Toy majors to reduce sourcing from China, eye new destinations

Toy majors in India are looking at new destinations to source their wares and reduce dependence on China. This comes in the backdrop of strained relations with Beijing.

Considering almost 95 per cent of the unorganised Indian toy market is dominated by Chinese toys, the players in the ₹1,000-crore organised toy industry are trying to focus on new territories like Europe, Vietnam, Indonesia and even India, since labour costs have gone up in China making it an expensive sourcing-destination.

“Sourcing from India will go up since labour cost is getting high in China. In fact places like India are going to be cheaper for toy manufacturing and we have already increased capacity at our Goa plant since we have started manufacturing for toy companies like Tomy of Japan, Flair of UK and even Hasbro, with whom we had a joint venture in the past,” says John Baby, CEO, Funskool.

Besides, GST is also expected to create a level playing field and give a fillip to organised toy majors who may not have to compete with the unorganised players and their mostly cheap Chinese imported toys.

“GST will help us compete with the unorganised players who import cheap Chinese toys as local manufacturing goes up,’’ added Baby.

Others like Germany’s Simba Toys, which supplies to stores like Hamleys and has 12 exclusive stores, has already reduced sourcing from China and is likely to set up local manufacturing in the future.

“In the past two years, we have been sourcing toys from our own facilities in Thailand for the Indian market. There has been a shift from China where we have reduced sourcing from 80 per cent to 50 per cent and this would go down further as we resort to manufacturing in bases across Europe in countries like France, Germany and Spain as it gets expensive to import from China. Besides, there are also plans to have a manufacturing base in India in the future,’’ says Narayan Sabharwal, Business Head, Simba Toys.

World’s largest toy company, Mattel, which sources from countries like Indonesia and Malaysia, may also look at India as its next hub since it has started making ‘Indian’ Barbie dolls. “We have our Barbie dolls in India which are being made by third party manufacturers and we have 15 per cent of our topline coming from ‘made in India’ products,’’ said Ishmeet Singh, Country Manager, Mattel Toys.

However, infrastructure constraints may remain an impediment when it comes to manufacturing in India. “Sourcing toys can never stop completely from China when it comes to making electronic goods like remote-control cars , LED lighting or chips for toys since it is a country where almost 70 per cent of the world’s toys get made. Even Mattel sources a majority of its leading brand Fisher Price toys for babies from China. While India is trying to export toys, it still has a long way to go as there is inadequate infrastructure to support toy manufacturing,’’ observes Vivek Jhangiani, past President of the All India Toy Manufacturer’s Association.