In December 2013, Toyjobs recorded the best month ever in its thirty-two year history. Not only was hiring strong in general, but many toy companies were hiring people at senior levels. This is a strong indication that the industry as a whole has left behind its primarily defensive posture of the economic downturn (teenage ninja heads in shells) and is now aggressively looking for opportunities (mutant turtle heads popping out of shells).
Typically, toy recruiting slows in January and February as the industry is focused on running from one trade show to the next. However, this year activity has not let up and search starts have continued to be strong. It can be difficult to actually close searches during this time period with so many people on the road but I think that the high level of search starts bodes well for toy industry hiring in February, March, April, and beyond.
Holiday toy sales were down slightly and no brick and mortar retailer stood out as having a great year. Several retailers came into January with particularly grim results. Toys ‘R’ Us and Kmart staggered out the holiday season punch drunk and wobbly. Costco’s toy department bombed. Even Dollar stores and the value channel were hurting. Our award for the worst behavior for a retailer this season goes to Target. Not only did Target have a massive breach of consumer data, but they are now compounding it by trying to strong arm suppliers into paying for their credit card problems.
Many retailers overpromised consumers on their ability to deliver late purchased goods. Some were advertising that orders placed as later as December 22nd would arrive before Christmas. This will only serve to increase already growing consumer cynicism over retail practices.
Retailers also cut into their own margins with “discounts” which were early, constant and deep. Even though many of these “discounts” were built into the purchase price, a lot of potential earnings for both retailers and their suppliers were still left on the table.
On the positive side, online retailers like Amazon, Zulilly and others absolutely knocked it out of the park. Offering both price and convenience is an unbeatable combination and physical retailers have a difficult task ahead in figuring out and presenting their value proposition to the consumer. Personally, I can’t think of
a single reason why I would want to be caught dead in a large retail store or mall during the holiday shopping season.
Total retail sales also improved. I can’t help but think that without any red hot toy smashes in 2013 that there were a lot of Xboxes, iPads and Microsoft Surfaces under the tree. Total retail sales are an indicator of the economy as a whole. As it improves, toy sales should come along for the ride…as long as we have engaging product.
Most economic data continues to improve, including the unemployment rate with the headline number (U-3) dropping in December to 6.7%. That said, the headline unemployment number is greatly understated on two fronts. First, a more accurate gauge of financial pain is U-6. U-6 represents unemployed people, plus people who are employed as a consultant or on a part-time basis but would prefer full-time work. It also adds people who have quit looking for work but would take a job if they could find one. U-6 currently stands at 13.1%. Another area of understatement is that U-3 does not consider people who have left the workforce or have stopped looking for work. You may think – “Well, how do they do that? How do they just decide to leave the workforce?” The answer is that most of America is populated by two income families and when one of the earners is either unemployed or underemployed, then the entire household is financially pinched. Rather than thinking about a 6.7% unemployment rate, a more accurate way of looking at the employment picture is that 20% of two income families are living worse off than they used to. As depressing as that may be, statistics are just a snapshot of a moment in time. The best way to view them is by looking at the trend history. Both U-3 and U-6 have been consistently improving. Unfortunately, the trend in people leaving the workforce is not. However, that should turn around as the first two continue to improve.
Looking forward, most economic data is improving. Employment data is improving, it’s overstated, but the trend is consistently growing better. Retailers had a difficult year but it wasn’t terrible –except for a few of them. Because retailers played it very cautiously in 2013 – ordering fewer goods and ordering them later – inventory levels are okay and there is not a lot of carryover. I expect retailers to play it the same way this year even if once again it means losing out on some sales due to empty shelves late in the holiday season. Most importantly for toy industry hiring is that manufacturers are hungry again and are actively looking for opportunities. This means they will need key people to recognize and seize those opportunities and more people to execute on them.
I look forward to seeing y’all at The New York Toy Fair!
All the best,
Tom Keoughan
