Toy Blog

803, 2017

Toy Industry Upbeat Heading Into 2017

March 8th, 2017|Categories: ToyJobs Blog|

February’s North America International Toy Fair capped a string of toy industry trade shows which saw toy executives shuttling from Dallas to LA to Hong Kong (twice…at least) to Nuremberg and finally to New York City where, for once, there was no snow and the weather was an agreeable 65 degrees.

Friday, just before the show opened, we were hit with a surprise. Toys ‘R’ Us announced a bloodbath with 270 corporate staff employees, some of whom had been there for decades, being laid off. Rumors and whispers went zipping around the decks of the Intrepid Sea, Air, & Space Museum as the fates of both the survivors and the less fortunate slowly became known.

The Intrepid was an inspired venue choice which helped make the Toy of the Year Awards a whole lot of fun. The Toy Industry Association staff did a great job making the evening “all it could be.” As always, it was particularly satisfying to see some of the smaller companies winning TOTY’s like Thames & Kosmos for CodeGamer and Zuru, Inc. for Bunch of Balloons.

Personally, I’m always interested in stories of toy industry veterans who are inducted into the Toy Industry Hall of Fame. This year, we were treated to moving tributes to Peter Eio, Ray Larsen, and Sydney Rosen. We learned what it took for each of them to strive for and reach success, as well as a little bit about what made them tick. If I could walk away from the evening with just one word, it would be perseverance.

On Sunday night, the toy industry gathered for the Wonder Women Awards Gala eager to see who would walk away with a coveted pink cape. I think everyone was pleased to see the event return to The Lighthouse at Chelsea Piers. Genna Rosenburg, Ashley Mady, Janice Ross, Mary Kay Russell, and their team have this thing down pat. As always, they throw a fantastic event while gliding around serene as swans although I am quite sure that underneath they have been paddling like crazy.

This year was highlighted by a Lifetime Achievement Award for former Mattel Chairman and CEO, Jill Barad, as well as a Gamechanger Award for Hollywood’s Geena Davis. Congratulations to all Wonder Women nominees and Award winners!

Meanwhile, back at the Javits Center, Toy Fair was chugging right along. The atmosphere was upbeat, even buoyant. Over the last three years, toy industry sales in the U.S. have grown between 4.5 and 6.7% annually. That will put toy company executives in a good mood. The crowd on Saturday was a bit subdued as if often the case on the first day of the show, but Sunday and Monday were busy and bustling even in what I unfairly call “the basement of gloom.” I will have to admit that this year the basement was buzzing and not gloomy in the least.
Kudos to TIA President Steve Pasierb, SVP Global Events Marian Bossard and the whole TIA staff for doing a fantastic job. My only possible complaint has to do with the interaction between the floors of the Javits Center and my large and bony feet. If my feet weren’t so big, there wouldn’t be so much of them to hurt.

Kudos to TIA President Steve Pasierb, SVP Global Events Marian Bossard and the whole TIA staff for doing a fantastic job. My only possible complaint has to do with the interaction between the floors of the Javits Center and my large and bony feet. If my feet weren’t so big, there wouldn’t be so much of them to hurt.

Life at Toyjobs is often slow during the first quarter as toy companies are too busy traveling from show to show to be able to even think about or doing. That said, this year we have been quite busy to date with strong numbers of search starts and completions. Three consecutive years of strong sales growth has put toy companies into an optimistic mood. Optimistic companies try new things and add new people. I expect that to continue with a lone caveat.

Republican lawmakers have been kicking around the idea of a “border adjustment tax.” That sort of thing would be temporarily devastating for the toy business, although over a year or two we would learn to adjust. Republicans aren’t fully aligned in support of it and the Trump Administration seems to be dancing around the edges but leaning against it. There is also LOTS of business pressure against this proposal. While it seems that everybody’s fingers are crossed, I guess most of us are thinking that a border tax knuckleball isn’t going to happen, if only because it would be so stupid. I am comfortable with that – but I am also mindful…stupider things have happened….and recently.

“May you live in interesting times.”

