1 Hong Kong Toys & Games Fair 2006 Prepared for Hong Kong Trade Development Council January 2006 Hong Kong Toys & Games Fair 2006

1Hong Kong Toys & Games Fair 2006

Prepared for Hong Kong Trade Development Council

January 2006

Hong Kong Toys & Games Fair 2006


METHODOLOGY

Timing of Fieldwork : January 9 - 10, 2006

Target group : 410 exhibitors; 705 buyers

Fieldwork : Face-to-face interview at the

Exhibition Venue


EXHIBITORS’ AND BUYERS’ BACKGROUND INFORMATION


Respondents: 410 Exhibitors

Hong Kong60%

Overseas40%

Exporter/ Re-exporter

36%

Others3%

Manufacturer54%

Americas

US

Other AmericaEurope

Germany

UKFrance

Spain

ItalyOther Europe

Asia Pacific

JapanChinese Mainland

Hong Kong

AustraliaOther Asia

Middle East

Africa

%

EXHIBITORS’ PROFILE EQ A1-A3

Company BaseMajor Export Market

Nature of Business

EQ A1-3

43

40

15

41

2

10

8

6

2

2

12

6

2

2

2

3

2

Wholesaler4%

Importers3%

*


Respondents: 705 Buyers

Hong Kong34%

Chinese Mainland

15%Others

5%

Europe15%

Asia (excl. PRC,Japan, HK)

20%

Exporter/ Re-exporter

30%

Importer21%

Others10%

Wholesaler11%

Manufacturer19%

N. America9%

Japan2%

Asia PacificChinese Mainland

Hong KongJapan

AustraliaSingapore

TaiwanSouth Korea

IndiaOther AsiaAmericas

USCanada

Latin AmericaEurope

UKGermany

FranceItaly

SpainRussia

Other EuropeMiddle East

Africa

BUYERS’ PROFILE BQ A1-A3

Company Base

Major Selling Market

Nature of Business

BQ A1-3

37

30

29

2

107

422117

2622

643

122

112

5

%

IndependentRetailer

5%DepartmentStore4%


TOYS & GAMES MARKET OVERVIEW AND FORECAST


17

32

30

14

2

5

24

27

28

12

4

5

Better than 2004

Slightly better than 2004

Same as 2004

Slightly worse than 2004

Worse than 2004

Uncertain

%

YEAR 2005 CHRISTMAS SALESEQ/BQ B2EQ/BQ B1

ExhibitorsBuyers

79% 79%

Respondents: 410 Exhibitors705 Buyers


19

42

28

6

2

4

21

39

31

5

1

4

Better than 2005

Slightly better than 2005

Same as 2005

Slightly worse than 2005

Worse than 2005

Uncertain

%

OVERALL OUTLOOK OF TOYS MARKET FOR 2006 EQ/BQ B2EQ/BQ B2

ExhibitorsBuyers

89%

91%

Respondents: 410 Exhibitors705 Buyers


45

10

41

20

18

Increased by 1-5%

Increased by 6-10%

Increased by 11-15%

Increased by 16-20%

Increased by 21-30%Increased by more than 30%

%

EXPECTED GROWTH IN TOYS MARKET IN 2006 AS COMPARED TO 2005 EQ/BQ B2EQ/BQ B3a

Respondents: 249 Exhibitors and 422 Buyers who perceived better market outlook in 2006 when compared to 2005

%

Exhibitors Buyers

Mean 12% 11%

8

11

42

21

1

16


BQ E1

MAIN REASON FOR ANTICIPATING A POSITIVE GROWTH IN TOYS MARKET EQ/BQ B3b

45

23

16

9

Rising/ improving economy

Emergence of “must-have” toys or hot items

Strong consumer confidence

Good performance of licensing

business

% %

Exhibitors Buyers

46

19

20

10

Respondents: 249 Exhibitors and 422 Buyers who perceived better market outlook in 2006 when compared to 2005

Others (each 2% or less)


BUYERS’ SOURCING PRACTICES


SOURCING PRICE (FOB) WHEN COMPARED TO A TOP BRAND PRODUCT EQ E1

Price for a top brand product = $20

Price for a top brand product = $20

BQ C1

Buyers%

$8 or below

$16.1-$20

$8.1-$12

$12.1-$16

12

24

35

29



MAJOR CHANNELS USED TO CONTACT NEW SUPPLIERS EQ D1-D4


BQ C2

Hong Kong trade fairs

Website

China trade fairs

Overseas trade fairs

Introduced by trade partners

Unsolicited calls or visits to suppliers

Trade publication

Unsolicited calls or visits by suppliers

%

62

44

30

23

12

11

11

10


PRODUCT AND MARKET TRENDS


33

21

19

6

8

3

2

2

1

1

25

22

15

12

3

3

8

2

4

5

16

18

18

13

12

2

7

3

3

13

19

19

17

5

4

5

3

4

4

21

17

21

8

4

13

8

4

32

17

11

6

4

2

2

11

2

4

25

21

20

15

1

3

6

4

1

1

Respondents: Exhibitors targeting respective markets (N. America: 173; EU: 163; Japan: 24##; Asia Pacific: 22##) [^ Sample base for Chinese Mainland is too small to show.]

