Fall Toy Preview

Fall Toy Preview: Upbeat and Productive

As I flew toward Dallas reading the Daily Doom & Gloom, I had a sense of trepidation about what the mood at the Fall Toy Preview might be. I’m happy to say that I was pleasantly surprised as everyone was pretty upbeat (it’s slinky, it’s slinky). That’s not to say that anyone was “irrationally exuberant” but I didn’t see all the slump shouldered long faces of a year ago.

At times the traffic seemed to be a little light until I realized (doh!) that this was a “by appointment only” show and that everyone was stuffed into their little cubicles having hopefully productive meetings (It’s slinky, It’s Slinky). There weren’t supposed to be a lot of people just milling around (like me). With the exception of Tuesday morning, most companies had full dance cards and all of the major retailers were well represented. The show was “player dense” with only serious toy companies showing and only serious customers showing up. In summation the Fall Toy Preview was upbeat and productive.

As the showed ended, I snuck off to Austin for a few days of good food and good music under the guise of awaiting the September jobs report. The report was better than expected as the US economy added 103,000 new jobs raising hope that a “double-dip” recession will be avoided. The alarming jobs data from July and August were also revised upward. It seems that instead of collapsing after the summer’s debt ceiling fiasco, the job market appears to have weakened slightly and is now beginning to rebound, albeit slowly.

There are 1.4 million more people on nonfarm payrolls than there were a year ago. That sounds good but it comes to an average of just little over 100,000 per month, which is nowhere near large enough to get the economy really growing again. In addition, Toyjobs favorite labor statistic, U6 (which includes people who have given up trying to find work as well as those working part time out of necessity rather than choice) has surged to 16.5% – its highest level this year and from a low of 15.7% in March. So, things are improving but at a very slow rate.

What’s holding us back?  In a word – uncertainty. We are having a slow and very fragile recovery but there are lots of icebergs around. The tricky thing about icebergs is that even if you can steer around what you can see, no one knows what’s under the surface. The press is pumping us daily doom and gloom about the European debt crisis. In reality this doesn’t affect the Main Street economy all that much. In fact, through the summer, retail sales have continued to slowly advance. It does affect the big money center banks who in their usual style – chased yield – and bought bonds from places like Greece(?) and Italy(?) in order to capture a few extra points of yield for their “safe” bond portfolios. In their Wall Street way they have done this in huge amounts with large amounts of leverage. Sound familiar? Needless to say the large European banks are up to their eyeballs in this junk. So, while this may not affect the Main Street US economy today… if it all falls apart then everything goes kerblooey!

The usually sober Senate led by the serial idiocy of Senator Charles Schumer has recently passed a currency bill aimed at China. The legislation was widely opposed by companies that do business with China. Small consumer goods companies, like toys and juvenile products, know that this sort of thing will make their manufacturing costs go up and their margins go down. Large companies selling to China (GE, Boeing, Bechtel) are afraid that even if it doesn’t start an all out trade war that: “They’re going to start f–king with us”. But the Senate was determined. Stated Schumer:  “We’ll shoot ourselves in the head if we have to!” Could it be? That it’s all electioneering? That the Chinese government rarely votes in US elections? That Senators are just beating their chests because they know the bill won’t pass the often less sober John Boehner and the usually less rational House?  And that nothing will really happen? No. That sort of thinking is just way too cynical.

Now hold on. There’s plenty of Senators stupider than me.”

 Uncertainty. Uncertainty has been the theme song (Joe Biden as the Skipper. Guess who plays Gilligan) of the Obama years (not that it’s all his fault). Businesses still don’t know what their taxes will look like or what their regulations will be. Just last week the Obama administration threw out part of their own probably never to be implemented health care bill (the long term care portion). Business cannot confidently make plans to invest in people or products without knowing what the playing field will look like. It is unlikely that things will noticeably improve until the next election. Of course if Michelle Bachmann is elected then all bets are off. That said, I do believe that there is reason for optimism.

Toy Industry search starts, which jumped ahead in August, have grown at an increasing rate. (IT’S SLINKY, IT’S SLINKY). Please follow our job board in the coming weeks as we expect lots of new postings (or sign up for our RSS feed to be alerted of all changes instantly). Companies seem to have realized that they need to plug some holes and add some talent, but there is a little hitch. Here at Toyjobs we are able to find our clients the people they need quickly and efficiently. That said, we have repeatedly been running into situations where companies quickly determine who it is that they want to hire, but then stall when it comes time to pull the trigger. Sometimes this goes on for months and I’ve seen it drag on for long as ten months. We have had a couple clients lose out on their chosen person because they waited while another company acted.

I’m guessing that many companies just don’t realize what goes on in a candidates head when they’re chosen but then made to wait…. They wonder. They wonder if there is some objection you have to their background that you are not telling them about. They wonder if you are “dating” other people and maybe they should just move on. They wonder if there is some financial problem at your company which constrains you from hiring them. They wonder what it would be like to work for your company if they need a quick decision in order to get something done. They wonder about all of these things and pretty soon they begin to have doubts and the romance is gone. The bloom is off the rose.