Tom Keoughan

 

 

 

 

102, 2017

Translating Trump for the Toy Industry (…or at least trying to)

February 1st, 2017|Categories: ToyJobs Blog|

The toy industry had a strong year with sales growth of about 5%. While that is down from 2015, it’s really pretty good. Despite strong annual sales, it looks like growth in the fourth quarter slowed from 2015 even though in the final week before Christmas goods were literally blowing off the shelves. Fourth quarter weakness mirrored the economy as a whole as GDP growth dropped from 3.5% in the third quarter down to 1.9%

The big winner was interactive sales. While brick and mortar growth was only up 1.6%, online sales grew a whopping 12%. That brought web sales to 21% of all holiday spending up from 15.4% last year. In other news; Edward Lampert sold of Craftsman Tools and pumped an additional $1 billion into his company. It looks like toy manufacturers will be able to sell to Sears-Kmart for at least one more year. Lastly, toy industry’s strong 2016 helped to propel Toyjobs to its third best year on record.

The future, however, is full of uncertainty. We have a new and very different Presidential administration. Emotions are running high and flying in all directions. I will try to put my comments in context by telling you that I could not bring myself to vote for either Trump of Clinton and only voted down ballot. And before my inbox explodes, this is a business publication so I will examine this from a purely business perspective.

As pragmatic business people, now that Trump is here, it is not our job to support or condemn but to adapt. That has been made difficult because for the first twelve days things have been moving incredibly fast. That said, our ability to try and interpret and predict Trump are enhanced by the fact that thus far he has been very predictable in pushing forward watered down versions of things he promised on the campaign trail. Every politician does this but usually to a less (hmm) Trumpian degree.

Much of Trump’s behavior is right out of The Art of the Deal. Make incredible demands and then negotiate back to what you really want.  Behave outrageously to throw your opponents off balance and confound them on how to strategize against you. This is pure Art of the Deal. I recommend you read it. Not because it’s the greatest book of all time on sales and negotiation techniques. It’s not. But it does give you a pretty clear picture into the Trump playbook.

Recent headlines suggest negotiations of a new trade deal with Mexico and…the Wall. Trump has floated a 20% “border tax” to pay for his behemoth. That would hurt both American consumers and American businesses who already manufacture goods in Mexico. Trump doesn’t want to hurt American consumers. Not if he wanted to protect his majorities in the House and Senate. Not if he wants to get re-elected in 2020. Trump is also very much pro-business (although not as much as he is pro-Trump).

Mexico is in a very weak position. Their economy is based on exporting to the US. In a “Mexican Standoff” (sorry) their economy would crater…and fast. Could they redirect and rebuild? Sure, but that would take a lot of time, money and most importantly pain. That said, Mr. Pena Nieto isn’t about to commit political suicide by just writing a check. Trump holds a much stronger hand and he needs to build The Wall and appear to make Mexico pay for it. I would expect that some mechanism in the renegotiated NAFTA agreement will allow both men to declare victory to their constituencies. I also expect the US to end up with a better deal than it had previously. For Trump this is an easy win against a weak and dependent opponent.

Moving on to the TPP. I didn’t like Obama’s version of the potential trade deal nor am I happy with Trump just ripping it up. China isn’t going anywhere. They are only going to get stronger. Obama sought to negotiate a multilateral trade deal with everyone in China’s neighborhood while at the same time skirting the elephant in the room. When you look at the region, China is big and has a large and strong economy. Their ability to either seduce or bully their neighbors is only going to increase. In fact, it has already. China continues to sign up partners in the Asian Infrastructure Investment Bank left and right. The sensible thing is to sign a big multilateral deal which includes China now. In the future they will only be stronger and be more closely tied to the rest of the region’s economies. If we wait, they will have much more leverage.

I understand Trump’s wanting to retreat from multilateral trade deals and replace them with bilateral ones. The US has the largest economy in the world. We are the 500lb gorilla. If we are negotiating with, say, Belgium; we are going to have much more leverage and get a much better deal than if we are negotiating with Europe as a whole. It also allows us to better pinpoint actions, either positive or negative, in the future. That makes perfect sense in the short term. I don’t know if it works in the long run. Frankly, it’s above my pay grade.

