Further to my February 19th posting on the toy industry, it appears that they have more to worry about than only managing product quality. According to Eric Johnson, Professor of Operations Management at Dartmouth’s Tuck School of Business, toy prices will increase anywhere from 5 to 10 percent later this year.

You are going to see more $7.99 toys at the bottom instead of $2.99,” said Michael Greenberg, the former CEO of toy maker Shelcore and now a toy-industry consultant.

While the reasons for this are not exclusive to the U.S. toy industry they are one of the hardest hit as they import about 80% of all products from China.

What’s happening? The major factors include:

1. Yuan - China’s currency continues to set new records against the U.S. dollar, rising 2.11% already this year and expected to increase an additional 5-7%. The yuan climbed nearly 7% in 2007.

2. Wages - China is experiencing an increasingly concerning shortage of labor, especially in certain coastal areas (which are manufacturing centers for certain products) which have caused an increase in wages by 20%. There are also new workers’ rights laws which will push this even higher as the employer takes on more responsibilities.

3. Materials - Plastic costs have risen 25% over the last 2 years due to higher petroleum costs.

Copper is 17% more expensive so far this year alone!

This should assist in driving traffic to trade media sites as buyers continue to scour the planet for alternative sources of their product.

I would also see this as helping C2C sites such as eBay as consumers, who will be the hardest hit in the end, increase their bargain hunting worldwide.