Gifts and Premium Industry in Hong Kong

• Hong Kong is a world-renowned sourcing centre for giftware. A wide spectrum of gift items can be sourced here, ranging from basic products to sophisticated, high-value merchandise. Hong Kong exporters are sensitive to changing market needs, and are known for their product quality and their high levels of compliance with product safety and environmental regulations and standards.
• Hong Kong's giftware industry is supported by a strong network of competent ancillary industries. Sectors such as toys and figurine candles are well served by the mould-making industry. Timepiece manufacturing, on the other hand, is supported by the metal products industry in terms of casings, bands and precision components.
• Structurally, there has been an increasing trend towards offshore trade for toys and some lower-priced gift items. High-value items such as timepieces and precious jewellery remain largely exported through Hong Kong, mainly by air.
• Hong Kong’s gifts and premiums exports bounced back by 49% year-on-year in the first nine months of 2021 after a 26% decline in 2020. While exports overall have surpassed their pre-pandemic levels, the export performance varies across different product sectors and markets.

Industry Features

Giftware covers a wide spectrum of light consumer products, ranging from basic to more sophisticated, higher‑value goods and including toys, timepieces, jewellery, silverware, kitchenware and clothing accessories. Other gift items include stationery, photo frames, jewellery boxes, artificial flowers, candles, soaps and works of art. An additional sector is promotional items for the corporate world, or the so‑called ‘premiums’ market.

Hong Kong's giftware exports are mainly targeted at the middle‑to‑high‑end market, and the city has competitive edges in product design and low production costs. Many Hong Kong companies have their own designers, and are shifting their business focus from original equipment manufacturing (OEM) to original design manufacturing (ODM) to enhance their competitiveness and profit margins. Some firms have even started to create and market their own brands by engaging in own brand manufacturing (OBM).

Hong Kong exporters are capable of delivering a large number of price‑competitive products for the premiums and give‑away markets (including cotton T‑shirts, baseball caps, ball‑point pens, key chains, plastic watches and electronic gadgets), although a variety of middle‑to‑high‑end gift items (such as porcelain dolls, silverware, brass and leather stationery, and jewellery sets) are also available. The exporters are sensitive to changing market needs and are known for the quality of their wares and their high levels of compliance with safety and environmental regulations and standards.

Hong Kong's giftware industry is supported by a strong network of competent ancillary industries. Sectors such as toys and figurine candles are well served by the mould‑making industry, while timepiece manufacturing is supported by the metal products industry producing casings, bands and precision components.

Structurally, there has been a trend towards offshore trade. This tendency has been striking in the case of toys and some lower‑priced gift items, particularly those bound for the US and increasingly the EU market. On the other hand, high‑value items such as timepieces and precious jewellery remain largely exported through Hong Kong, mainly by air.

Performance of Hong Kong's Exports of Giftware and Premiums [1]

Source: Hong Kong Trade Statistics, Census and Statistics Department

Following a sharp fall in the first half of 2020 due to the global pandemic, Hong Kong gifts and premiums exports started to rebound in Q3 2020, so that over the whole year 2020 they suffered a 26% decline in sales. As the economy reopened and the recovery continued in 2021, the industry recorded broad‑based export revival and saw a 49% year‑on‑year growth for January‑September 2021.

While exports have surpassed their pre‑pandemic levels, the export performance across different product segments and markets varies. Sales to most traditional markets such as the US, the EU, the UK and Switzerland are still lagging, while various Asian markets, including mainland China, Macao and Taiwan have already exceeded their pre‑pandemic levels.

Product‑wise, almost all categories registered growth in the first nine months of 2021, with the exception of cases of optical goods. Exports of fine jewellery, the dominant category of Hong Kong’s giftware exports, and wristwatches (not battery‑powered and with a non‑precious metal case) led the return to normality, reaching 14% and 98% above their pre‑pandemic levels, while other categories were still 6% to 34% below.

Sales Channels

In general, Hong Kong companies rely heavily on OEM and ODM orders. While premiums and give‑away items are embossed with the buyers' company logos and names, most gift products are exported as open items. Hong Kong manufacturers also offer expertise in design, engineering, tooling, quality control and other technical know‑how to their customers. As e‑commerce becomes the new norm, an increasing number of Hong Kong traders have set up online platforms to facilitate one‑stop promotional gifts procurement for corporate clients across the globe.

To expand business networks and explore market opportunities abroad, many Hong Kong manufacturers participate in international trade fairs. Since gifts and premiums comprise a wide range of products, manufacturers may participate in other fairs aimed at specific sectors, for example toys, stationery, jewellery or timepieces. Some leading trade fairs are listed as follows:

Industry Trends

There is a trend towards consolidation of buyers and retail channels. In particular, large‑scale retail chains and mass merchants are minimising inventory and shortening delivery lead times in an effort to lower costs and business risks. Such developments will continue to pose a threat to smaller manufacturers, as giant retailers, doing their own direct sourcing, may tend to favour large suppliers. On the other hand, the rise of giant retailers has provided new opportunities for private labelled items.

Intense competition on price and increasing environmental awareness are prompting giftware manufacturers to explore more affordable and non‑polluting substitutes to traditional materials. Prominent examples include recyclable or renewable packaging materials. In addition, giftware firms are finding they need to turn out an increasing number of new models and designs in order to stay competitive.

Meanwhile, licensing is entering the home accessories market. According to industry sources in the US, there is good market potential in the licensing of decorative accessories. Licensed products based on familiar characters from movies or TV series are expected to remain popular. Hong Kong companies are in a good position to capitalise on this trend, as they are known for protecting clients’ interests with due respect for intellectual property rights.

