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Prepared for Hong Kong Trade Development Council January 2006

Hong Kong Toys & Games Fair 2006. Prepared for Hong Kong Trade Development Council January 2006. METHODOLOGY. Timing of Fieldwork : January 9 - 10, 2006 Target group : 410 exhibitors; 705 buyers Fieldwork : Face-to-face interview at the Exhibition Venue.

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Prepared for Hong Kong Trade Development Council January 2006

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

  2. METHODOLOGY • Timing of Fieldwork : January 9 - 10, 2006 • Target group : 410 exhibitors; 705 buyers • Fieldwork : Face-to-face interview at the Exhibition Venue

  3. EXHIBITORS’ AND BUYERS’ BACKGROUND INFORMATION

  4. EXHIBITORS’ PROFILE EQ A1-3 EQ A1-A3 Major Export Market Company Base Nature of Business % Americas US Other America Europe Germany UK France Spain Italy Other Europe Asia Pacific Japan Chinese Mainland Hong Kong Australia Other Asia Middle East Africa Importers 3% Wholesaler 4% Hong Kong 60% Others 3% Exporter/ Re-exporter 36% Manufacturer 54% Overseas 40% Respondents: 410 Exhibitors *

  5. BUYERS’ PROFILE BQ A1-3 BQ A1-A3 Major Selling Market % Company Base Nature of Business Asia Pacific Chinese Mainland Hong Kong Japan Australia Singapore Taiwan South Korea India Other Asia Americas US Canada Latin America Europe UK Germany France Italy Spain Russia Other Europe Middle East Africa N. America 9% Importer 21% Hong Kong 34% Europe 15% Exporter/ Re-exporter 30% Manufacturer 19% Asia (excl. PRC, Japan, HK) 20% Japan 2% Wholesaler 11% Others 10% Chinese Mainland 15% Others 5% Independent Retailer 5% Department Store 4% Respondents: 705 Buyers

  6. TOYS & GAMES MARKET OVERVIEW AND FORECAST

  7. Exhibitors Buyers YEAR 2005 CHRISTMAS SALES EQ/BQ B2 EQ/BQ B1 % Better than 2004 Slightly better than 2004 Same as 2004 Slightly worse than 2004 Worse than 2004 Uncertain 79% 79% Respondents: 410 Exhibitors 705 Buyers

  8. Exhibitors Buyers OVERALL OUTLOOK OF TOYS MARKET FOR 2006 EQ/BQ B2 EQ/BQ B2 % Better than 2005 Slightly better than 2005 Same as 2005 Slightly worse than 2005 Worse than 2005 Uncertain 89% 91% Respondents: 410 Exhibitors 705 Buyers

  9. EXPECTED GROWTH IN TOYS MARKET IN 2006 AS COMPARED TO 2005 EQ/BQ B2 EQ/BQ B3a Buyers Exhibitors % % 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% Mean 12% 11% Respondents: 249 Exhibitors and 422 Buyers who perceived better market outlook in 2006 when compared to 2005

  10. MAIN REASON FOR ANTICIPATING A POSITIVE GROWTH IN TOYS MARKET BQ E1 EQ/BQ B3b Exhibitors Buyers % % Rising/ improving economy Emergence of “must-have” toys or hot items Strong consumer confidence Good performance of licensing business Others (each 2% or less) Respondents: 249 Exhibitors and 422 Buyers who perceived better market outlook in 2006 when compared to 2005

  11. BUYERS’ SOURCING PRACTICES

  12. $16.1-$20 $12.1-$16 $8.1-$12 $8 or below SOURCING PRICE (FOB) WHEN COMPARED TO A TOP BRAND PRODUCT EQ E1 BQ C1 Price for a top brand product = $20 Buyers % Respondents: 705 Buyers

  13. 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 Respondents: 705 Buyers

  14. PRODUCT AND MARKET TRENDS

  15. Exhibitors Buyers THE FASTEST GROWING TOY CATEGORIES IN 2006 EQ C1/BQ D1 EQ/BQ C1 Asia Pacific Chinese (excl. PRC, N. AmericaEuropeJapanMainland^ Japan, HK) % % % % % - 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 Toys Die Cast Toys & Action Figures - - - - - 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) # small base; ## very small base

  16. Exhibitors Buyers EXPECTED PERCENTAGE GROWTH OF MAJOR TOY CATEGORIES IN NEXT 12 MONTHS EQ C2/BQ D2 EQ C4/BQ C8 Computer Toys & Games Battery Operated & Electronic Toys & Games Educational Toys & Games Baby Toys & Products % % % % 5% or less 6 – 10% 11 – 15% 16 – 30% More than 30% - AVERAGE (Exhibitors) 12% 18% 16% 17% AVERAGE (Buyers) 18% 17% 14% 17% Respondents: Exhibitors expecting respective categories with highest growth 94 87 75 37# Buyers expecting respective categories with highest growth 145 139 123 103 # small base

  17. CARE PROCESS

  18. AWARENESS & IMPLEMENTATION OF CARE PROCESS EQ C8a-c BQ E1 When to implement the CARE Process Exhibitors Already implemented 28% This year 37% Likelihood to implement CARE Process Awareness of CARE Process Undecided 11% Next year 22% No 36% Yes 19% No 81% Yes 64% Ways of implementing the CARE Process % Will start preparing for obtaining the seal of compliance Will obtain the seal of compliance Respondents: 410 Exhibitors 78 Exhibitors aware of CARE process Respondents: 50 Exhibitors likely to implement CARE process

  19. AWARENESS & IMPLEMENTATION OF CARE PROCESS BQ D8a-c BQ E1 When to implement the CARE Process Buyers Already implemented 35% This year 30% Likelihood to implement CARE Process Awareness of CARE Process Next year 18% Undecided 11% 2 years later or more 6% Yes 29% No 40% Yes 60% No 71% Ways of implementing the CARE Process % Will require suppliers to be CARE certified Will favour suppliers who are CARE certified Respondents: 705 Buyers 206 Buyers aware of CARE process Respondents: 123 Buyers likely to implement CARE process

  20. EXECUTIVE SUMMARY

  21. 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.

  22. 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.

  23. 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.

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