I am NOT advocating that companies rush into hiring anyone but many companies know very well that they are taking an inordinate amount of time between first interviewing a candidate and actually pulling the trigger and making them an offer. Remember that the best people are also being courted by your competitors and if they can be decisive and come across as a dynamic get it done organization, they are going to attract and return the best talent. Remember the old adage – Time Kills Hires.

Everyone knows it’s slinky

Everyone knows it’s slinky

Everyone knows it’s slinky

Tom Keoughan

By | October 19th, 2011|ToyJobs Blog|Comments Off on Fall Toy Preview: Upbeat and Productive

Toyjobs Sees Surge in Search Starts

There’s a lot of gloom and doom on Wall Street right now which the media is only too happy to capitalize on in order to sell more advertising to more eyeballs (for the media it’s a sort of a stimulus program). However, most economists think there is only a 25-30% chance of a double dip recession. That percentage is up from 20-25% but economists overwhelmingly feel that the most likely outcome is continued slow growth (CSG?). While CSG doesn’t feel all that good, we’ve gotten used to it and it’s a helluva lot better than 2009, right?

Big investment managers on Wall Street are jumpy and stock indices are swinging wildly on any even minor news. “The current Greek bailout plan is in danger! Oh, heavens! …Gee, I think there will be another one. Factories in Pennsylvania, Delaware and South Jersey slowed down in the month of July! Oh, my.” I’m told (because I ain’t no expert) that a lot of this crazy volatility is caused by hare triggered computerized high frequency trading. The stock market has been trading in a range for a while so these programs are set to sell massive blocks of stock when we reach a point near the top of the range and conversely scoop stocks up when we near the bottom. This leads to wild gyrations which will take a little while to settle out.

On a positive note, retails sales were up 0.5% in July and figures for the previous two months were revised upward as well. Japanese supply chain disruptions are coming to an end. Prices have come down for oil, energy transportation and commodities. Unfortunately for the toy industry there are still problems in China with: manufacturing costs, labor, electricity and transportation.

The job market continues to slowly improve and unemployment has stabilized at just over 9%. The government also revised its May and June jobs reports upward. July non-farm payrolls increased by 117,000 (154,000 private market jobs minus government layoffs) which is the tenth straight monthly gain. 117,000 additional jobs per month isn’t enough to keep up with population growth (for that we need approx. 200,000) but it is heading in the right direction.

Total Nonfarm Payrolls All Employees

While it will be interesting to see the August numbers, we have to remember that during July and August we are in the midst of “the summer doldrums” when hiring slows down on a seasonal basis even during good times. I expect that we will see noticeably improved numbers in the October and November jobs reports. I hear you – “Where did that come from? What makes you say that, Tom?” Well, for one thing – I am in the employment business.

Toyjobs noticed a much improved employment atmosphere in January as companies started with new budgets after a decent, though unspectacular, Christmas. The slope of the improvement curve steepened in mid May as retailers went from “happy talk” to actually placing orders. Unfortunately we then hit July and August during which hiring slows down while hiring managers go on vacation and everybody (me too) is a little more focused on “outside activities.” A lot of the searches that we started in late May and June slowed to a crawl during July and will be finalized in the next couple of weeks. If we were publishing two or three weeks from now you would see a much bigger list of Toyjobs Success Stories (or you can just check back next month). Summer doldrums generally continue through the first half of August while toy company executives stare at their phones and pray that they don’t ring with purchase order cancellations. When they start breathing again about the third week of August, they suddenly seem to realize that the Fall Toy Preview is upon us and they better get moving if they want their team in place for the 2012 selling season. This year they didn’t all wait until late August. Toyjobs saw a surge in search starts at the beginning of August. Those searches are being worked now and will likely be filled in September/October. I foresee continued strength in search starts in late August and September. Why? Because that’s the usual seasonal pattern. Let me curb my enthusiasm by saying that we are nowhere near back to normal again but we are in so much better shape than we were two years ago and things seem to be getting better faster.

So, if you’re out of work, make the day after Labor Day the time when you renew your efforts to reach out to your network. If you’re working but would like to change jobs, now is the time to dust off your resume and tweak it up a bit. If you’re a hiring manager, think about how you can shorten your “decision cycle” and “pull the trigger” quicker. Otherwise one of your competitors might hire the person you want.

Muddling through more confidently,
Tom Keoughan

By | August 23rd, 2011|ToyJobs Blog|Comments Off on Toyjobs Sees Surge in Search Starts

Japanese Supply Chain and Oil Price Shocks Temporarily Slow Recovery

The May unemployment rate ticked up to 9.1% from 9% in April. Incongruously U6, Toyjobs’ favorite employment statistic (which includes part timers and consultants who would prefer full time work) dropped by a tenth of a percent to 15.8. These numbers are just snapshots in time and it’s better to view their trends over a number of months. Should there be a trend toward slower employment growth, I think it will be reversing at about the same time it becomes readily apparent.

