Hard to fill orders for hot items
all points in between. Furthermore, labor shortages in the U.S. have made it difficult to get stuff unloaded from ships and onto trucks.
But for toymakers that heavily rely on holiday sales, there’s a lot at stake for the nearly $33 billion U.S. industry. The fourth quarter accounts for 70 percent of its annual sales. On average, holiday sales account for 20 percent of the overall retail industry. And 85 percent of the toys are made in China, estimates Steve Pasierb, CEO of The Toy Association.
The snarls are so severe that some retailers are telling companies they don’t want products if they’re shipped after mid-October. That’s because products that typically took four to six weeks from when they left a factory in China to landing at a U.S. distribution center now take 12 to 16 weeks, says Marc Rosenberg, a toy consultant.
The struggles are happening as the U.S. toy industry enjoyed a nearly 17 percent increase in sales last year and a 40 percent increase in the first half of this year as parents looked to entertain their kids at home, according to NPD Group, a market research firm.
But while analysts expect strong growth in 2021, many toy companies said they’ll see their sales reduced because they won’t be able to fulfill orders on hot items, particularly surprise hits. They are also incurring big
costs that will force some toy companies to shutter.
Toy executives say they can’t raise prices any more than 10 percent — even though it won’t completely cover the higher costs — because they’re worried about shopper reaction. Mattel Inc., the nation’s largest toy company, warned this summer it’s raising prices in time for the holiday season to offset higher shipping costs, though it didn’t say by how much.
Costs of containers on ships have increased more than six-fold from last year with some brand executives saying they’ve gone up to $20,000 from roughly $3,000 a year ago. That has forced big
retailers like Walmart and Target among others to charter their own ships.
Foreman calculates 1,800 Tonka trucks fit on each 40foot container. So at $20,000 per container, that’s costing him $11 each. That’s up from an average of $1.75 each in a typical year. He says he’s focusing on shipping smaller items like Mash’ems — soft, squishy, water-filled collectibles — onto containers as he looks to maximize the total dollar value of the container and profit margins. He estimates he can fit $150,000 worth of Mash-ems in a container versus $40,000 worth of Tonka trucks.
Some like MGA Entertainment, the maker of
L.O.L dolls, are expediting the flying of its toys because it now costs roughly the same shipping.
Jim Silver, editor-in-chief of TTPM, a toy review site, says big discounters like Target and Walmart should have a healthier supply of toys compared with smaller ones because of their clout. Target says it has been teaming up closely with its vendors and transportation partners to keep stores wellstocked and ready for its customers.
But Melissa McCollum, owner of Learning Express Toys in Birmingham, Ala., says she’s received only 25
percent of the holiday toys as of mid-September; typically,
that figure is 50 percent. And The Toy Book, the leading trade magazine serving the toy industry, is promoting a curated list of in-stock products that retailers can get fast from U.S. warehouses.
Many toy companies like Basic Fun and PlayMonster have reduced advertising.
“We would be advertising to empty shelves,“said Tim Kilpin, president of PlayMonster, who says 15 percent to 20 percent of its holiday goods are snarled in the supply chain. Koosh, a toy ball made of rubber filaments, was completely sold out in August, and he didn’t think there would be a chance of it being replenished by Christmas, he says. But on Wednesday, Kilpin said he received word that some of the containers including shipments of Koosh are flowing from the West Coast.
The bottlenecks are expected to have lingering consequences. Toymakers are facing pressure from retailers to ship the first flow of holiday 2022 goods in early March instead of late April and the second cycle in June instead of by late July, says Andrew Yanofsky, head of marketing and operations at WowWee.
That will force companies to make decisions about how much to make and reorder without having a full picture of the sales data, he says.
Yanofsky said he placed a big bet initially on Got2Glow Fairy Finder, a light show in a jar that allows children to find virtual fairies, because he knew he wouldn’t be able to replenish the production given the snarls.
“We took a risk on excess material beyond the scope of what we thought we could sell, “he said.
Even the few toy companies that make goods in the U.S. have struggled because of labor shortages.
John Gessert is CEO and president of American Plastic Toys, based in Walled Lake, Mich., with another plant in Mississippi. He says the company is missing 35 percent to 40 percent of its front-line workers. Now, it’s shifting away its focus on play kitchens that require six workers toward less labor-intensive toys like basketball sets, which require just three workers to put together.
“I have never had such a complicated puzzle to fix,“he said.