Four Factors to Consider When Choosing Domestic vs. Foreign Toy and Game Manufacturing by Michelle Spelman

Toy Factory by Pasukaru76 via Flickr

Toy Factory by Pasukaru76 via Flickr

According to the United States Department of Commerce, approximately 85% of the toys purchased in the U.S. are manufactured in China, while only 3.5% are made here domestically. 

So, for a small, new American company, working to bring a new toy or game to market, it seems that figuring out how to have the product made in China would be an automatic decision.  But small companies may be surprised to discover that many products can be made domestically and that doing so may be the right strategy for a number of reasons.

The classic business decision triangle of of cost, quality, and speed apply here. 

The theory says that, in any situation, a company should be able to negotiate for any two of these priorities, at the expense of the third.  So, if you want the best price and quality, you’ll have to wait longer to get it.  If you want best quality and you want it fast, you’ll have to pay more.  And, if you want it fast for the lowest price, then quality will suffer.

It makes sense, right?  

Cost Speed Quality Venn Diagram

A fourth criterion to consider – and probably most important - is this: what does your company stand for, in terms of values, mission and vision?  What do you ultimately want to be known for?  What do you want to accomplish?

New companies must ask themselves tough questions to determine their priorities among these four key decision drivers. 

What does the company you are launching stand for?  Are you looking to build a new brand that will grow, expand and endure over time?  Or is the major objective to stay focused on getting the product out there as fast as possible and make as much money as possible in the shortest amount of time and then move on to something else?

What if your idea takes off suddenly and you find yourself out of stock?  How long can you wait for a factory to deliver new inventory?  Can you afford to pay to expedite production and long-distance freight from a plant overseas to ensure you don’t miss a key order or sales season?

Cost is the driving motivator for overseas manufacturing, and ultimately can make or break a new product venture.  It doesn't matter how good the product is if consumers can’t reconcile the value of the experience it provides with the price they have to pay.  Test the product with consumers and survey retailers. Research what the right price should be from a retail standpoint, and then reverse engineer the manufacturing process to determine if it can be made and sold at the right price with right margins to be a sustainable business model.

The first impression a new product or brand makes on consumers is often a make-or-break opportunity.  While competitive pricing is absolutely critical, weigh the risk of compromised quality against it when choosing a manufacturer.  Opting for a slightly lower profit margin in the beginning can be a strategic investment in future success if it means better quality and higher positive response from consumers. 

While foreign manufacturing often costs less, it doesn’t always cost less.  Don’t assume that domestic would be too expensive.  Explore your options and compare!  Make sure you take freight expenses, customs and import tariffs into consideration when you compare. Time is money too, and it literally is a “slow boat from China” unless you pay hefty extra fees for expedited air freight, so be sure to add that to your equation as well.

Think about your values, and those of your customers.  While cost is often the first priority, it isn’t always the most important factor for consumers.  Domestic manufacturing positions you to make a positive contribution toward rebuilding the struggling economy.  This isn’t important to a lot of people, but it is becoming important to more and more people over time. This is a bonus selling point that can help a small company gain a foothold in the marketplace.  It’s a bragging right that communicates your support of job creation, families and improved quality of life in this country.  These are traits that can endear you to your customers.  When they feel aligned with you, they are motivated to become brand champions for you.  That’s incredibly powerful marketing that can’t be bought.

The right answer for manufacturing is different for everyone.  You may find, after you weigh your options and set priorities, you must go overseas to produce your product in a way that will be profitable and efficient.  But, if you look, you may discover that a domestic option could be the better choice. 

The choice you make can be the deciding factor between success or failure.

Are you currently manufacturing your product overseas or domestically?  Please share your experiences and thoughts by leaving a comment on this article!

Michelle Spelman

Michelle Spelman is Editor and Inventor Relations Liaison for Chicago Toy & Game Group. She is a game inventor, and co-founder of Flying Pig Games LLC, creators of award-winning Jukem Football card game. She is also founder of Cincinnati Game & Toy Industry Professionals group, and is the Cincinnati Children’s Toy Examiner. An independent marketing consultant providing contract services, executive coaching and strategic direction, she’s in her sweet spot when she is working with companies focused on women and family-oriented products and services.