First, we should note that government statistics are notoriously inaccurate and will be revised several times before finalized. We also saw an oil price spike which has now begun to abate. Let’s not forget enough seriously crazy weather (tornadoes in Massachusetts?) to make an “endtimer” sound almost rational. Next time you’re at the supermarket remember to stock up on locust repellent.

I think that a good portion of the May numbers can be explained by supply disruptions after the Japanese triple disaster (3/11) especially in the area of auto components. No parts has meant less hours, no hiring, furloughs and layoffs in the huge US auto manufacturing sector which had previously been growing. In April, US economic growth was 0% but if you back out auto manufacturing the number would have been .4% which annualizes to a strong 4.8% (anything over 3% is pretty good). Now we can’t just extrapolate forward like that with any degree of accuracy but ex-autos the US economy was growing at a healthy 4-5%.

It will take Japanese suppliers several months to get up and running at full tilt and unfortunately the period of reduced supply will coincide with the usual summer hiring slow down. In July and August as people work shorter weeks (how much work really gets done on summer Fridays?), take long weekends and extended vacations it becomes difficult to get job candidates interviewed by all the necessary people or even get everyone together in a room to make a decision.

Additional drags on the economy this summer will be the end of QE2 (basically the government buying scads of bonds in order to keep interest rates artificially low) and the end of the Obama stimulus plan (roadwork everywhere).

As a seasonal/cyclical business the toy industry is naturally just a little out of sync. In most of the economy, companies get new budgets in January leading to a jump in hiring. The toy industry is up to its eyeballs in trade shows until March so much of that employment pop waits until then. Toy industry hiring has markedly improved this year but in just the last three or four weeks I have seen an even stronger acceleration in search starts. For small and mid-sized toy companies it’s often not until mid-May that retailers move from “happy talk” and planogramming to actually locking in orders. As toy companies gain clarity in their business outlook they feel more comfortable adding staff that they already knew they needed but were holding off on.

Increased search starts in late May/early June. Should lead to increased hiring in late June and early July. Typically there is a weak patch in search starts during July and in the first half of August. Late in August toy companies seem to suddenly wake up to the fact that the new sales season will begin in October (really before that if you want to get appointments scheduled for the Fall Toy Preview). If they want to make changes to their sales team before that they have to move fast. The reality is that they’re already late to the chase and probably should have started these searches in late July/early August. This next spurt in the toy industry hiring coincides with what should be an improvement in economic and employment numbers for the economy at large as people return from summer vacations and the Japanese supply situation improves.

That’s the plan anyway. Absent tea leaves and chicken entrails it’s all I can offer for now. That forecast will surely change with new information and heightened brainpower the latter of which seems unlikely during the summer months. September certainly feels a long way off for autoworkers and the unemployed but this soft patch should be over quickly so keep on keepin’ on.

Muddling through,

Tom Keoughan

By | June 8th, 2011|ToyJobs Blog|Comments Off on Japanese Supply Chain and Oil Price Shocks Temporarily Slow Recovery

Product Safety Conundrum and a Fall Toy Preview Review

Just as the toy industry began to make headway in convincing government agencies to rationalize product safety regulations along comes Mattel with an eleven million toy safety recall from its Fisher Price unit. Jakks Pacific then chimed in with its own half million piece recall and Graco added a recall of baby strollers. One thing that all three had in common is that they all were “product safety” issues or – design flaws. Certainly, it’s nearly impossible to police every factory in the Chinese hinterlands who may slip in a little lead paint to increase their beaten down profit margins when the gweilo isn’t looking. These, however, are design flaws and there just really isn’t an excuse. I’ve heard the arguments that if you look at these toys you don’t intuitively see any danger. That may be true, but Mattel is the largest toy company in the world and has entire departments focused purely on product safety. They also used outside safety labs who were apparently asleep at the switch.

Ironically, the biggest beneficiary of the recall will probably be Mattel. Most of those toys were sold between 2001 and 2008 and the majority of them are already on the scrap heap. Under the Mattel regime, Fisher Price toys don’t seem to have the longevity they did twenty years ago (thinner walls equals lower costs). Few will be returned and there is no inventory to pull off of retailer’s shelves or languishing in Mattel warehouses. Rational changes that were being considered in safety regulations will now most likely be shelves. The current overregulation disproportionally affects small and medium size toymakers. Mattel is the only company which gets to use its own internal safety lab which I have got to believe is less expensive than going outside. It can also amortize testing costs and manpower over a gazillion products sold. Small and medium companies are hit much harder by testing costs, time to market and eyestrain (having to read through all those crazy regs). Creativity has also been blunted as companies learn to play it safe. It’s very risky to produce a new and innovative product and take a flyer to see if it sells in the marketplace. Overregulation means that a company needs pretty large presells to be sure that a product at least breaks even. The unlevel playing field benefits Mattel quite nicely. No one believes that Mattel has been orchestrating large product recalls on purpose…but it sure makes you wonder.

