Chinese Consumer Trends – Shanghai Toy Maker’s blight and bliss

As Mintel has recently launched it’s China Reports series, our Chinese analyst team have been out on the streets looking at more “unconventional” economic indicators that reflect on the Chinese market as a whole. Recently I interviewed some (ex) workers at the now closed no. 9 Toy Factory.

Shanghai No. 9 Toy Factory was closed down in early 2012, after around 70 years in business. One of the earliest pioneers in China’s toy industry has decided to exit the toy business because in the end it could only make RMB2 million in profit. The factory, which sits on prime real estate on Yan’an West Rd the company could net 20 million RMB from leasing the space. Ahh, the joys of modern economics.

“So the decision is really just a matter of economic analysis, rather than it has not been able to stay afloat in a highly competitive market.” Stressed Gu Agen (not real name as he prefers unidentified), a senior manager of the factory. The wooden toy market is indeed very competitive because the cost of labour is much higher in Shanghai than Zhejiang Province to its south. The province, particularly Yunhe County, has many small toy manufacturers that have sprouted up in the last two decades, most of whom conveniently copied the Shanghai master and other veterans’ toy designs and sold them for cheaper prices.

Gu, 59, said that by renting the whole premise of the factory out, the former toy maker can still pay its around 300 workers salaries and all other benefits as if it is in usual operation, but the employees can get a whopping bonus as if the business had claimed bankruptcy. (Chinese bankruptcy laws allow for settlements to long term employees as part of the closure.) Gu and his wife, both long time employees, were each given compensation of over RMB100,000 (roughly $15,000 USD)

Gu has mixed feelings about the premature death of the toy factory. He spent his entire life working there. The company was regarded as one of China’s most famous, launching many designs and leading the industry for most of its 70 year history. He developed such feelings toward the discarded toys left in the factory stores that he decided to give them a final chance at life. Gu offered to buy all the remaining stock at a bargain rate. He stores them in a warehouse he rented in Qilian Xincun, a remote suburb in Northern Shanghai.

With ample time on hand now that he doesn’t have to go to the factory every day, he packs up some toys in the basket above the front wheel of his rugged bicycle and becomes a roaming peddler. He sells the toys, which are wooden pieces and blocks and rides around the city selling them for RMB5-10 each ($2 USD). If they had been sold in stores, each would have sold for RMB30-100 ($6-15). They include sets of International Chess, a traditional Chinese chess game with Cao Cao, Guan Yu and some soldiers in a battle along the Huarong Path, taken from the Chinese classic “Romance of the Three Kingdoms”, a set of four wooden pieces that can form 200 hundred types of geometric shapes and forms, and a set of wooden oblong pieces that were once featured on TV to build skyscrapers, as well as miniature pianos with four octaves.

With his lifelong experience in the toy business he explains and demonstrates how to play with the toys easily and expertly. Offering the toys at such a rock bottom prices, he found his stock disappearing rapidly.

Asked if he would consider setting up a shop online such as on Taobao.com, he said he didn’t use computers let alone the Internet. What’s more important, he is not interested in selling all the toys in his storehouse all at once. He prefers to part with them slowly, a dozen a day, because he wants the toys to remain part of his life.

“I don’t do it for the money.” Said Gu. “I’m one year from retirement and I already have enough to get by. I still get my salary now that the factory is closed, and I have a pension once I retire. I have a few apartments (together with my wife)”, he said. He added that his daughter is doing financially quite well. “My son-in-law earns over $100,000 USD annually, so she doesn’t need it either. ” He then lowered his voice, indicating that his daughter brings in less but still quite handsome amount.

“They are all against me selling toys on the streets,” he said as they argue that in business terms the revenues from the toy sales were meager and hard to justify the trouble he goes through to get them.

“I have some affection toward the toys, on which I’ve spent my entire life.” he decided. “I still want to be with toys somehow.”

If you want to understand the Chinese economy further or are interested in understanding Chinese Consumer Trends, contact Mintel to talk to one of our analysts.

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