Buyers targeting respective markets (N. America: 197; EU: 202; Japan: 47#; Chinese Mainland: 71; Asia Pacific: 110)

Computer Toys & Games

Battery Operated & Electronic Toys & Games

Educational Toys & Games

Baby Toys & Products

Dolls & Soft Toys

Party items

Outdoor & Sporting Items

Candy Toys

Hobby Goods & Collectible ToysDie Cast Toys &

Action Figures

THE FASTEST GROWING TOY CATEGORIES IN 2006

EQ/BQ C1

Asia PacificChinese (excl. PRC,

N. America Europe Japan Mainland^ Japan, HK)% % % % %

# small base; ## very small base

27

18

9

13

5

14

14

18

20

18

20

5

2

4

5

4

2

ExhibitorsBuyers

EQ C1/BQ D1

-

-

-

-

-

-


5% or less

6 – 10%

11 – 15%

16 – 30%

More than 30%

EQ C4/BQ C8

Respondents: Exhibitors expecting respective categories with highest growth94 87 75 37#

Buyers expecting respective categories with highest growth145 139 123 103

AVERAGE (Exhibitors) 12% 18% 16% 17%AVERAGE (Buyers) 18% 17% 14% 17%

Battery Operated & Electronic Toys

& Games% % %

EXPECTED PERCENTAGE GROWTH OF MAJOR TOY CATEGORIES IN NEXT 12 MONTHS EQ C2/BQ D2

ExhibitorsBuyers

Educational Toys & Games

Computer Toys & Games

Baby Toys & Products

18

49

9

24

14

36

13

28

9

18

31

12

26

13

16

44

12

19

10

13

36

15

31

5

29

39

8

24

7

22

35

14

22

8

25

34

8

22

11

%

-

# small base


CARE PROCESS


AWARENESS & IMPLEMENTATION OF CARE PROCESS BQ E1

Exhibitors

Respondents: 50 Exhibitors likely to implement CARE process

EQ C8a-c

No81%

Yes19%

Will start preparing for obtaining the

seal of compliance

Will obtain the seal of compliance

Ways of implementing the CARE Process

52

46

%

Awareness of CARE Process

No36% Yes

64%

Likelihood to implement CARE

Process

Respondents: 410 Exhibitors 78 Exhibitors aware of CARE process

When to implement the CARE Process

This year37%

Already implemented

28%

Next year22%

Undecided11%


AWARENESS & IMPLEMENTATION OF CARE PROCESS BQ E1

Buyers

Respondents: 123 Buyers likely to implement CARE process

BQ D8a-c

No71%

Yes29%

Will require suppliers to be CARE certified

Will favour suppliers who are CARE certified

Ways of implementing the CARE Process

62

35

%

Awareness of CARE Process

No40%

Yes60%

Likelihood to implement CARE

Process

Respondents: 705 Buyers 206 Buyers aware of CARE process

When to implement the CARE Process

This year30%

Already implemented

35%

Next year18%Undecided

11%2 years later

or more 6%


EXECUTIVE SUMMARY


SUMMARY - I

MARKET OUTLOOK

Sales during the Christmas period in 2005 was satisfactory. Around half of the respondent found it better than the previous year.

Both exhibitors and buyers continue to be confident with the market prospect. Around 90% of them believe the overall toy market will stay positive or become even better in 2006.

Among those who anticipate a positive market growth in 2006, majority expects an increase of at least 6%.

Both exhibitors and buyers envisage the improving economy will be the main contributor to the growth.Exhibitors also expect “must-have” toys or hot toy items will

turn up as a stimulator of the market.Buyers believe the stronger consumer confidence is another

reason for their anticipation.


SUMMARY - II

PRODUCT & MARKET TRENDS

Both exhibitors and buyers foresee “Computer Toy & Games” to be the fastest-growing toy category in 2006, followed by “Battery Operated & Electronic Toys & Games” and “Educational Toys & Games”. Participants believe the average growth rate of the top-3 toy categories will be ranging from 12 – 18%.

BUYERS’ SOURCING PRACTICES

A renowned brand name is certainly a powerful driver of the profit margin. When buyers are sourcing a toy with comparable features and quality to those produced by top brands, more than one-third of them expect it to be 20 – 40% cheaper. However, nearly 40% expect it to be further cheaper.


SUMMARY - III

CARE Process

CARE Process is more widely known among buyers than exhibitors. 29% of the buyers is aware of this international toy industry's ethical manufacturing programme, compared to 19% for the exhibitors.

Among those who are aware of the programme, over 60% have already implemented or will implement it in the near future. Participants are planning to achieve the programme by obtaining the seal of compliance or require/ favour suppliers who are CARE certified.


Documents

1 Hong Kong Toys & Games Fair 2006 Prepared for Hong Kong Trade Development Council January 2006 Hong Kong Toys & Games Fair 2006