Switching gears (kerlunk!) – the economy continues to improve albeit very very slowly. September’s unemployment rate was unchanged at 9.6% but U6, a broader measure of unemployment which includes people who have stopped looking for work and those settling for part time jobs rose to 17.1% from 16.7%. Government shed 159,000 workers half of whom were temporary census workers the rest are layoffs primarily from state governments and municipalities who have seen their tax revenues shrink. The somewhat good news is that private employers added 64,000 jobs. Unfortunately that is not enough. The US needs to add 200,000 jobs per month simply to keep up with the population growth of the workforce. It seems that we’re running harder and not even staying in place.

Despite what the media may say, the real disappointment isn’t consumers, who have good reason to be conservative given widespread unemployment and their damaged balance sheets. The real problem with the economy is large companies who are flush with cash but seem to be too scared of their own shadows to start spending. Economists are seeing an increase in the number of job postings but companies are very slow to fill them. It’s estimated that if openings were turning into jobs at the pace they usually do, the unemployment rate would be about three percentage points lower. One reason that companies are dragging their feet is uncertainty over the November congressional elections. Before hiring, business needs to know if what some call “the Bush tax cuts” but is really – the existing tax code – is going to be extended.

This was echoed at the Fall Toy Preview as many of the senior executives that I spoke with were finding it difficult to make planning decisions. As for the business of selling toys, most were upbeat. Sell-in has been good although margins are down. There is a feeling that the holiday season will have a very strong price focus which should help the toy business as most companies have been concentrating on producing lower cost goods. After the economic turmoil that we’ve had most companies want some clarity out of Washington and also want to cash their big January checks before they spend them.

Down in Dallas a common complaint was the lack of trade show support by larger toy companies. For years, the behemoths, Mattel, Hasbro and Lego have not supported toy industry trade shows. That practice is now being taken up by second tier companies like Jakks Pacific and MGA. Mattel and others were having their own “toy fairs” in LA in the two weeks following the Fall Toy Preview. Some buyers even left Dallas early to travel to Los Angeles. Certainly this makes business sense for larger companies as they know they are going to get their face time with the retailers. Obviously, they would prefer that buyers be totally focused on their product line rather than be “distracted” by hundreds of smaller competitors. Alright I get it, but the toy industry may want to consider whether they want these larger toy companies dominating the TIA board. Certainly, the TIA needs their dues but one of TIA’s main functions is to organize trade shows and industry events. In choosing not to support trade shows, these companies dominant place on the TIA board is a clear conflict of interest. One of a trade organization’s most important missions is to protect the interests of its smaller and medium sized members. The big boys have the ability to fend for themselves.

If the Fall Toy Preview was moved to Los Angeles at the same time that Mattel and others were holding their “toy fairs” then the larger companies would likely just switch weeks. I wonder if maybe all parties could be accommodated by having two shows in LA on consecutive weeks. The main show with small and medium size companies during one week. Mattel and other large companies could do their thing the following week. Any company that thinks it’s important enough to draw buyers away from the big boys would be welcome to take the gamble and show in week two. Of course, that may or may not work out for them.

“Everyone under one roof” is an admirable goal but it’s never going to happen. The toy industry can’t even get everyone in the same town at the same time. I don’t want to criticize the Toy Industry Association too much here. By all accounts, they have done an excellent job under the leadership of Carter Keithley. This is NOT the TIA of even just a few short years ago. However, TIA and the TIA board need to tackle this problem now. Meetings should be scheduled, smoke filled rooms rented, arms twisted and compromises made. Complaining quietly amongst yourselves doesn’t accomplish anything. I would recommend speaking directly with either Carter Keithley or your favorite TIA Board Member to ask how you can help.

Hoping I didn’t stir up too much trouble,

Tom Keoughan

By | October 25th, 2010|ToyJobs Blog|Comments Off on Product Safety Conundrum and a Fall Toy Preview Review

From the Yuan Wars to Toy Company Jobs

As November’s very heated election approaches in a continuing climate of economic malaise, desperate politicians are pointing the finger of blame anywhere and everywhere but at themselves.  The nation is rightly disgusted with its banksters but is growing immune to the long and continuous public bludgeonings of their ilk.  In search of another scapegoat the thundering congressional herd lurches eastward – “Blame the Chinese! – after all they don’t vote in our elections.”

Chinese workers have been striking (or just not showing up) and demanding higher wages.  Frankly, good for them – they were being paid a pittance and many had pretty lousy living conditions.  I’m all for an increase in the purchasing power of Chinese factory workers.  That said, a dramatic upward currency revision, as many in Washington are calling for, could have all sorts of unintended consequences.

China is NOT sucking up as many U.S. jobs as is touted by the pandering vote grubbers.  Low end (toys, sneakers, small appliances, et al.)  manufacturing left our shores long ago and is not coming back.  You can’t make these goods in the U.S. and still meet “the Wal-Mart price”.  Even in these dire economic times no one will accept a wage low enough to make widespread U.S. consumer goods production feasible.  Well, except maybe in Detroit.  “What about cars?” you ask.  “Building cars isn’t low end manufacturing.”  Yes, they are building cars in China but they are not shipping them here.  Those cars are for Asian consumption.  By the way, part of “they” is “us”.  U.S. auto manufacturers are building cars in China for Asian consumption as well.