As in other sectors, e‑commerce has emerged as an important sales channel for the gifts and premiums industry, a trend that is accelerating in the aftermath of the Covid‑19 pandemic. In the US, for example, online sales accounted for more than one‑third of the sales of apparel and accessories as well as toys and hobby items, two product categories which cover a great deal of giftware. The opportunity to sell directly to local and overseas consumers (D2C), is particularly important for manufacturers who offer the personalised gifts which global consumers increasingly desire.

CEPA Provisions

Under the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA), the mainland has given all products of Hong Kong origin, including giftware, tariff‑free treatment since 2006. This allows tariff savings up to 20%, compared to products with Most‑Favoured‑Nation (MFN) status. According to the stipulated procedures, products which have no existing CEPA rules of origin can enjoy tariff‑free treatment upon application by local manufacturers and upon the CEPA rules of origin being agreed and met.

The promulgated rules of origin allowing giftware products to benefit from CEPA's tariff preference are basically similar to the existing rules governing Hong Kong's exports of these products. Generally speaking, for the manufacturing of imitation jewellery, moulding and assembling ‑ identified as the principal processes for the purpose of determining origin ‑ must be done in Hong Kong. For giftware articles manufactured from paper, cutting, die‑pressing, wrapping and gluing must be done in Hong Kong. If rolling or forming are required after die‑pressing, such processes must be also done in Hong Kong. Detailed information is available here.

General Trade Measures Affecting Giftware Exports

Some trade measures, such as anti‑dumping charges, affect giftware products exported by Hong Kong companies. For example, certain paper‑made products, folding gift boxes and wax candles are subject to US anti‑dumping duties, while some ring binder mechanisms are charged against by the EU. These measures can affect Hong Kong companies as many of them manufacture on the mainland. On the other hand, the EU removed import quotas on kitchenware of porcelain or china from the mainland in 2005.

Product requirements have become more stringent in overseas markets, mainly in areas of product safety and environmental protection. For example, the EU’s Implementing Decision concerning harmonised toy safety standards in support of the Toy Safety Directive was announced in July 2019. In the US, meanwhile, the enactment of the Consumer Product Safety Improvement Act (CPSIA) poses a challenge to Hong Kong's toy exporters. Tightened lead limits, prohibitions on the use of certain phthalates and third‑party testing requirements are among the strengthened provisions contained in the CPSIA.

Safe and ethical working conditions have also increasingly been a concern among overseas buyers. A number of leading buyers such as Hasbro, Mattel, LEGO and Walmart require suppliers to meet high standards. The International Council of Toy Industries (ICTI), with the active involvement of Hong Kong toy makers, has introduced a Code of Business Practices and an associated supply chain programme known as the Ethical Toy Program (formerly CARE Process) for manufacturers, distributors and retailers of toys and related merchandise in member countries.

For health reasons, the EU has a directive controlling the use of nickel in objects intended for contact with the skin, such as watches and jewellery. In addition, the EU has prohibited trade in clothing, footwear and other textile and leather articles which contain azo‑dyes, from which aromatic amines might be derived. Separately, the National Candle Association has established a framework for quality control of candle and candle accessories, and has published international standards through the American Society for Testing and Materials (ASTM). These standards are not legally binding to outsiders and are only applicable to the US, but candles bearing the NCA quality mark may have a competitive edge.

Product Trends

Personalised items or items with DIY elements: With customers becoming more sophisticated, they tend to look for something unique when choosing gift items. In response to changing customer demand, an increasing number of giftware traders now offer gift items that are customised to personal specifications. These may be monogrammed goods, or “mix and match” assortments of themed or coloured accessories. Customers can create gift items with their own individual style. Items with DIY elements include the design and assembly of 3D papercut light boxes. Recent examples include EONIQ, a home‑grown watchmaker selling custom watches and DIY watchmaking kits to both local and overseas markets.

Corporate giveaways to boost sales: Corporate giveaways will continue to be an effective sales and marketing tool. According to a recent survey conducted at the HKTDC Hong Kong Gifts and Premium Fair, traders continue to back promotional gifts and premiums. One fifth of them considered this to be the most promising category in 2019, up significantly from 13% the previous year. Companies will look to distribute functional yet creative higher‑value premiums in the future, as target recipients are no longer impressed by lower‑value items. Thrust into the spotlight by Covid‑19 are healthy gift ideas such as UV light sanitisers for mobile phones and portable air purifiers as well as gifts for virtual corporate events. A recent example is Homeshake, a local at‑home cocktail brand which offers DIY cocktail giftsets for online celebrations and networking functions.

Innovative technological items: The prevalence of high‑tech gifts is a trend seen across the board. Examples include photo‑printing phone cases, smart watches and interactive dolls, as well as scanner mouses which can accurately convert printed text, tables and pictures into digital formats. Most recently, drones are becoming very popular gift items for both kids and adults. While new technologies such as extended reality (XR) and mobile applications will continue to transform the industry, giftware manufacturers should be aware of the tightening of regulations on digital products in some markets, including the EU’s Radio Equipment Directive and Product Liability Directive.

Home products and festive items focusing on family values and connecting with others: A major trend is the popularity of so‑called "home products" and festive items, as consumers spend more time with family and friends at home. In step with this development, houseware, tools, DIY & home deco products will continue to be favoured gift items. Consumers also increasingly feel the need to reach out and communicate with others in traditional ways, such as sending hand‑written greeting cards and scrap‑booking.

More emphasis on healthcare and related products: The ageing population together with the Covid‑19 pandemic have focused minds on healthcare and related products. A prominent example is Dayton Industrial’s Health Watch collection to facilitate e‑health that remotely collects, transmits, evaluates and communicates patient health data. Candles, fragrances and aromatic gifts are also sought after as ways to relieve stress, and their popularity has led to increased sales of items such as candle holders, fragrance oils and other accessories.