By Carla Reed
I hate to be a Grinch, but……
aren’t the holidays getting more advance notice
This is a global phenomenon – on a recent trip to
Germany I found the stores bedecked with holiday fare, and
this was only October!!! Even the duty free stores at the
airport are getting in on the act with Holiday packaging
and promotions. Yes, I admit it – I fell into the trap!
Who can resist a singing reindeer – especially when
the song is in German!
And now for the interesting twist to Christmas of 2004 – based
on the labels on all the items that filled my personal cache
(including the traditional hand-painted nutcracker), it seems
that Santa will need to relocate to China! No doubt the elves
are considering what it would be like to set up shop in warmer
climates – that is, if the whole manufacturing operation
is not outsourced. It would certainly make sense for Santa
to go straight to the source – toys are one of the
items that have benefited from the low labor rates – amongst
other things. Which brings me to my next commentary – what
happened to ‘Made in Germany’? Or whichever western
nation you choose to think of.
As a global commuter, one of my pastimes, in between flight
delays, is to visit the airport gift shops, looking for local
souvenirs. I have one rule though – items need to be
manufactured in the country that I am currently visiting.
In the case of Germany, I have concentrated on specific items,
one of which is Steiff stuffed animals. For the uninitiated,
Steiff teddy bears are actually an adult collectible! (or
Steiff toys have been lovingly made in Germany for years,
each item easily identifiable by the special ‘Knopf
in Ohr’ – button in the ear. And these are no
ordinary bears! The little village of Giengen on the Brenz
was the home of the very first jointed bear – or Teddy
Bear – designed and manufactured in 1902 by Richard
Steiff. Named in honor of one of America’s favorite
presidents, Teddy Roosevelt. Teddy has become part of the
American family since an American toy buyer purchased 3,000
of these pieces in 1903. In fact, Steiff teddy bears, dressed
up as hunters and fishermen adorned the tables at the wedding
of President Roosevelt’s daughter in 1906. As such,
I have always thought of my Steiff bears as a link between
the USA and Germany.
On this trip I selected a couple of stuffed animals from
the new ‘Cosy Friends’ range and was surprised
to find that the famous ribbon and button ‘Knopf in
Ohr’ no longer carries the words Made in Germany. Making
Steiff toys is a labor intensive process with over 30 steps.
Cost prohibitive in any industry. Steiff, in common with
the manufacturing exodus from Europe, is taking advantage
of low cost outsourcing. Cost pressures have driven German
Brands like Mercedes Benz and BMW to assembly points with
low cost labor and other incentives. But Steiff? How could
Giengen on the Brenz have allowed such an outrage? Almost
apologetically, the rear of the label explains that this
item has been carefully manufactured in China, under quality
control of Steiff Germany. Chinese hands now craft the toys,
and the role of Steiff GmbH has been reduced to final inspection
and the placement of the famous label!
The mystique behind the Steiff label has resulted in a market
for collectible Teddies, many of which fetch hundreds of
thousands of dollars in traditional venues like Christies
and Sotheby’s – or over the web on Ebay! The
Limited Edition items that are displayed on these websites
advertise the fact that they are Handcrafted in Germany.
Perhaps that alone will one day make them collectible, as
the more mainstream products are crafted by hands on distant
It seems that the sun is setting on the manufacturing industries
in many parts of the western world. A combination of taxes,
environmental legislation, high wages and other issues make
finding low cost manufacturing facilities an imperative for
many of the most respected brand names. The playing field
is being leveled and luxury goods are now manufactured in
the same locales as their illegal knock offs.
Initially the source of low cost consumer goods, China is
now creating products that bear labels previously reserved
for only the most exclusive products. Which begs the following
- Do companies understand:
- What motivates the consumer – product
- Where is the true value – the quality
or the logo?
- What is the value of the Brand – snob appeal
or quality assurance?
- Do firms understand the long-term
impact to that brand once they outsource?
- Is the benefit of low cost production worth the uncertainty
of a longer supply chain? As market demand varies,
long supply chains, especially in toys and apparel, which
sensitive to ‘fashion’, instincts are
- What are the risks inherent in sharing
manufacturing techniques and skills with potential
- Once the low cost providers move up
the food chain, where will the next global factory be?
Educated consumers know the difference between a high fashion
product made of Italian leather versus a similar item made
in Italy. Craftsmanship and tradition combine to create products
that are truly classic – elegance is worth the premium
for an item that reflects the lineage of the Brand.
Unfortunately, this is not true for all products – the
thrill of cashmere at every day low prices is tantalizing.
Will luxury and economy converge? The low cost producer
wins the battle of the checkout. The rulebook is rewritten
as emerging nations compete for market share. But what
is the long-term impact? What will the owner of the Steiff
collectable feel when their neighbor brings home their
Steiff from Wal-Mart? We may not grasp what is lost ‘till
it is gone.
ChainLink Research, Inc.