If the U.S. political class is able to harangue China into a significant upward revision of their currency, it will cost U.S. jobs.  American companies who have their products manufactured in China will have higher costs, and because it is very difficult to budge retailer’s price points, will therefore have smaller margins.  An environment of diminishing margins is not likely to spur additional hiring.  Companies will not be looking for additional sales marketing or product development staff.  This is especially true of smaller private companies where owners tend to view the cost of each additional employee as coming straight off the bottom line – which translates to straight out of their pockets.  A rising yuan doesn’t support these small businesses which are supposed to be the engines of American job growth.

In taking a country from the 12th century to the 22nd in the span of a mere fifty years, China’s leaders have to deal with far bigger problems than the U.S. Congress.  They are going to move slowly and do what they think is right for them – whether what they think is right, actually is right or not.  Them, of course, being the Communist Party, which is committed to maintaining power whether the country is communist or not.  What we will likely see is a few small gestures such as the past two weeks 1% rise in the yuan in an attempt to mollify the situation until after the U.S. elections (now only six weeks away) when everyone’s attention will be focused elsewhere.

One of the factors that is really holding up job growth in the U.S. is uncertainty.  Business owners like predictability.  They determine what profit margin they want in order to make an enterprise worthwhile.  Then they try to project sales (always tricky) and try to set costs at a level that will give them that margin or better.  Costs are supposed to be the easy side of the equation to figure out.  Unfortunately, we are currently in a situation where no one knows what health care costs will be or what climate change legislation costs will be.  No one even knows what the tax rate will be.  The tide may turn either for or against the business community but once we know what the rules are we can decide what to do about them.  Until we know the costs we can’t even do the calculations, therefore many things are being put on hold . . . like hiring.

In the current economic climate it’s time to scrap blindly chanting ideology and focus on the pragmatic.  Just so you know where this is coming from – I consider myself socially liberal and fiscally conservative but most of all a pragmatist.  “People can believe in whatever they want, I want to do what works.”  I know, I just painted a huge target on my back and expect to be pelted from all sides by Nerf missiles when I arrive in Dallas for the Fall Toy Preview.  In any case, what seems to be pragmatic in that it would help the economy and can also actually be passed and signed into law is to extend all Bush tax cuts for a period of two years and then review them two years on.  This is not the time for a 700 billion tax increase.  I think it’s likely that is what will happen.  Obama doesn’t have the votes to do what he wants and everybody realizes it will be disastrous if taxes increase for everyone at the end of 2010.

Upcoming tax certainty isn’t the only positive as the economy continues to slowly (very slowly) improve.  There are other “reasons to be cheerful”.  Despite the hot summer doldrums, retail sales for July and August slowly but steadily increased, coming in ahead of expectations.  August saw an acceleration in manufacturing in both the U.S. and China.  Growth was slow but again it was positive.  However, we should temper our enthusiasm on this particular metric.  It is completely natural for production to ramp up in July and August as seasonal goods are manufactured for late August/September pre-holiday delivery to retailers.  While sell in is good, the ultimate question is sell through.

Average hourly earnings – which decide how much money people have available to spend – were up by 0.3 percent.  There was also a rise in temporary employment which is often a prelude to the creation of permanent jobs.  A better than expected 67,000 private sector jobs were added in August and there were upward revisions to data for the previous two months.  True, the government shed 114,000 temporary Census workers but that was expected.

The September stock market has been strong and most economists are de-emphasizing the chance of a double dip recession.  Warren Buffett last week stated:  “I am a huge bull on this country.  We will not have a double-dip recession.  I see our businesses coming back almost all across the board.”  After all the gloom and doom of the summer it seems that we find ourselves in a situation where the economy is not collapsing but rather heading in the right direction though at too slow a pace to drive unemployment down.

The toy industry has several things going for it.  Most toy companies have focused this year on producing low cost goods.  While retail sales have been creeping upward, shoppers have been hesitant to purchase big-ticket items like autos, furniture, appliances. In fact, electronics retailers are revamping their aisles to focus on handheld gadgets to try to excite consumers who have grown weary of their traditional big-sellers:  televisions and personal computers.  After all, how many big-screen TV’s do you need?  Handheld devices are still pricey compared to toys.  The toy industry may find itself in the pricing sweet spot for the 2010 holiday season.

The growth of Toys’R’Us pop up stores is also exciting.  Last year Wal-Mart only had to deal with the competitive impact of 90 somewhat hastily assembled Toys’R’Us Express locations.  This year Toys’R’Us is planning 600 express stores with 300 of the locations already up and operating.  More locations, more shelves to fill and more competition for a Wal-Mart whose toy department will be 25% smaller this year, are all positives for toy companies.

