point hard to see the end of humans on the production line for toys when the demand is so variable and potentially short term! The implication of this is that we will still need low cost human labour at the core of toy manufacturing for the foreseeable future.

Trade Wars – the current friction between the USA & China over unbalanced goods shipments and trading practises has definitely accelerated North American toy companies moving some production away from China to other countries. We run a company which helps toy brands find contract manufacturing in India – www.ToyTeamIndia.com and every time there is a new announcement/new threat to shipping toys from China, new customers approach us for help moving production. Longer term though, it seems likely that this issue and the confrontational approach to addressing it is mostly driven by the incumbent President of the USA. Once he moves on, we suspect the focus will shift elsewhere, but in the meantime there is no doubt that the current situation is accelerating some toy production moving elsewhere.

The Growth Of India & Vietnam As Toy Manufacturing Hubs – we have written elsewhere extensively about the growth of Vietnam & India for toy manufacturing. In summary, Vietnam is the easier place for Chinese factory owners to set up new factories for cultural and geographical reasons, and as such many of the major China based manufacturing groups have set up plants in Vietnam. India however, has far more scale potential, in fact it is the only country in the world with similiar population to China, and is currently around 1/3 the labour cost on average. This combined with the existing industrial capacity, especially for plastics manufacturing means that India is likely to become the 2nd biggest toy manufacturing hub in the world in the next 5 years.

Technology has revolutionised business in general in the past decade or more. Currently though the majority of toys are still manufactured with human labour using similiar if evolved injection moulded plastic machines as have been used for a long time. The next wave of technology and the next evolution of toy manufacturing looks set to be an interesting journey for all of us!

For more information on how to find toy manufacturing in India, please refer to our Toy Team India website: www.ToyTeamIndia.com, or feel free to get in touch via the Contact page.

Are We Entering A New Golden Age For The Toy Industry…?

Are We Entering A New Golden Age For The Toy Industry…?

There’s always something to gripe about in the toy business. In fact if you listened to the talk in the corridors at toy fairs around the world, you’d think the industry was about to plummet around our ankles, and you’d end up thinking that each and every year if you listened to closely to some of the lovable whingebags  we all meet on the circuit!

However, there is genuinely a lot to be thankful for right now in the toy business. Yes manufacturing price inflation is an ever present challenge, retailers aren’t making things easier and strong competition is always there. But if you look at the sales trends for play related products, if you look at the kids movie slates coming out of Hollywood for at least the next 5 years, if you look at the plethora of digital brands we can tap into and if you look at the vast array of really exciting technology which keeps opening up opportunities for us there is much to be positively excited about!

The consolidation the industry has seen in the last 5 or so years has on the whole (in my view) been hugely beneficial to the toy business as a whole – for instance while for some the fact that Disney owns so many massive franchises now gives them a great degree (perhaps too much for some people) control, that actually works to the toy industry’s advantage in my opinion – because Disney really know what they are doing, and so they aren’t going to have massive franchises directly competing at the box office versus when they were competing with Marvel & Star Wars, which means shelf space can be more sensibly allocated based on staggered release dates, reducing cannibalisation & driving additional sales overall. And the more the overall category performs, the more retail shelf space we are likely to get, opening up more opportunities for other licensed and non licensed products.

I also really love the new toy companies who have entered the industry in the past few years, stuck around and are now definitely up and coming. What clears space for these up and comers is the consolidation among more established toy companies allowing for fresh approaches to sparkle up the toy aisles around the world.

The other hugely positive trend which is still in it’s infancy, but which is going to continue to revolutionise the industry is the removal of barriers to entry via crowd funding. The type of products that would usually not even make it to a retailer pitch meeting now arrive at the doors of sometimes snooty toy companies with a proven following, existing sales record and with a ready to order product versus just a concept needing fully designing and engineering. At last the toy industry has a path to being truly creative versus churning out the same old stuff – wow, we can really push the boundaries now because we can prove consumer demand before we have to secure retail support.

So yes, there are as ever many ongoing challenges and not a few threats in the toy biz, but actually there is an awful lot of positive stuff going on which makes me think we may be heading into a new golden age of the toy industry…!

 

by Steve Reece, CEO of Kids Brand Insight www.KidsBrandInsight.com,  a leading Consultancy to toy, game and kids entertainment companies around the world, which helps companies find the right toy & game factories, consumer research test their products with kids and parents and secure export distribution/market entry around the world