Suppliers of plush toys are minimizing material, labor and inspection spending.

Makers of plush toys in China are implementing strategies to address looming cost challenges and boost margins.

Among the pressing concerns is increasing material costs amid a shortage of cotton supply. In July 2010, spending mounted 15 to 50 percent YoY.

The natural fiber reached $2,626 per ton in August, which is $442 more compared with the previous corresponding period. This is the highest level recorded in the China Cotton Index in the past 10 years. In fabric form, rates jumped 15 percent to $2.50 per meter. PP-cotton filling rose 50 percent from $1,765 to $1,912 in May. Expenses are projected to continue climbing in coming months due to lingering rainstorm damage.

Makers are therefore maintaining a conservative attitude when stocking up on supplies to prevent further cost increases stemming from hoarding. Because of unstable input fees, factories are also limiting the acceptance of large orders with long lead times.

Apart from material challenges, companies in the Pearl River Delta and Yangtze River Delta regions are augmenting wages to counter the labor shortage. At the start of 2H10, the base salary jumped from $179 to $224 last year to between $224 and $269 in some businesses.

The adjustment, however, is still small considering the higher cost of living in the areas. Resultantly, plants are having difficulty recruiting younger personnel as many prefer jobs that do not require manual work and offer competitive compensation. At present, many plush toy suppliers meet only 60 to 70 percent of employee quota, with 80 to 90 percent consisting of older staff aged 30 to 45. Several are worried the situation may worsen in the next five to 10 years, pushing factories to move inland where labor supply is more stable.

Also adding to expenses are rising inspection and certification fees due to stricter overseas safety standards. On average, a midsize business can spend $7,350 to $14,700 each year for tests. To reduce spending, makers are no longer focusing mainly on plush items. Many are venturing into categories such as pet toys and home decorations that entail fewer quality requirements. Others opt to shift out completely.

 

Plush toys product range

China suppliers plush toys continue to invest in R&D, especially as similar efforts proved beneficial in pulling up overseas sales during the financial crisis.

In comparison to 1H09, shipments in the line increased about 11 percent to $70.8 million in March 2010 and amounted to $102 million in April. Meanwhile, May figures climbed 15 percent, with exports to the US and the UK rising at least 20 percent.

With the orders of the toy peak season between July and September, makers are projecting that year-end export volume and value will grow 15 to 35 percent and 10 to 20 percent. In fact, some have already booked factory schedules until November.

To achieve these targets, suppliers are creating licensed designs based on popular cartoons, games and films. Items in Disney and Sanrio characters are among the best-sellers. Many plants allot one-half of production capacity to branded OEM types, with a few focusing on such variants.

Moreover, businesses are investing in multifunction versions to strengthen practicality. To illustrate, Hoping Toy Works Co. Ltd offers models that can be opened from the back and converted into blankets.

Suppliers are also incorporating electronic features in new models. About 70 percent of Canfine Toys Ltd’s selection adopts flashing light, musical sound, recorder, radio, MP3 and MP4 player, digital photo frame or baby monitor functions.

In addition, a few large enterprises are partnering with video game designers to create online counterparts of the actual products. The stuffed toys have a unique password that, when registered on the Internet, enables children to play with and raise the computer version as a pet. Some of the interactive programs include educational modules.

Aside from appearance and function, suppliers of plush toys are improving safety aspects. Specifically, many makers are reducing choking hazards by replacing buttons and beads with patchwork and embroidery. Those that continue to use the former submit the models to pull and tensile strength tests.

Companies are also selecting hook-and-loop tape in place of zippers for models that unfold. Toys using the first have a lower risk of pinching or injuring children’s fingers.

Further, manufacturers continue to develop items utilizing environment-friendly inputs. Shanghai Oriland Group Plush Toys Mfy adopts organic cotton, while Hoping employs bamboo rayon and soybean protein fiber. The “green” fabrics, however, still cost three to five times higher than regular kinds.

Resultantly, conventional cotton and polyester variants remain popular. The common constructions are velboa, velour, coral plush, dull boa and velvet.

Pricewise, the key determinants are materials, size and function. The least-expensive models are $0.50 to $2, and utilize locally sourced velboa, nylon or velvet. The releases are stuffed with 15d polyester and measure 5 to 15cm tall.

Midrange types are $2.50 to $8. China-made or imported velvet, or natural fiber shell, and 6 to 7d polyester filling are used. They are 20 to 40cm and can boast electronic add-ons.

Products priced at $8.50 to $25 are considered high-end. The 40 to 100cm models are available in velvet, mink, fleece or natural fibers procured abroad. The selection also has more features, including a recorder and an interactive game option. For more on Makers of stuffed toys limit production costs.