A shopper wearing a face mask due to the coronavirus disease (COVID-19) pandemic searches Jan.
Mark Makela | Reuters
Even from the porch of his Malibu home, toy manager Isaac Larian cannot escape the biggest business challenge of the Christmas season. He sees a long line of container ships in the port of Los Angeles, some 70 miles away.
Larian, CEO of MGA Entertainment, said the congested port has been a stubborn eye catcher off the California coast for at least May. As he tries to relax and watch the sun go down, it’s a constant Reminder of the many toys that still arrive.
The delay in unloading the ships could jeopardize whether parents can buy the toys in time to wrap them up and tuck them under the Christmas tree. If they miss the opportunity, toys could linger on shelves with clearance stickers until well into winter.
“I can see an ocean full of containers,” he said. “Ship after ship after ship full of containers waiting to be unloaded.”
He said the company, which makes LOL Surprise, Rainbow High, and Little Tikes, currently has enough inventory to fill about 65% of its pending orders. He said MGA Entertainment expected revenue to grow 50% this year, but is now expecting 18-20% growth. He did not release any specific sales figures as the company is privately owned.
Larian is just one of many toy manufacturers grappling with a massive bottleneck in the global transportation pipeline caused by and caused by the coronavirus pandemic Blockade of the Suez Canal in March. Shipping containers that once cost $ 3,200 are now selling for more than $ 20,000, Larian said. And even when containers are unloaded, there aren’t enough truckers to deliver these shipments.
Power outages in China, resin shortages and higher labor costs have also weighed on the supply of goods and increased prices.
“It is a really complex issue that has a chain effect and I fear it will continue for a long time,” said Larian.
No company is immune. Bigger ones have more resources. Home depot and Cost co have gone so far Contract dedicated container ships to expedite your orders. Bigger companies have the money too to place orders on time when the items are needed. Hasbro and Mattel unanswered a request for comment on this story, but executives have stressed that the major toy companies are better equipped to meet these challenges.
At a Goldman Sachs conference in late September, Hasbro CEO Brian Goldner said his company was “using all kinds of tactics and techniques to make sure we have the product we need”. That includes nearly doubling the number of ports used in the US and adding a number of new ports in Asia, he said.
Hasbro expects some toys to be delayed and arrive by the beginning of the fourth quarter rather than the end of the third quarter, but toys will be on shelves in time for the busy shopping season, he said.
“We believe we will all have products, even if we might have a little more product in certain categories, but we will have the product for the holidays,” he said.
These products are becoming more expensive. At the same investor conference, Mattel CEO Ynon Kreiz said his company is raising toy prices to cover higher costs, but he doesn’t expect it to dampen demand.
“We believe that the toy industry as a whole will remain a strategic category for retail,” said Kreiz. “Items aren’t expensive. And parents will always prioritize spending money on their children, especially when it comes to quality products and trusted brands.”
Market researcher NPD Group estimates that total vacation spending in November and December will increase by 3% year-on-year, with an extension of the season to October and early January by 5%. Meanwhile, consultants Bain and Deloitte estimate each estimate that Christmas sales will increase by at least 7% and reach around $ 800 billion.
Industry analysts said there wasn’t a single must-have vacation toy this year. Instead, they assume that consumers will be attracted to items that were most popular during the lockdown.
“There are a few character-driven ones [toys], with Batman, Grogu, Paw Patrol and Frozen out there, “said Nikki Baird, vice president of retail innovation at Aptos, a retail technology company.” But more emphasis [is] on sensory play such as kinetic sand, water toys, Legos, fidget toys. And also toys that encourage exploratory play. “
Parents, who typically wait for sales in late November and December, want to get their hands on their children’s wishlists earlier this year.
“If your child has a heart for something, buy it now,” said Steve Pasierb, CEO of the Toy Association. “Do not wait.”
