A number of my contacts are reporting that the once bend over backwards attitude of Chinese toy manufacturers towards price and minimum order quantities has done a 180 degree turn. Factories are rejecting orders that do not meet their minimums, are unilaterally increasing prices and refusing to provide samples in the quantities needed prior to manufacture.
What is going on? Why did the game change and change so suddenly? I think there are at least three reasons and probably more.
For one, there are just fewer factories. The Chinese government safety crackdown plus the recession closed thousands of factories. Granted, many of these were marginal, but they still provided a competitive landscape that favored the buyer.
Upwards pressure on pricing has made offering low, low prices dangerous. What happens if you give a price concession and then two months later face a dramatic increase in resin prices or wages? Safety concerns mean that you can no longer use cheaper materials, now you have to live with the price. That could mean financial disaster.
A shift on how the Chinese people see the west. China’s self-esteem has rightfully soared while the European and American economies have soured. Chinese businesspeople may no longer feel the need to defer to what they had once seen as superior economic engines.
Is this new paradigm going to last? I will write about that in my next blog.