As for toy company jobs, the annual late August/September hiring bounce has been somewhat muted for a number of reasons.  Retailers continue to order late in an attempt to shift as much liability as possible onto toy manufacturers.  The trouble is that factories have been relocating inland and north.  It takes longer to get goods to the coast, there has been a shortage of shipping containers and also massive traffic jams on roads leading to the ports.  Later ordering combined with longer lead times is not a recipe for success.  Over my three decades in the business, I have noticed that toy companies feel better about themselves and start hiring once their goods hit the retailer’s loading docks.  Later shipping has caused many companies to delay pulling the trigger on hiring decisions.  Also, all of the uncertainty over government rules, regulations and taxes has been a considerable factor.  Make no mistake about it some companies have begun hiring and we have begun a number of searches, but there are also a lot of companies talking about their staffing needs but dragging their feet rather than getting going.  Like the economy, things are moving in the right direction but slowly, slowly.

Still Muddling Thru,

Tom Keoughan

P.S.  Wow, sorry about the long tirade.  There must have been some “pent up demand”.  I guess the main difference between me and the Washington gasbags is that I have not yet learned how to talk in bullet points.  See y’all in Dallas.

By | September 22nd, 2010|ToyJobs Blog|Comments Off on From the Yuan Wars to Toy Company Jobs

Fall Toy Preview: A Little Grumbling Despite The Full Dance Cards

My experience at the Dallas Fall Toy Preview was that the overall mood was “workmanlike”.  While I can’t say that people were exactly upbeat, there wasn’t the pervasive sense of gloom that we’ve seen at the last few trade shows.  Most people seemed to give off more of a sense of being survivors, of being beaten up but having made it through with the knowledge that the worst is over but that there are still some tough miles ahead.

In the weeks leading up to the show there was a lot of talk that Target and Wal-Mart (both extremely early price choppers this year) were not planning to attend.  I hear that before every trade show and, as always, Target and Wal-Mart sent buyers although not their entire contingent.  Even with that I still heard a lot of grumbling at the show despite the fact that most companies had very full dance cards.  My sense is that those people and companies who were disappointed were so because they had a false set of expectations.  If you go into Dallas thinking that you are going to write a Target order, I can guarantee you that you will be disappointed.  This is a great show for getting retailer feedback about your offerings, giving you a chance to tweak product, packaging and assortments prior to the all important Hong Kong Toy and Gamers Fair in January.  It’s also a great time to focus and have some quality meetings with second and third tier retailers.  As one VP Sales said to me “even if Wal-Mart and Target weren’t here at all, I have the opportunity to meet with fifty customers in just three days.  Where else would I want to be?” 

With Wal-Mart de-emphasizing the toy aisle those second and third tier retailers are becoming more important.  By stepping back, Wal-Mart has allowed other retailers to see opportunity in the toy business and many of them are responding aggressively.  Toys ‘R’ Us is stepping into the malls with eighty pop-up stores.  This will be their first year of doing this so their execution is a question mark but let’s face it, anything has got to be an improvement over the mess that was the KB Toys retail experience.  Sears is testing getting back into the toy business and, if successful, will make a bigger commitment for 2010.  Barnes and Noble and Borders, two retailers that definitely still get traffic, are putting a greater emphasis on toys and providing a lot more shelf space.  I suspect that other retailers will follow suit now that they won’t have to compete with Wal-Mart pricing on as many products.  Toy companies should be happy with the increased shelf space, diversification of customers, and the likely higher margins to be had from these retailers. 

What toy companies should be complaining about is the lack of trade show support from toy behemoths Mattel, Hasbro and Lego.  This lack of support has now spread to second tier players such as Jakks Pacific, Spinmaster and MGA.  Certainly this makes business sense for larger companies as they know they will get their face time with the retailers.  Obviously, they would prefer that buyers be totally focused on their product line rather than “distracted” by a hundred smaller competitors.  Alright, I get it, but the toy industry may want to consider whether they want these large companies dominating the TIA board.  Certainly, the TIA needs their dues but one of TIA’s main functions is to organize trade shows and industry events.  In choosing not to support trade shows, these companies’ dominant place on the TIA board is a clear conflict of interest.  One of a trade organization’s most important missions is to promote and protect the interests of it’s smaller and medium sized members.  The big boys have the ability to fend for themselves. 

In our isn’t that ironic file:  Mattel has reached a settlement in twenty-two class action suits over their widespread product recalls in 2007.  The recalls resulted in over-regulation which disproportionally affects small and medium size toymakers.  While Mattel can amortize testing costs and manpower over a gazillion products sold; the smaller companies are hit much harder by testing costs, time to market and eyestrain (from having to wade through all those crazy new regs).  Creativity has also been blunted because small companies can no longer produce a new and innovative product and take a flyer to see how it sells in the marketplace.  The new rules mean that a company needs pretty large presells to be sure that a product will at least break even.  Now do I think that Mattel intended this from the beginning?  Of course not, but the fact remains that Mattel is one of the biggest beneficiaries of their own quality and product safety failures.  If the court approves this settlement – it looks to me like they got off cheap. 