Last year, retailers encouraged shoppers to grab gifts early due to the pandemic. Amazon, Target and Walmart started Christmas sales events in October, among others. But even then, the bulk of the sales happened in December, although a small portion shifted forward, according to the NPD.
About 16% of fourth-quarter toy sales were in October, up 3% from 2019, NPD said. Toy sales soared in December accounted for 55% of the total for the fourth quarter, 3% less than last year.
That 3% fluctuation means there was around $ 400 million in toy sales at the start of last year’s season, as the toy industry hit $ 11.5 billion in the Christmas Quarter.
To cope with the tight stocks, Retailers place bigger bets on fewer items, says Pasierb. It was a strategy that was also used for the back-to-school season and will likely mean less choice for consumers.
The LOL Surprise OMG House of Surprises playset from MGA Entertainment.
Toys that were popular during the pandemic can also be hard to find. Neil Saunders, managing director of GlobalData Retail, said he had noticed a shortage of inventory and a lower inventory of craft and to-do toys that parents wanted to entertain their children with. He also noticed gaps in fidget toys, plush toys and dolls.
Larian said for MGA, items like his LOL Surprise OMG House of Surprises playset – that’s on Walmarts Top toy list – and LOL Surprise Movie Magic Studios box set – that’s on Goal List – will be harder to find.
“The LOL house – this item is over $ 200 and it’s big,” Larian said. “You can only pack 150 to 200 in a container. You cannot air freight it.”
On the flip side, he said, numerous LOL Surprise blind bags – wrapped packages with small collectible toys hidden in them – can fit in a 40-foot container or be shipped on an airplane.
The company’s lavishly manufactured fashion dolls are also running out. Larian said MGA’s average cost to make a toy was up 22% year over year.
Larian said the supply chain has numerous broken links, not only in China but also in the US. For example, there aren’t enough truckers to move containers once they reach the shore, or enough workers for domestic production facilities.
He said wages at Ohio-based MGA’s Little Tikes have risen 60% as the company struggles to fill manufacturing jobs.
Walmart and Target both hire additional people in the supply chain to keep goods moving during the holidays and beyond. Walmart, which has approximately 1.6 million US employees, is Hiring of 20,000 employees for roles such as order filler and freight handler. Target, which employs approximately 350,000 people, hires 30,000 people in the supply chain.
Target said it will be highlighting its toy division this holiday season as well approximately tripling the number of Disney stores in target locations and in collaboration with FAO Schwarz on a time-limited collection.
Higher labor and transportation costs will also affect customers. A recent Salesforce report estimates that prices could rise by as much as 20% this holiday season.
“There will be some offers, but supplies are running out and retailers will not want to make massive offers on toys,” Saunders said. “It’s going to be an expensive vacation.”
A new report by the NPD Group shows that 29% of consumers in the US plan to spend more on Christmas shopping this year than they did last year.
Although prices may be higher this year, they’re offered as a discount, Aptos’ Baird said.
“Retailers know they are competing with other retailers for a limited portion of consumers’ wallets – a one-time, seasonal expense,” she said. “Since retailers are competing for that share of the spend, I assume that even if the supply is limited, there will still be promotions.”
LOL Surprise toys on a shelf at Target.
If retailers don’t have the toys shoppers want, stores could miss out on sales in other categories of goods, Larian said, explaining that retailers often use toys as a “loss guide” to attract customers.
“Toys are an emotional purchase,” he said. “Toys bring pedestrians to stores, as a mother or grandmother or grandfather, when you go to a Target or a Walmart or even continue walking Amazon to buy toys, you end up putting more things in the basket than just this toy. “
Larian said retailers will hit this holiday if goods don’t hit shelves in time. Then, he said, toy companies will suffer in the following quarters as retailers try to sell the products in warehouses instead of placing more orders.
“Christmas is December 25th,” said Larian. “If we don’t get the goods on the shelves by then, then sales will drop significantly afterwards. These toys are already ready. The hangover lasts until January, February, March, April, if not longer it will be full of goods. “