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Price Hike on the Horizon? Paying for the Cost of Safer Toys

In September, the Toy Industry Association (TIA) and the American National Standards Institute (ANSI) announced that they had begun implementing a new program to tighten up toy testing and inspections with unified practices and accredited testing labs. There's no word yet on when the program will fully roll out, but Daniel Grossman, TIA's chairman of the board and CEO and founder of Wild Planet, believes most manufacturers have already proactively and voluntarily improved their testing procedures to a level sophisticated enough to comply with the new regs.
November 1, 2007

In September, the Toy Industry Association (TIA) and the American National Standards Institute (ANSI) announced that they had begun implementing a new program to tighten up toy testing and inspections with unified practices and accredited testing labs. There’s no word yet on when the program will fully roll out, but Daniel Grossman, TIA’s chairman of the board and CEO and founder of Wild Planet, believes most manufacturers have already proactively and voluntarily improved their testing procedures to a level sophisticated enough to comply with the new regs.

For now, toycos are shouldering the cost of this extra layer in the manufacturing process themselves. But that’s simply not a sustainable solution, especially given that the cost of producing toys in China has also been on the rise over the last three or four years. The minimum wage has gone up there by 10% each year, and price increases on raw materials and oil (which figure heavily into toys made of foam, plastics and metals) have also played a part in driving up the cost of doing business in the region.

Hasbro chairman Alan Hassenfeld says the International Council of Toy Industries’ CARE program for setting standards for ethical manufacturing and human rights in factories, which he helped design as ICTI co-chair, has triggered worker demand for higher wages in China, so it’s partially culpable for the rise in labor costs. As for product safety, Hassenfeld is a strong advocate of creating a global standard for the toy biz, a move that would reduce the duplicate testing that’s happening right now to meet standards set by various territories and trade groups. Having one set of parameters in place would shrink testing costs and put all players on a more level playing field.

That would definitely be a welcome change for Toronto, Canada-based manufacturer and distributor Dynatech Action, which has been forced to do extra testing to provide different types of measurements to different retailers and orgs. Though the cost of testing itself is the same, president and CEO Brad Pedersen says the number of tests being performed has increased significantly. And at US$500 to US$800 per test, it can add up quite quickly.

The extra financial burden will have to be passed along to retailers and consumers at some point, and industry players are speculating that most toycos will raise their prices by summer or fall 2008, says Herb Mitschele, VP of international sales and marketing for Playmates Toys. Action figures and accessories, dolls, vehicles, outdoors and sports are categories likely to be affected.

But Thomas Kaeppeler, CEO of German puzzle and game manufacturer Ravensburger, says that because the price hike will be a slight one, most consumers probably won’t even notice. And according to NDP Group toys and video games analyst Anita Frazier, a rising percentage of consumers say they would pay more for toys made in the US for the holiday shopping season. For its part, Ravensburger is looking seriously at marketing efforts to get the message out to consumers that 75% of its toys are manufactured in Europe.

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