Negotiating trade with China is a completely different story. China is ascendant. It has a big powerful economy, the second largest in the world. It has numerous trading partners. It has choices. I expect Trump will bluster and blow. China is a convenient political whipping boy. He will tirade about currency manipulation – although the reality of that ended about ten years ago. While Trump rails about “America First” we need to remember that “China First” has always been China’s policy. I’m sure that both sides of this imbroglio realize that a trade war serves nobody’s interests.

After the fireworks, I expect that Trump will walk away with very positive optics and a marginally better deal but the Chinese will be able to bring home some face saving measures. Chinese negotiators have a history of taking a longer view. They have always been good at postponing their concessions to sometime down the road. Sometime down the road could mean post-Trump and a new round of negotiations.

The danger is that when two Big Brutes play a high stakes game of chicken (especially with an audience) they often have to get hit in the head a couple of times. Therein lies the potential for disruption…and broken bar room furniture. It’s entirely possible that this scenario doesn’t play out. Maybe cooler heads will prevail and realize “everybody gets hurt.” Things may not slide in this direction…but they could.

I’m approaching the next two years with an attitude of optimistic caution. I am naturally optimistic but cautious because the rules are changing and the game board may be altered. Business has been good and Trump plans on instituting some very business-friendly measures in tax reform, deregulation and overseas profits repatriation but his public stance on international trade hangs over our heads.

I expect Trump’s trade negotiations to work out as a marginal net positive in the end. The question is when will that end be? With Mexico, I expect things to come together quickly and easily. China, on the other, could be a long and rocky road

…on the other hand I could be completely wrong about all of this. I am reminded of the traditional Chinese Curse, “May you live in interesting times.”

See you all in New York,
Tom Keoughan

P.S. Please direct all complaints to:

Steve Bannon
The White House
1600 Pennsylvania Avenue NW
Washington DC 20500

Let’s at least keep that guy busily distracted.

 

712, 2016

Sell Through Season Starts Strong

December 7th, 2016|Categories: ToyJobs Blog|

U.S. employers have continued to hire at a steady clip bringing the jobless rate down to its lowest level in nine years. That’s good news for toy manufacturers as ‘Sell Through Season’ is going strong with total retail sales up sharply.

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Foot traffic at stores has been somewhat thinner than the frenzied human herds of years past after retailers began offering discounts as early as Halloween and many Thanksgiving weekend promotions were also available online. Many Americans feel that it’s easier to shop from the sofa rather than to fight one’s way through the mall.

Reduced crowds meant reduced violence which can only be a good thing. That said, there did seem to be an increase in parking lot gunfights so you will still not see me anywhere near a retail outlet on that particular weekend. College kids promoting “Black Friday Brawl” videos online were left offering mostly tame fare and even resorted to posting previous years’ hooliganism under this year’s banner. There was a much shown wild melee in Modesto, California but if you watched it, you would have seen that those kids didn’t know how to throw a punch.

Sales of Hatchimals, Nerf guns, Star Wars Drones, and 4K TVs seem to be driving holiday sales but there is more than enough volume to go around. Here’s to a strong continued sell through season! Strong sell through makes toy companies happy. Happy companies hire. Here at Toyjobs, we like that.

(Sell through) Seasons Greetings,

Tom Keoughan

1410, 2016

Dallas Toy Preview Enters a Death Spiral

October 14th, 2016|Categories: ToyJobs Blog|

In recent years, the Dallas Fall Toy Preview has been characterized by more and more toy manufacturers pulling out of the exhibition. This is the result of a split show which sends both manufacturers and retailers scurrying to Los Angeles, then Dallas, then back to Los Angeles, and finally to Hong Kong. Something had to give and it appears that now something has.

This year the dates of the Dallas show were moved forward so as not to conflict with the Jewish holidays, but that caused a direct conflict with Toy Show activities in Los Angeles. As a result, the entire Retail Midwest didn’t show up. There was zero representation from: Kohl’s, Meijer, Walgreens, Kmart, Costco, or Shopko. It was great to have large contingents from Wal-Mart, Target, and Toys ‘R’ Us. It’s always good to get as much face time with them as you can. But the reality is that they really conduct business in their headquarters. Most toy manufacturers will see them there and prefer to see them there.