Toy industry hiring continues to slowly improve.  It’s certainly not good but it’s better than it was six or even three months ago.  My continuing forecast is that hiring will continue to be weak at least until the August/September (and it may take longer) time frame.  For most of 2010 hiring will be slow although not as bad as 2009.  Some very important meetings are coming up in December and January. Those meetings are not with retailers and not in Hong Kong but with banks.  Banks slashed loans and lines of credit in 2009.  With banks still reluctant to lend, regardless of Holiday sales numbers, I can’t imagine that seasonal fashion businesses will be at the top of their lending lists. 

Muddling thru,

Tom Keoughan

By | October 30th, 2009|ToyJobs Blog|Comments Off on Fall Toy Preview: A Little Grumbling Despite The Full Dance Cards

It’s Crunch Time in the Toy Industry

The annual summer doldrums for the economy at large and the toy industry in particular are beginning to come to a close. Toyjobs’ fast first half start which had us on track to have our best year ever fell off precipitously in late June, July and early August. Both search starts and search closes slowed to a crawl. However, just over the past week I have noticed that things have begun to pick up. Suddenly we are having a lot of discussions about new search starts and should be beginning a number of new searches shortly. All of this is pretty predictable and is part of the annual hiring cycle for toy company jobs. Same as it ever was.

Typically in the last two weeks of August a lot of retail buyers turn all their “happy talk” into actual written orders. A few toy companies experience joy, most companies grumble even while emitting a sigh of relief and a few toy companies are left staggering like punch drunken boxers. The business is even crazier than usual this year due to wildly fluctuating costs as well as the longer lead times needed between order taking and shipping. “So, you have finally confirmed your order now that pricing has changed, and by the way we can’t get the goods to you by the time you would like them”. Most toy companies will be “okay” but will have spent the year running even faster for less sales volume and lower margins. Not exactly progress.

Crunchtime is accompanied by an annual tumult of some toy companies laying off, some companies elatedly hiring, some companies buying each other and some toy companies just collapsing entirely. In 2008, this is exacerbated by problems with the economy at large and the whirlwind is likely to be even more acute than usual.

From a toy industry recruiters perspective, it seems as if the toy industry as a whole breathes a deep sigh of relief and then suddenly is jolted to attention by the realization that the next toy selling season is only eight weeks away. A burst of hiring begins as toy jobs appear and toy companies seek to beef up their sales teams for the next campaign. Of course, just as retailers haven’t given companies enough time to produce, inspect, ship and deliver goods by a specific date; now toy companies haven’t given themselves enough time to staff up and fill those jobs by the Fall Toy Preview. Even with resumes already on their desks, most companies won’t be able to execute hires that quickly. Some will. The message here is “Don’t Wait!” Every year it’s a mad scramble and that scramble has already begun.

Even as business continues through this stormy period, there are beginning to be a few brief patches of light. Sales at Walmart and a few other retailers (Walgreen, BJ’s) are doing well even as overall retail remains sluggish. More importantly oil prices have begun to ease which should translate into lower resin and transportation costs and if retailers allow toy company price hikes to stick – wider margins next year. Our short term forecast is for a rebound in toy company jobs this autumn but not as big of a rebound in toy jobs as usual.

With the Olympics underway, all eyes are focused on China (albeit with brief glances to the Caucasus). We have lots of non-Olympic China news in this month’s China Report. Now that we know that spyware has been installed in many Chinese hotel rooms and in Chinese taxicabs, our main feature focuses on a few methods to combat this increasing threat (we’ll post it on our website for future use). Toy industry executives certainly travel a lot in China but you might want to consider adopting some of these strategies here at home especially now that in Los Angeles a U.S. Court has determined that in the toy industry, intellectual property theft even occurs on U.S. soil. Who woulda thunk it? Here at Toyjobs we have revamped our website and added a few new features. We hope you like it and find it useful. Please feel free to send our comments and/or the usual blistering critiques.

Wishing for more toy company jobs,

Tom

By | August 15th, 2008|ToyJobs Blog|Comments Off on It’s Crunch Time in the Toy Industry

Fall Toy Preview Successful . . . Industry Continues to Stumble

Although there was some back hall grumbling that “everyone under one roof” translates to “everyone pays the TIA” it seems that even those who were prepared (hoping) to hate the Fall Toy Preview felt that it was a huge success.

             

Yes, there were a few glitches such as a crazy numbering system which made it a little confusing to find your way around.  Also, cell phone reception was so poor that the only way to avoid dropping calls was to drop off the railing.  Such minor annoyances are to be expected at an inaugural show and should be easily fixable.

             

The TIA went all out and it was especially good to see them proactively seeking feedback from exhibitors and attendees.  I’m always a little suspicious of the raw numbers publicized by any trade show organizer.  Just as every exhibitor will tell you that business “is fantastic” and fudge his sales numbers up by twenty five percent; so too buyer attendance numbers are never to be trusted.  Did you see 775 buyers milling about?  I didn’t see 775 buyers milling about.  That said the show seemed to be extremely well attended by major (and not so major, but important, retailers).  Target seemed especially well represented.  It was a little strange that several of Walmart buyers didn’t make the trip considering that they’re just down the street.  The big manufacturers (Mattel, Hasbro and Lego) as usual did not really support the trade show even though they are permitted to dominate the TIA board.

