December 2003 | Vol. II - No. 12
It was the acronym that dominated the headlines through the spring and summer of 2003. But while the effects of Severe Acute Respiratory Syndrome (SARS) captivated the world and ravaged countries throughout Asia, its impact on the toy industry was minimal.
"No facilities were closed, but additional safeguards were put into place," said Shannon Eis, spokesperson for the Toy Industry Association. "They also had contingency plans in place where they could move production to other facilities in the country or even facilities offshore."
Those contingencies did work, agrees Tony Laferrera, co-president of the United League of Toy Representatives Association.
"If one were to look hard enough, I am sure they would find situations where SARS affected the industry somewhere, such as the cancellation of buying trips or delays in manufacturing schedules," said Laferrera. "Other than normal delays, there haven´t been any extraordinary shipping problems versus previous years, as of yet."
That observation is supported by figures released by the Hong Kong Trade Development Council. The New York City-based organization reported that, while travel to and from Asia was down considerably, orders saw only a marginal decrease.
A survey conducted by the trade council of Hong Kong businesses in May 2003 indicated 84 percent of respondents said some of their buyers had cancelled business trips to the city, citing SARS as the reason. On the bright side, 92 percent said buyers continued to place orders, even without paying a visit.
Further, many exporters and manufacturers used alternatives to face-to-face business practices -- email, fax, phone and courier services -- to put samples in the hands of prospective and existing customers.
The council´s report also indicated that 93 percent of all respondents had implemented rigorous practices for preventing the spread of the disease, including employee screening, hygiene awareness programs and disinfecting production facilities.
"We´ve sensed a pick-up in Hong Kong´s business momentum since early June," said Elsweet Rufino, press officer with HKTDC. "Now we anticipate faster acceleration as business travelers return with confidence. SARS did disrupt normal buying seasons, but business travel is steadily returning to Hong Kong."
In July 2003, the trade council released a follow-up report, noting established companies with known product lines were weathering the storm better than those attempting to bring new goods to market, since the latter requires more face-to-face contact with clients. The report also warned that pent-up demand could further impact the traditionally tight delivery schedules leading up to Christmas. Rufino admits the reduction of travel did affect the industry, but says the recovery for the holiday season should be complete.
"Christmas inventories are low all over the world because SARS disrupted normal buying seasons, especially for new products that involve hands-on viewing and face-to-face discussions," he said. "For toys, gifts and consumer electronics, the Pearl River Delta is the true North Pole. Hong Kong companies are able to ensure that these gift items reach the world´s shops in time for Christmas."
With Asia’s importance in the global toy market, Laferrera believes players in the industry may take a new look at how business is done, but he doubts it will change where business is transacted.
"I wouldn´t use the term ‘reliance,’ but there will be a rethinking of the methodology in dealing with Asia," Laferrera said. "With today´s technology, so much more can be done in a more expeditious and economical fashion and still accomplish the same objectives.”
"Business is a risk in every sense of the word, but today´s systems were developed ultimately for efficiency, and that will dictate the direction for the future," he said.
Forecasts released by the HKTDC, which predicted export growth of 3.3 percent, down from 4 percent in 2002, cite the weak American dollar for enhancing the price competitiveness of producing in Asia generally, and Hong Kong specifically.