I’ve always felt that at a trade show, it’s best to focus on mid-tier retailers. If they are all in one place and willing to give you some quality time, that’s where you can justify the cost of the show. Manufacturers can also save the time and expense of trucking to Menomonee Falls or Walker, Michigan.

Don’t get me wrong – I love the Dallas Show. There are open showrooms and toy executives have a fair amount of down time. If I can spend two days and meet thirty toy company Presidents, I’m gladly going to do it. In fact, most toy industry types I talked to like the show itself. It’s relatively inexpensive. It’s compact and people get to see friends and acquaintances from across the industry because everyone is pretty much in the same place day and night. That said, the show can’t go on if it doesn’t make financial sense

After 2016’s lack of retail support, I’m predicting a thirty percent decline in exhibitors in fall of 2017, followed by a 2018 Zombie Walk. Clearly a better solution must be found. The composition of the TIA Executive Committee and Board of Directors seems to be less dominated by Mattel, Hasbro, and Lego than they have been in quite some time. That may provide an opening for less table tipping in trade show planning. It’s time that the show moves to Los Angeles. I often hear that there isn’t a good venue, but that’s hard to believe. There’s the LA Forum and the Los Angeles Convention Center has lots of different size halls available. Truth be told, we only take about two full floors of the Dallas Market Center. I can imagine that two adjacent hotels with exhibitors taking out suites and conference rooms might work. If you think about it, that’s really not so different than the old New York Toy Building.

The real problem has always been timing. The larger companies: Mattel, Spin Master, Jakks Pacific, MGA, etc don’t want to show at a time when buyers may be distracted by their smaller, nimbler (and more creative?) competitors. One answer would be to have a seven to ten-day show with one part dedicated to large companies at their headquarters or El Segundo showrooms and another part focused on small and medium sized companies located at some centralized venue. Manufacturers could be able to choose which group they wanted to join but might find it difficult to command buyer attention if they picked a group that was inappropriate for them. In any case, that’s my two cents. I am now going to duck and cover in a probably vain attempt to avoid incoming poison arrows.

As for the toy industry itself – things continue to be strong. Toy sales have grown 6-7% for the last year and a half, despite somewhat sluggish retail sales. That is making toy companies happy. Happy companies hire. Here at Toyjobs, we are on track to have the third best year in our thirty-five-year existence. In fact, I’m ready to proclaim that toy industry hiring is “Back to Normal.” 2016 has brought a resurgence in toy company hiring of Marketing and Product Development people. From 2009-2015, toy hiring was all about: Sales, Sourcing, and Safety. Sell more – make it cheaper – get us through the regulations. I believe that the strong increase in Marketing and Product Development jobs indicates that toy companies are being less defensive and are now aggressively pursuing new products and new initiatives. That can only be good for the toy business as a whole.

Looking ahead to the holidays sales season, I see no reason why strong toy sales should not continue. Unemployment rates continue to come down. Median household incomes have surged over the last year. Consumer confidence is climbing. This should translate into continued strong toy sales. Robust sales should mean that happy companies continue to hire through this year and into next. May it be so.

All the best,
Tom Keoughan

P.S. My “Back to Normal” comments apply only to toy industry hiring. One need only look at the current election cycle to see that the world at large is certainly not “Back to Normal.”

2208, 2016

Making Sense of Conflicting Economic Signals

August 22nd, 2016|Categories: ToyJobs Blog|Tags: , , |

To better understand all the conflicting economic indicators being reported, one needs to dig a little deeper than the headline numbers. Hiring has been strong for most of the year which has lead an increasing number of people who left the workforce to rejoin it. More jobs has meant higher consumer confidence and a greatly increased consumer spending. Some of the increased consumer spending has also been driven by banks.

