NEW YORK (WNN) – With three months until Christmas, the basic fun toy company has made an unprecedented decision: to leave a third of its iconic Tonka Mighty dump trucks for US store shelves in China.
Why? Given the rising prices of shipping containers and clogs in the supply network, the transportation cost to get the yellow heavy toy into American soil is now 40% of the retail price, which is approximately $26. This is up dramatically from 7% a year ago. And that doesn’t even include the cost of getting the product from US ports to retailers.
“We’ve never left a product behind like this,” says Jay Foreman, CEO of Basic Fun. “We really didn’t have a choice.”
Toy companies are rushing to get their products to retailers as they grapple with a severe supply network crisis that could mean sparse shelves for important holidays. They are trying to find containers to ship their goods while exploring alternative ports. Some toys are flying in instead of shipping by boat to ensure delivery before December 25th. And in cases like Basic Fun, they’re leaving some toys behind in China and waiting for the cost to drop.
Like all manufacturers, toy companies are facing supply chain woes China has temporarily closed factories since the pandemic began and in early 2020. Then, US stores temporarily cut or halted production amid the lockdown. The situation has only worsened since spring, with companies finding it difficult to meet the growing demand for all kinds of goods from shoppers re-entering the world.
Manufacturers are grappling with bottlenecks at factories and major ports like Long Beach California — and all points in between. In addition, labor shortages in the US have made it difficult to unload goods from ships and trucks.
But for toy makers that rely heavily on holiday sales, a lot is at stake for the roughly US$33 billion industry. It accounted for 70% of annual sales in the fourth quarter. Holiday sales average 20% of the overall retail industry. And 85% of toys are made in China, estimates Steve Pasierb, CEO of The Toy Association.
The annoyance is so severe that some retailers are telling companies they don’t want products if they are shipped after mid-October. That’s because products that typically took four to six weeks to land at a U.S. distribution center from a factory in China now take 12 to 16 weeks, says Mark Rosenberg, a toy consultant.
According to market research firm NPD Group, the struggle is happening as the US toy industry enjoyed a nearly 17% increase in sales last year and a 40% increase in the first half of this year as parents keep their children at home. wanted to entertain. .
But while analysts expect strong growth in 2021, many toy companies said they would see their sales plummet because they would not be able to fulfill orders on hot items, especially surprise hits. They are also incurring huge costs that will force some toy companies to close.
Toy executives say they can’t increase prices by more than 10% — even though it won’t fully cover higher costs — because they’re concerned about buyer feedback. The nation’s largest toy company, Mattel Inc., has warned it will increase prices for the holiday season this summer to offset higher shipping costs, though it didn’t say how much.
The cost of containers on ships has risen more than six times over the past year, with some brand executives saying they have risen from about $3,000 a year ago to $20,000. This has forced large retailers such as Walmart and Target to rent their ships.
Foreman counts 1,800 Tonka trucks that fit on each 40-foot container. So at $20,000 per container, it costs him $11 each. This is higher than the average $1.75 each in a typical year. He says he’s focusing on shipping smaller items like mashum — soft, squishy, water-filled collectibles — over containers as he looks to maximize the container’s overall dollar value and profit margin. He estimates that he can fit $150,000 worth of Mash-Ems in one container, compared to $40,000 worth of Tonka trucks.
Some, like LOL doll maker MGA Entertainment, are accelerating their toy flight because now its shipping costs are almost the same.
Jim Silver, editor-in-chief of toy review site TTPM, says that big discounters like Target and Walmart should have healthier supplies of toys than smaller ones because of their dominance. Target says it’s working closely with its vendors and transportation partners to keep stores well-stocked and ready for its customers.
But Melissa McCollum, owner of Learning Express Toys in Birmingham, Alabama, says she’s only received 25% of the holiday toys as of mid-September; Typically, this figure is 50%. 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 from U.S. warehouses faster.
Many toy companies, such as Basic Fun and PlayMonster, have reduced advertising.
“We will be advertising for empty shelves,” said Tim Kilpin, president of PlayMonster, who says 15% to 20% of holiday goods are stuck in the supply chain. The toy ball cushion made of rubber filaments sold out completely in August was, and there is no possibility of replenishing it until Christmas, he says.
The obstacles are likely to have far-reaching consequences. Andrew Yanofsky, head of marketing and operations at WowWee, says toy makers are facing pressure from retailers to place the first inflow of holiday 2022 merchandise in early March instead of late April, and in June instead of late July. Ship the second cycle.
He says it will force companies to make decisions about how much to make and reorder without a complete picture of sales data.
Yanofsky said he initially made a big bet on Got2Glo Fairy Finder, a light show in a jar that allows kids to find virtual fairies, because he knew he’d be snoring while watching the production again. Will not be able to fill.
“We took a risk on additional material beyond the scope of what we thought we could sell,” he said.
Even some toy companies that make goods in America are struggling because of labor shortages.
John Gessert is the CEO and President of American Plastic Toys, which is based in Walled Lake, Michigan, with another plant in Mississippi. He says the company is missing 35% to 40% of its front-line employees. Now, it’s turning its attention to play kitchens that require six workers and more toward less labor-intensive toys like basketball sets, which require only three workers to put together.
“I’ve never had such a complicated puzzle to fix,” she said.
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