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Yiwu brings yuletide cheer to the world

12-29-2011 11:01 BJT

On December 20, Ren Guoan, general manager of Yiwu Santan Arts & Crafts, closed the factory and let his workers take two months off for Christmas and Spring Festival. The start of the Christmas celebrations marked the end of this year's business for his company, which sent out nearly 400 containers this year, worth around 35 million yuan ($5.52 million), up more than 20 percent year-on-year.

"Our orders surged to the highest volume since 2004," Ren told the Global Times. "But I didn't make as much profit as the previous year."

Ren's company, which manufactures artificial Christmas trees, decorations and other festival ornaments, is just one of the 600 or so factories and companies currently involved in the Christmas business in Yiwu, Zhejiang Province. The city has built up one of the world's largest wholesale markets for "small commodities," such as accessories and household items.

Although 2011 ended surprisingly well with an unprecedented boom in Christmas orders, most producers in Yiwu have seen their profits squeezed by the rising costs of raw materials, labor and rents as well as fierce competition, and industry insiders expect to see consolidation in the sector in the coming years.

Recession-proof festival

According to Yiwu customs, Christmas products exported through the city's port amounted to 21,000 tons, worth $120 million, in the first 11 months this year, up 7.3 percent and 50.7 percent respectively, compared with the same period last year.

"I don't have the exact export number, but I can tell you exports through Yiwu customs only accounted for a small part of our orders, because quite a lot of containers were shipped through other ports such as Shanghai and Ningbo," Chen Jinlin, secretary general of Yiwu Christmas Products Industry Association, told the Global Times. "In my estimation, Yiwu's Christmas ornaments production probably exceeded 10 billion yuan this year."

Yiwu now supplies almost half of the world's Christmas products, with a 40-percent market share in Europe and a share of at least 60 percent in the US, according to the association.

Meanwhile, instead of curbing demand, the global economic downturn seems to have given a boost to the consumption of Yiwu's Christmas products.

"Even during an economic crisis, Westerners still need to celebrate their important festival. And tight budgets made many people skip the high-end Christmas ornaments for cheaper ones, which is why foreign orders for low-end products rose significantly this year," Chen said.

Profits undermined

Although this year has been the best yet for Yiwu in terms of Christmas sales performance, many business owners have barely been able to turn a profit. Rising costs of raw materials, wages and rents are the three major factors that bumped up the cost levels for local Christmas product factories.

In particular, due to the labor-intensive characteristics of the Christmas ornament industry, many Yiwu companies have had difficulties in recruiting enough staff to meet their surging orders. As a result, labor costs have jumped by as much as 30 percent this year.

"On average, there was a 10 percent increase in orders received this year, but the profit margin was narrowed by 5 to 10 percent because overall production costs were up by 15 to 20 percent, while the average sales price went up only 10 percent," Chen explained.

 


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