Why India’s Growth In Toy Manufacturing Is Only Going To Accelerate From Here Onwards

The toy business is still in the early stages of transitioning from a single manufacturing hub model (with China as the single hub) to a multi-hub situation going forward. There are a number of reasons for this, but above all it is because the Chinese economic miracle, which has moved more than 1 billion people out of poverty. For the toy business this means that the massive low-cost labour force we have relied on for decades needs to move onto manufacturing more complex and higher cost items to support increased labour cost requirements.

For more on why China’s role is changing, check out our video presentation below:


“Toy Sourcing: The Next 10 Years”





WHERE INDIA IS AT TODAY

Today, India has about one dozen high quality export centric toy factories. The number of factories is rising rapidly though, as is the capability of the existing factories. The supply chain is also maturing, although there is still some way to go – anything that has ever been manufactured for toys can be found in China, and the current reality is that the experience and depth of supply chain in India today is still developing.


India is inevitably going to be a growing force in the toy business for at least the next decade for 4 reasons:


1. The first we already looked at – China is going to become less and less competitive over time for manufacturing low-cost items like toys.


2. Massive labour pool - India is the only country in the world with a similar sized population to China, so the workforce is definitely available. And whereas in China the labour force tends to travel in from a distance and live on site, in India the labour force is local, meaning no issues with dorm working culture in terms of overtime limit infractions and living conditions.


3. Low labour cost – India’s production line workers get paid around half as much in $USD equivalent as Chinese factory workers. Keeping prices low is one of he most important things in the toy business due to price elasticity, and labour cost is a major part of the FOB cost of toys.


4. Latent industrial base – a massive labour pool with no supply chain is not going to work. India, unlike other alternative toy sourcing hubs to China, has a massive industrial base already. The automotive sector is very strong in India, with the country producing more than 25m cars per annum. The vast majority of components inside a car are made from plastic. As such, India has strong domain experience and capability with injection molding and blow moulding plastic. Roto molding is not such a strength, but a number of toy factories have now developed this capability.


So, in conclusion, the toy business is moving to a multi-hub sourcing model, because in the future capacity will inevitably spread across multiple countries, including China still but to a lesser extent, Vietnam, and even some near shoring. But the country with the most capacity going forward is likely to be India.


That isn’t to say that India is the perfect solution. There is still progress to be made in many areas. There is no promise that things will get easier by working in new hubs, the reality is that China over time has become a fantastically reliable and efficient source of toys. New hubs will work in different ways and may not always deliver the same levels of consistency, service and reliability as we have become used to from China. But the reality is that this shift is happening, so the key to success here is how we manage the ongoing transition.


Toy Team India is a Consultancy helping toy & game companies find manufacturing in India. We also Consult on strategic sourcing diversification. If you have sourcing needs which are not currently being met, or if you need our help to increase efficiency and cost savings in your Sourcing efforts, please feel free to drop us a line.

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