Mainland pirates put pressure on giftware makers
Profits are under pressure at Hong Kong's giftware manufacturers as mainland rivals flood the market with knock-offs and outright fakes.
Mainland copycats are churning out pirated key chains, coffee mugs, perfumed soap, clocks and glow-in the-dark cocktail stirrers with impunity, trampling intellectual property rights and eroding profit margins at established manufacturers.
Piracy is so endemic in China that chasing counterfeiters is pointless, gift-makers say.
'Our profit margins have been hit badly,' said Jane Kwok, marketing manager of Masterwin Group, a Hong Kong gift manufacturer. 'We are still eking out a profit, despite the rough conditions.'
The company, which has a factory with 5,000 workers in Shenzhen, produces key chains, desktop accessories and other gift items.
The prices of its key chains had fallen by half from two or three years ago, said Ms Kwok.
'We see other Hong Kong gift manufacturers facing the same problem. Some have closed down and many are facing serious problems,' she said.
'Chinese factories copy our items and sell them at a lower price. It's hard for us to catch them because they introduce a small change and claim it as their own design.'
Although cheap mainland competition has been around years, the number of small Chinese gift factories had mushroomed since 2000, she added.
Masterwin is shifting production from key chains to desktop items in an attempt to thwart the counterfeiters. It was also selling newly designed products exclusively to selected customers, rather than on the open market, said Ms Kwok.
Piracy is not the only factor driving down giftware prices. Competition is forcing a migration of industries to ever-cheaper locations in inland China, where companies are generously compensated for higher transport costs with a far cheaper labour bill.
'Our profit margins have been falling year by year,' said Sharon Wan, manager of Ta Shun Industrial (HK), another Hong Kong gift manufacturer. Although Ta Shun has three factories in Shenzhen, it has been out-priced by mainland companies that have set up in more remote parts of China.
Enhanced production efficiencies were also cutting prices, said Randal Hu, founding general manager of Ouma Industrial, a Shanghai-based manufacturer of coffee mugs, hand-phone accessories, key chains and leather items.
Ouma's profit margin had dropped 10 per cent over the past five years but total profits had grown because sales had increased, he said.
Despite the pessimism expressed by many gift manufacturers, Hong Kong's giftware exports rose 6 per cent to $116.2 billion for the first nine months, according to the Trade Development Council.
