Mattel hasn’t made it any easier for themselves or anyone else in the toy industry. When CEO Robert Eckert landed on the front page saying “the company discloses problems on its own time table because it believes both the law and the CPSC’s enforcement practices are unreasonable”; it was the height of the folly. I’m not saying that I disagree with what he said. After all, Congress has gutted the CPSC’s budget over the years and left it with a single lonely toy tester. Even some of the Commission’s own buildings are embarrassingly not up to code. That said, Mr. Eckert’s timing could not have been worse. What was he thinking? Clearly this was the time to take a constructive approach with the CPSC and an apologetic one with the public. One suspects that after that quote Eckert got a lot of heat in the boardroom and that one of the directors probably gave him a whack with a rolled up newspaper before he was trotted off to Washington for his contrite appearance before Congress.
Mattel, however, was still playing the blame game and pointing the finger at Chinese manufacturers. China is a pretty easy target since it has major quality control problems at an incredibly large number of factories manufacturing all sorts of consumer goods. While Mattel was playing its China card it was soft pedaling the fact that the vast majority of its own recalls were the result of product safety issues (design problems) rather than manufacturing quality problems in China. Nobody has bothered to really educate the public on the difference between a product safety issue and a quality control problem. Certain Northeastern senators who are running for President seem congenitally unable to grasp the difference.
Mattel had magnet issues. The magnet problem in toys came to the surface in 2005 with a number of injuries and deaths resulting from children swallowing magnets from Rose Art’s Magnetix. In October of 2006, several children were injured after swallowing magnets from Mattel’s Polly Pocket line of products. Mattel issued a recall on the Polly Pocket products but they had a much bigger magnet problem stretching from Batman to Barbie and beyond. At the time, Mattel did not recall these products and decided to, in gambler’s parlance, “let it ride”. To be fair, there were no injuries from these products but the magnet issue was out there and it would have been much more responsible for Mattel to take the financial hit and issue a recall then rather than crossing its fingers and hoping that no children got hurt. Only about a year later when Mattel was under the harsh glare of the spotlight did that recall finally come.
China has not been happy about all the fingers pointing their way over its huge quality control problem. Just as Mattel tried to scapegoat China and de-emphasize its own culpability, now China in demanding (let’s face it they demanded that apology) and receiving a very public apology from Mattel is trying to use Mattel as a scapegoat to deflect attention from the country’s massive quality control problem. In just the last thirty days China has yanked the export licenses of 300 toymakers and shut down about 2,000 unlicensed toy factories. Obviously they have a major problem. Mattel has countered with yet another waffle and is now claiming that their apology has been “mischaracterized”.
The fingers have been pointing everywhere. Everywhere that is except to the place that is the likely cause of at least the Chinese quality problem in the first place. As for Mattel’s magnet recall, I’m afraid they own that one themselves. Miraculously no fingers except for a few hushed industry insiders have been pointing to Bentonville, Arkansas. The media hasn’t seemed to want to touch it. The politicians (especially former board member Hilary Clinton who has her own China problem in the guise of Norman Hsu) certainly hasn’t wanted to touch it either. U.S. toymakers remain mum about it because they’re fearful of retaliation when it comes time to sell next year’s product line. Walmart and its fellow mass market retailers are the white elephant in the room that no one wants to discuss. Finally, union backed WakeUpWalmart has started running ads on the topic. Unfortunately, WakeUpWalmart is so hopelessly biased that they can’t be taken completely seriously even when they’re right.
By keeping its price points artificially low in an era of rising costs, Walmart puts margin pressure on U.S. toy marketers who in turn send that margin pressure down the line to Chinese manufacturers and suppliers. It’s as if at each step in the chain everybody has his hand in the next guy’s pocket trying to steal his profit margin out of theirs until the last guy in the supply chain is left with razor thin margins along with rising costs. This incredible pressure on the manufacturers is what leads to cutting corners and scrimping on both the quality and amount of materials used. Add to this the fact that most Chinese factories of any type are staffed by basically impoverished people who might be more than a little inclined to take a quick backhander and it’s easy to envisage a system that is either just barely in or just barely out of control.
This is where the TIA could step up and do something useful. As a responsible toy industry spokesman (yes, quite a new role for the TIA) it could bring very public pressure to bear on retailers to lift price points which will not only increase the retailer’s own profit margins but let everyone in the supply chain breath a little easier. If they were to do this as an industry-wide spokesman then retailers would not be able to retaliate against individual suppliers. They could commission studies to determine if consumers are willing to pay a dollar or two more for a toy if it meant a higher level of quality and safety for a product that they are going to give to their children. Personally, I believe that a mother purchasing a toy for $7.99 is more than willing to pay $8.99 for it anyway. I think we all know this to be true. If the TIA were to commission such a study and make it very public it would gut the mass market retailers’ monotonous cry of “we need our prices that low because the consumer demands it.”
Obviously, the toy industry needs to change its quality control procedures as well and that seems to be happening. In a sense, that’s really only treating the symptoms. By going after the roots of the problem as well, a better long term solution for everyone can become reality.
See y’all in Dallas.
Tom Keoughan
