Makers are enhancing product features to move upmarket and boost sales.
Design developments in China's Christmas trees and ornaments industry reflect the sector's brighter outlook as overseas sales increased between 10 and 20 percent YoY from mid-2010. Better-performing components and greater attention to detail enhance models' decorative quality.
These product improvements are in line with makers' gradual upmarket shift to widen profit margins and avoid stiff price competition in the low end. Such measure is reminiscent of manufacturers' general strategy in 2009, which they abandoned last year when basic pieces kept businesses afloat.
With recovering economic conditions, suppliers are concentrating on feature upgrades. In prelit Christmas trees, for example, LEDs and fiber-optic lights are replacing incandescent variants.
LEDs are increasingly becoming popular for their brightness and vivid colors that allow fancier decoration. These components also have a longer life span of 10,000 to 30,000hr compared with incandescent alternatives' 2,000 to 3,000hr. In addition, LEDs do not generate heat and, therefore, are safer to use.
Similarly attractive are models with fiber-optic lights in multiple hues. Often found in high-end Christmas trees, such parts are utilized to make or decorate needles.
There are also releases with built-in music and bulbs flashing to the rhythm.
To improve aesthetics further, suppliers are enhancing components in select options for a richer look. An upscale Christmas tree standing at 6ft may boast more than 20 layers and 500 branches. A less expensive version of the same height has fewer than 10 layers and 150 branches.
In creating realistic pieces, manufacturers are paying increased attention to detail. Intricate touches of snow on the foliage, for example, help enhance design credibility. Further, the density of individual needles is an important consideration in achieving lifelike Christmas trees. Those found in low-end models are only 0.07mm thick, while upscale releases boast 0.1 or 0.12mm variants.
The shape is also essential in determining quality. Premium Christmas trees have needles with a sharp point, whereas less expensive alternatives come with rectangular leaves.
Companies are likewise boosting durability by utilizing stronger raw materials such as high-end PVC in making branches and needles. Additionally, the input retains paint longer, keeping colors sharp even after three to four years of use.
In contrast, less costly PVC creates brittle leaves, the pigment of which fades faster.
Although suppliers of Christmas trees and ornaments are enjoying more favorable market conditions, they still have to overcome several hurdles external and inherent to the industry.
One R&D challenge is the limited design variation due to the line's traditional nature. Manufacturers cannot make too much modification on the themes and shapes of staple items, including Christmas trees and balls, and snowflakes and Santa Claus models. This has resulted in product homogeneity, which fuels competition further.
Another cause for concern is the low revenue generated from basic pieces despite the increasing number of orders. Although inquiries rose as opposed to last year, they are still 20 to 30 percent below precrisis levels. Profit margins become even narrower after shipping costs are added, especially when exporting Christmas trees.
To drive sales, many suppliers are reducing MOQs from $3,000 to between $1,000 and $2,000. They have also shortened the average lead time from the previous 30 to 45 days to about 20 to 25.
Besides obtaining orders, makers face the difficulty of completing contracts due to the ongoing labor shortage. Automation is not always the best solution because the Christmas trees and ornaments line requires intensive handiwork.
Subcontracting large-volume orders and hiring local farmers as temporary employees are among the strategies suppliers are adopting to cope with limited resources.
With regard to prices, manufacturers predict a 10 to 15 percent climb in the next 12 months due to inflation, increasing raw material and labor costs, and the yuan's appreciation.
Amid strong competition in the low end, companies intend to shift to the midrange and upscale segments in one or two years. This move also takes into account countries such as Pakistan, India and Vietnam, which are eating into China suppliers' overseas markets for basic pieces.
Some manufacturers of Christmas ornaments are offering decorative items in other holiday themes to increase sales. The strategy is not difficult for such companies since these models require similar production processes and target the same clients. Suppliers of Christmas trees, however, do not have the same opportunities. A few of them have shifted or branched out to other lines, including artificial plants, early on.
The key price determinants for Christmas trees are the size, materials, craftsmanship and built-in features.
Low-end 6ft-tall models go for less than $5 and have no ornamentation. The components are made of recycled plastic. Branches and layers are fewer than 150 and 10, respectively. Cut in strips, the needles are 0.05 to 0.07mm thick. The bases come in a three-legged construction.
Midrange Christmas trees of the same height are priced between $5 and $20. The products have more than 150 branches and 10 layers. Several releases feature accents that resemble snow.
Suppliers use virgin, recycled or combination plastic to yield stronger parts. There are bases in die-cast metal wrapped in plastic.
The needles, which are 0.1mm thick, hold their shape and keep colors vivid longer than less expensive versions. These are made of, or adorned with, fiber-optic lights in some options.
Priced above $20, upscale Christmas trees boast components in virgin plastic. The branches and layers exceed 500 and 20, respectively. The needles are thicker at 0.15mm and have realistic shapes. Some are also made of fiber-optic lights.
High-end models are more stable as they stand on a heavy metal base also wrapped in plastic. Most are prelit and decorated with LEDs.
The design, materials, size, craftsmanship and surface treatment affect the prices of Christmas ornaments as well. All pieces may come in foam, paper, nonwoven fabric or rattan.
Low-end items from China are machine-made and do not reach $0.50. In contrast, midrange versions may have details or motifs done by hand. These are between $0.50 and $0.80.
Premium options boast more features, including built-in LEDs that showcase color-changing designs. Such models go for $0.85 to $1.50.
Dalian Overseas Industry Co. Ltd
Dalian Overseas Industry Co. Ltd
Note:This article was originally published by Global Sources, a leading business-to-business media company and a primary facilitator of trade with China manufacturers and India suppliers, providing essential sourcing information to volume buyers through our e-magazines, trade shows and industry research.
All price quotes in this report are in US dollars unless otherwise specified. FOB prices were provided by the companies interviewed only as reference prices at the time of interview and may have changed.
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