Future for Toy Industry 'Challenging but Bright'

Call for Unified Position in Face of Tariff Threats

Richard Gottlieb, Principal and Founder, Global Toy Experts, tells the audience that while most of the world's toys are made in China, other countries have been developing toy industry centres, including India, Thailand and Indonesia.

HONG KONG, Jan 9, 2019 - (ACN Newswire) - From Mainland China's continued and growing presence in toy production and consumption to caution over tariffs; from the relevance of the Belt and Road Initiative to tech toys for kids and adults; from intuitive toy ideas to Hong Kong's intellectual property (IP) role. The Hong Kong Toys Industry Conference 2019 covered a plethora of the industry's pressing issues, trends and aspirations under the theme "Forging the Bright Future for the Global Toy Industry".

The one-day conference yesterday (8 Jan) was co-organised by the Hong Kong Trade Development Council (HKTDC), the Federation of Hong Kong Industries, the Hong Kong Toys Council and the Toy Manufacturers' Association of Hong Kong Limited, running concurrently with the HKTDC Hong Kong Toys & Games Fair, the HKTDC Hong Kong Baby Products Fair and the Hong Kong International Stationery Fair.

The first conference speaker, Richard Gottlieb, Principal and Founder, Global Toy Experts, stressed his firm belief that the toy industry is based on free trade. "The industry's ecosystem relies on designers, inventors, manufacturers - as well as public relations firms to talk up the products, and logistics and container shipping to keep the system going," Mr Gottlieb said. While most of the world's toys are made in the mainland - with southern China acting as the main "toys complex" - he said other countries have been developing toy manufacturing centres, including India, Thailand and Indonesia.

Mr Gottlieb said Southern California in the US remains the major creative centre for the toy industry, followed by Japan and the European Union, with Hong Kong continuing to create opportunities through its IP protection capabilities. He also predicted that the mainland would become the overall largest consumer of toys by 2022, now showing the fastest rate of growth, while the top consumer countries currently include the US, Denmark, the UK, Germany, France, Brazil and Japan.

The global toy industry should take a unified position in the face of tariff threats and amplify its position on free trade and safety standards, said Mr Gottlieb, suggesting a global congress should be held for the toy industry. As major international toy centres, Hong Kong and Nuremburg in Germany were "great" possible venues for such a congress to be held.

Caution Advised for Toy Industry

The message from Louis WK Chan, HKTDC Assistant Principal Economist (Global Research), was that while the current Sino-US trade dispute is now in the negotiation stage, with hopes of positive news emerging, the toy industry still needed to be cautious, with Mainland China representing 81.5% of global suppliers. While the toy industry is currently not targeted by sweeping new tariff barriers it was "not impossible" for the toy industry to be affected.

Mr Chan cited the HKTDC Export Index for the fourth quarter of 2018 regarding market sentiment, saying that the toy industry was "more cautious and gloomy" compared to the third quarter, despite the perception of the US market "inching up" due to its better economic performance.

Offering advice on how to cope with possible US tariffs on toys, Mr Chan mentioned the possibility of products being put forward for being "specifically excluded" from tariffs, with some 984 such requests having been approved by the US very recently. Also, strategies such as setting up e-commerce operations, considering the reclassification of products, and applying for a rule to lower the price of a product related to value were all legitimate ways of avoiding tariff charges.

So, too, was the prospect of using a US-recognised foreign trade zone or bonded warehouse to defer duties, while toymakers could also consider alternative manufacturing bases and explore new market opportunities. Mr Chan mentioned Poland, Chile, the Czech Republic, Vietnam and India as among the countries where good opportunities were emerging, and indeed where local companies were looking for new suppliers. Hong Kong was also expanding on the number of free trade agreements such as those recently concluded with the Association of Southeast Asian Nations (ASEAN) and Georgia.

Belt and Road: Indonesia a "Hot Spot"

Drawing on his 38 years in the toy industry, Dominic Tam, CEO of Combine Will International Holdings Limited, addressed the issue of global trends and challenges under the Belt and Road Initiative. With higher manufacturing costs in Mainland China and the advent of the Sino-US trade dispute, manufacturers were looking to relocate production to Belt and Road countries - which Mr Tam indicated could represent up to 30% of global gross domestic product (GDP) - while buyers were looking for alternative sourcing locations.

Mr Tam said Indonesia was among the "hottest" locations for relocating production and his company decided to launch there on the island of Java, home to most of the Indonesian population and only a five-hour flight from Hong Kong. He said among the advantages of relocating were competitive minimum wages and savings in the costs of water and electricity, while workers came from local districts which saved on meal and dormitory expenses.