Bank prmonthly-changeofits have been squeezed by long term, record low interest rates. To make up for it, they have been pumping credit cards out to more people and increasing credit card loan limits while at the same time increasingly loaning that money to riskier borrowers. Over the past year, US banks have added $54 billion in loans to consumers through loans on credit cards. After contracting during the financial crisis, credit card debt is not expanding at its fastest rate since 2007.

You would think that economy would be booming but GDP has only grown at a 1% rate thus far this year. The problem is that businesses have been holding back on spending on everything from computers to new equipment and factories. We need both consumer and business spending otherwise it’s as if the economy was trying to ride a bicycle with only one pedal.

If businesses are confident enough to hire, why aren’t they also putting money into expansion efforts? Oneexplanation is that workers are relatively cheap and also easy to get rid of should the economy slow. There is also plenty of spare production capacity, so companies don’t yet have much incentive to devote funds to new projects. Most companies will be conservatives with their balance sheets until they see signs of a growth rebound. They will also hold off investing until they have a better sense of the future tax and regulatory regimes that they are likely to us-subprime-ccface next year. Business spending should begin to pick up after the November elections, regardless of who is elected as businesses are better able to forecast.

The good news for the toy industry is that business is booming. Toy sales have been growing for the last year and a half at a 6 to 7% annualized rate. Strong sales have also mean that toy companies have been adding people. Toyjobs is having a bang-up year and is placing people at a level we haven’t seen since 2008. It is also heartening to see the return of hiring in the Marketing and Product Development sectors. Hiring in these areas has been extremely slow since the beginning of the financial crisis. I’m a little concerned that we haven’t seen the usual avalanche of toy Sales jobs that we usually see this August. Perhaps toy execs are all away on vacation. They better wake up! Fall Toy Previews are only four weeks away! I look forward to seeing everybody there.

All the best,
Tom Keoughan

806, 2016

Toyjobs Continued Its Hot Hand

June 8th, 2016|Categories: ToyJobs Blog|Tags: , , |

After a weak first quarter, Toyjobs followed up April, its best month ever, with a strong May showing. This mirrors the economy as a whole which, during the last couple of years, has had a series of weak first quarters following by markedly increased (although still tepid) growth. The latest projections from the Federal Reserve Bank of Atlanta are for second quarter GDP growth of 2.5%. Overall, it should come as no surprise that the toy industry has been hiring, even though some companies have experienced a bit of a Star Wars hangover. NPD has reported that toy sales in the US increased 6.5 % in 2015 and another 6% in the first quarter of 2016.

Moving forward economic signals appear to be mixed. US credit and debt balances have been soaring as consumers grow more comfortable carrying debt and spending money.

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Pending home sales rose in April to the highest level in over ten years. April also saw consumer spending rise after a six-month slump. Wal-Mart rocked to a strong quarter even while many other retailers struggled.

On the other hand, the US has suffered two weak job reports in a row with the May report being particularly devastating. In May, employers added only 38,000 jobs – the fewest in almost six years.

Revisions to prior reports also subtracted a total of 59,000 jobs from payrolls in the previous two months. Add to that the numbers of Americans working part-time jobs who want full-time jobs shot up from 6 million to 6.4 million. These “involuntary part-timers” continue to be a sign of considerable weakness in the job market. Finally, although the headline unemployment rate dropped to 4.7% this was largely due to a steep decline in labor force participation as millions of people have left the workforce in frustration.

The future is murky. Two bad months do not make a trend, but they may be a sign that the economy is losing what momentum it did have. On the other hand, maybe this is just the annual summer doldrums beginning a couple of weeks early. In any case, this is not the time to load up on debt or go out and buy a new Ferrari. Uncertainty calls for caution.

Here at Toyjobs, we are cautious but also quite optimistic. Over the last fifteen months, toy sales have been much stronger than the economy as a whole. I have no doubt that in six to eight weeks, toy companies will realize that the 2017 toy selling season is coming up fast and will begin the annual mad scramble for new or additional Sales Executives. Be advised that the Dallas “October” Fall Toy Preview arrives a little early this year on September 27th. It would be prudent to start your sales searches in late July or early August if you want your new people on board and ready to go.

All the best,
Tom Keoughan