When Sarah Bongiorni started work on her book, A Year without “Made in China,” one of the first categories she had to cross off her shopping list was toys. The mother of two had a terrible time finding anything in the toy departments of Target, Wal-Mart and the other big box stores that was made anywhere else in the world. So when I started working on my book about companies that are successfully competing with China, I started looking for a toy company. I had already found a garment manufacturer (American Apparel), a flashlight company (Mag Instruments, makers of the MagLite) and a bicycle company (Intense Cycles), all of which were competing very successfully in markets dominated by low-wage countries. Would it be that hard to find a toy manufacturer?
In fact, when I talked to industry insiders, I was told that manufacturing toys in the U.S. on a competitive basis was impossible. Outside of small, “artisanal” toy makers employing half a dozen people, there were no companies for me to write about.
Don’t believe everything people tell you. There is a toy company that a) manufactures 100 percent in America, b) employs about 90 people and c) sells into Wal-Mart, not to mention Dollar Stores, Hobby Lobby and a lot more chains.
That company would be Tattoo Manufacturing Inc. of Tucson, Arizona, the world’s leading manufacturer of temporary tattoos, with roughly $25 million in annual sales. . According to CEO Steve Tooker, the company has a 90 percent share of the U.S. market and a 60 percent share of the world market.
It crossed my mind to question whether or not temporary tattoos are really toys. Well, they’re sold in toy stores, for starters. And if they were to be classified as novelties that fit into the same category as give-away pens, key chains and other trade show trinkets, the company’s achievement would be no less impressive, because guess who dominates that market?
I asked Tooker the obvious question: How do you do it? He had several answers. One was the use of expensive, vegetable-based dyes that cost $40.00 to $50.00 per pound, vs. $5.00 per pound for dyes that would be less safe. (After the toxic toy soldier event of last Christmas, would you buy temporary tattoos from China with chemicals that soak into your children’s skin?) A second advantage he cited was the firm’s heavy investment in information technology. “We can process an order for 100 tattoos in the same way and at the same cost as an order for 20,000 tattoos.” Perhaps more significantly, Tattoo Manufacturing can go from order to delivery in five days, a time frame Chinese manufacturers could never beat.
The most important factor, however, is automation. Labor accounts for only 3 percent of the company’s total revenue, so the fact that wages in China are about $1.25 an hour isn’t a competitive disadvantage.
Automation is not the only path to success, but it’s one that I hear frequently mentioned as I talk to CEOs who are winning in the global economy.