Among the challenges of relocating was the requirement for longer logistical lead times in comparison with the "parent" factory in the mainland, while key registration and permit approvals were quite straightforward. Mr Tam said it took two-and-a-half years to set up the Indonesian facility, from construction to operation, and while Indonesian employees were not as quick in completing work as their mainland counterparts, the quality was good with a lower rejection rate. He also said that investment among Belt and Road countries was improving, citing investments made by Singapore in Indonesia's industrial parks as an example.

Global Trend for Mobile Toys

Technology trends in the toy industry up to 2022 were explored by Jonathan York, Senior Analyst, Euromonitor International, as he presented a snapshot of the sector and explored the next generation of consumers. He showed how video games were outgrowing the traditional toys and games sector in terms of retail sales value, while the Asia Pacific region was the fastest (and leading) region for retail sales in compound annual growth rate (CAGR) terms, with the Middle East and Africa showing strong growth potential. Over the period 2018 through 2022, the mainland is expected to overtake the US in market size, including for tech-based toys, Mr York concluded.

Mobile penetration rates are rising rapidly across the globe and by 2022 more than 80% of households worldwide will possess at least one smartphone, while the penetration rate for the mobile internet will get closer to 100% in the run up to 2022, said Mr York.

While adults are increasingly turning to mobile games for personal use, children are picking up smartphones at home and are looking for more sophisticated ways to interact online. Indeed, in 2018, 37.3 million Google Home and Amazon Echo products were sold globally, growing 45% compared to 2017, with Asia expected to follow this trend. Mainland China-based companies Alibaba, JD.com and Xiaomi are all gearing up for smart living concepts, according to Mr York.

He said future consumer characteristics will see smaller but wealthier households, with consumers more willing to spend on toys for their children as well themselves. At the same time, smart devices such as phones and tablets are becoming more commonplace in households while children are being introduced to technology at an earlier age, with greater access to media content. Mr York explained that the digitalisation of toys, smarter consumers and toys, and "mixed reality" capabilities are all hallmarks of the future toy industry.

Appeal for Toys with "Adventure and Experience"

A selection of everyday items - a water bottle, a cork, a straw and chopsticks - was used to demonstrate how to create experiences of excitement and adventure for children by the final speaker at the conference, Professor Doctor Hartmut Wedekind, Professor of Early Childhood Education at the ASH Berlin and Scientific Director of the Learning and Research Center for Children, HELLEUM.

Professor Doctor Wedekind explained that experiences such as climbing a rope helped to give children a sense of adventure while also promoting a child's desire to create art, including paintings and drawings. The objective of the toys and games industry was to engage children to be active, so that materials may be used in the creative process. He said that children learned, particularly in an educational environment, by playing, exploring and "being amazed" - and toy companies should be encouraged to create toys that were completely new, where children can explore materials step by step.

With that message, Professor Doctor Wedekind finished by unveiling a workable toy fashioned from the raw materials he showed earlier to the audience.

HKTDC Hong Kong Toys & Games Fair
Edition: 45th
No of Exhibitors: Over 2,100 exhibitors from 42 countries and regions
Fair Websites: http://hktoyfair.hktdc.com
Product Highlights: Click here https://bit.ly/2LQH9VI

HKTDC Hong Kong Baby Products Fair
Edition: 10th
No of Exhibitors: Over 610 exhibitors from 29 countries and regions
Fair Websites: http://hkbabyfair.hktdc.com
Product Highlights: Click here https://bit.ly/2F6LKSg

Hong Kong International Stationery Fair
Edition: 19th
No of Exhibitors: Over 260 exhibitors from 14 countries and regions
Fair Websites: http://hkstationeryfair.com
Product Highlights: Click here https://bit.ly/2TuyjQ9

Photo download: https://bit.ly/2FhLDnU

About HKTDC

Established in 1966, the Hong Kong Trade Development Council (HKTDC) is a statutory body dedicated to creating opportunities for Hong Kong's businesses. With 50 offices globally, including 13 on the Chinese mainland, the HKTDC promotes Hong Kong as a platform for doing business with China, Asia and the world. With more than 50 years of experience, the HKTDC organises international exhibitions, conferences and business missions to provide companies, particularly SMEs, with business opportunities on the mainland and in international markets, while providing business insights and information via trade publications, research reports and digital channels including the media room. For more information, please visit: www.hktdc.com/aboutus. Follow us on Google+, Twitter@hktdc, LinkedIn.

Source: HKTDC

Contact:

Natalie Wong, Tel: +852 2584 4472, Email: natalie.hy.wong@hktdc.org
Iris Chow, Tel: +852 2584 4395, Email: iris.cc.chow@hktdc.org

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