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Los Angeles, CA (PRWEB) February 17, 2013
The Toy, Doll and Game Manufacturing industry is expected to continue its modest recovery from painful revenue losses suffered during the recession. Revenue is expected to increase 1.0% to $2.69 billion in 2013. According to IBISWorld industry analyst Sean Windle, Because toys, dolls and games are discretionary items, industry demand is heavily dependent on economic factors, such as unemployment, consumer sentiment and the level of disposable income all of which experienced losses over the past five years. To make matters worse, industry operators have had to face not only dismal economic conditions, but also mounting competition from lower-cost imports. As a result, IBISWorld estimates industry revenue fell at an average annual rate of 6.2% in the five years to 2013.
While the worst of the downturn has passed, the same cannot be said of the industry's struggle to compete with lower-cost imported toys. Manufacturers in countries like China, which accounts for the overwhelming majority of industry imports, enjoy more relaxed labor and environmental regulations, and can therefore produce goods at a fraction of the cost of US manufacturers, says Windle. In order to remain competitive, industry firms have had to lower their prices, which has caused them to incur higher fixed costs and made it harder to absorb rising raw material expenses. As a result, the industry's profitability has declined over the past five years. With faltering profitability, many firms have resorted to labor and wage cuts, facility closures or been forced to exit the industry.
The Toy, Doll and Game Manufacturing industry exhibits a low market share concentration. Although close to one-quarter of the market is taken by two global toy manufacturers, Mattel and Hasbro, the remainder of the industry is characterized by a large number of small and privately owned firms. IBISWorld estimates that over half of all companies in the industry will employ fewer than five workers in 2013, with nearly three quarters of firms expected to employ fewer than 10 workers. In contrast, only 3.7% of industry operators are expected to employ 100 or more workers. While the industry remains fragmented, concentration has increased over the past five years, due to many firms being forced to exit the industry under tough economic conditions. Faced with falling demand and eroding profit margins, many underperforming operators had no choice but to close up shop. Other firms that survived the economic downturn have transferred their manufacturing facilities overseas to take advantage of lower production costs.