International Toy INDUSTRY
India, a Growing Toy Manufacturing Hub by STEVE REECE, CEO, Kids Brand Insight
THE TOY INDUSTRY HAS A LOOMING, brooding, large-scale challenge ahead. For decades we have relied primarily on China for toy products. China has been very competitive in terms of pricing for a long time, but the ability to offer the lowest price is under threat due to rising labor costs. As the Chinese economy shifts away from a manufacturing base to a services base (as is usual when a market economy matures), the toy industry needs to consider what Plan B might be. The vast amount of knowledge, experience, and capacity in China is a huge strength for the global toy industry, and as such I am certainly not making a ridiculous apocalyptic suggestion relating to future prospects for toy manufacturing in China. China is here to stay as a major part of our supply chain, for decades to come at the very least. The challenge is that we operate in an industry where pricing for long-standing traditional toy formats has hardly increased in decades. When I look at today’s prices for board games or action figures, they are not very different from the prices of these types of products in the 1980s. The reason for this is the tremendous advancement in the manufacturing and design engineering processes, combined with China’s long-standing cost advantage. So if we look forward to a scenario where the “engine” of toy manufacturing is no longer able to supply us at the prices we have become accustomed to for toys and games, what can we do about it? I’m increasingly seeing India as the only possible Plan B. There are several reasons for this. First, India has a huge population with a large number of people for whom factory work would be considered attractive. In fact, of all the other Asian countries currently being considered as potential toy manufacturing hubs, none has the potential scale of
India. I’ve seen commentary on Thailand and Vietnam as potential toy manufacturing hubs, but these countries simply don’t have the potential scale of workforce as India. Thailand has a population of approximately 67 million and Vietnam’s population is approximately 90 million. India’s vast population of 1.25 billion dwarfs that of Thailand and Vietnam, and is not far from China’s 1.35 billion people. Second, India has a vast engineering and manufacturing industry, al-
beit currently focused on other categories such as automotive and raw materials. However, don’t think for a minute that the existing manufacturing industries in India are in any way second rate. Car brands that have manufacturing facilities in India include Ford, Hyundai, Renault, Nissan, BMW, Audi, Volkswagen, and General Motors. JCB alone has six manufacturing plants in India. So India is already a massive manufacturing hub, with vast experience and expertise in mass-market manufacturing of products that are much more complicated than toys, and have
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equally or more exacting safety standards. In my view, this existing capability need only be pointed in the direction of toys to make a significant contribution to global capacity. Third, as India’s domestic toy market grows, so inevitably will demand for local production and investment in local production. There is no doubt of course that India has many challenges in terms of being a developing country. Infrastructure is not uniformly to the standard we would expect in the West, but my research and travels in India make me firmly of the belief that there are some highend facilities in India manufacturing large quantities of comparatively complicated toy products for leading global and international toy companies, but up to now, this has been a little bit of a secret. There are some Indian factories with ICTI certification and other important certifications. For now, however, the issue is capacity. While in theory you can get high-quality plastic toys manufactured in India right now—and due to lower labor costs (around 50 percent less than China) you should be able to save money—the reality is that there are currently only so many factories with high-end capabilities and certifications. And these factories are already working to the extent of their capacity while investing heavily in expansion. So if your company is considering moving manufacturing facilities to India, you may need to secure capacity sooner rather than later! » Steve Reece is the CEO of Kids Brand Insight, a consultancy to the global toy industry offering export sales; factory finding in China, India, and beyond; and consumer testing on toys and games.