             

For all the talk of the Dallas show’s success, several toy executives did point out that while the show itself was cheaper, if you add in the costs of the February show, then the cost of having a permanent showroom in New York that could have accommodated both shows plus other meetings throughout the year, would have been cheaper.  In an interesting twist, several senior executives were seen wandering the halls in the company of Dallas Market Center staff apparently looking at permanent showroom space.  Although I don’t think it will happen this year; it will be interesting to see if the TIA’s strategy backfires and the February Javits show eventually collapses.  Then again, that may have been part of their strategy all along.

             

In other toy news, lead paint recalls just keep coming.  Last Friday Mattel issued yet another major recall.  Was that their fourth major recall or their fifth?  It’s getting difficult to keep count.  Other smaller players have continued to issue recalls as well.  As we move into the holiday shopping season, it seems difficult to believe that continuing recalls at this late date won’t be on consumers’ minds. 

             

The other thing on consumers’ minds might turn out to be all the empty shelves.  With new testing regulations the safety labs are backed up and toy companies are having a difficult time getting their goods on the water.  The new testing policy, while a good thing, has been difficult to implement in year one.  The policy exempts orders placed before August 10 so that the majority of product made it just under the wire.  That said a lot of orders are finalized at the end of July and beginning of August and for those that missed the cutoff there will be trouble.  There will also be problems for any and all reorders.

The toy industry, the TIA (unfortunately it’s still necessary to separate those), the ANSI (American National Standards Institute) and the Chinese government are working to enact more stringent testing procedures and that is very positive….as far as it goes.  Anyone in the toy industry knows that what’s really strangling the business is retailers’ strict adherences to artificially low price points during an inflationary time.  While I hear a lot of people saying “Walmart will have to let us increase prices”, that remains to be seen.  In the midst of the toy recall crisis and with temperatures in much of the country still north of 80 degrees; Walmart slashed toy prices 10 to 50 percent on October 1.  As the price leader and the largest retailer Walmart’s actions drive pricing decisions throughout the retail landscape.  It seems clear that Walmart, which takes in about 25 cents of every dollar that consumers spend on toys, has no intention of altering its policy of using toys as (artificially) low priced loss leaders to drive foot traffic.  In a sign that he doesn’t quite get it TIA president, Carter Keithley was quoted “That expense could be passed along to consumers, but we hope not.  Hopefully the burden will spread around between all the parties involved.”  No! No!  No!  Pass it on to consumers!  That’s what a rational business does during a time of rising costs.

             

It could be quite beneficial for the toy industry if the TIA were to commission a study to see if consumers would be willing to spend a dollar or two more in exchange for safer, higher quality and yes, longer lasting toys.  I think we all know what their answer would be.  If done by the TIA for the industry as a whole and publicized to the hilt then major retailers would not be able to single out individual companies for retaliation.  The time to do this is when the toy business is in the glare of the media spotlight.  The time to do it is now.

By | October 30th, 2007|ToyJobs Blog|Comments Off on Fall Toy Preview Successful . . . Industry Continues to Stumble

Mattel v. China and the Blame Game

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

By | September 25th, 2007|ToyJobs Blog|Comments Off on Mattel v. China and the Blame Game

The Return of the Texas Two-Step

First of all I would like to thank everyone for the overwhelmingly positive response to my last Toyjobs Executive Monthly article. The only negative comments came during a highly charged Friday afternoon phone call from the TIA Board Chairman. For my part, I also view that response as positive.

Besides all the positive feedback, many of you offered strong suggestions about industry tradeshows and the current showroom impasse. If you are desirous of positive change within the industry, I suggest applying pressure through public letters to various toy industry forums. The industry has seen where watching and waiting and sidebar conversations gets us. I would also strongly recommend getting involved and standing for election to the TIA Board. Unfortunately, it seems that to run for the TIA Board you have to be nominated by a current TIA Board member. Hmm…not exactly a mechanism for positive change. Still, you can volunteer to pitch in and help out and not take any position on any question until after you’re elected. After all, that’s the way our national politicians do it.

As for me, I hope the October show in Dallas is a raging success. I hope that everyone is selling more toys and hiring more toy people; but we should keep in mind that a Dallas Toy Show has failed before. There are also a lot of manufacturers saying that they won’t show in Dallas, but I suspect that they’ll eventually come around. The toy industry is just about the metooingest business there is. Nobody will commit to anything until they see who else has committed to it first. I suspect that once a critical mass of toy manufacturers and buyers commit to the Dallas show, that most everyone else will begin to fall into line no matter how angry they are. Of course, people have every right to be angry. The TIA Board Executive Committee overruled the TIA Board and went against the wishes of much of its membership. They effectively torpedoed the ability of toy manufactures to work out of showrooms in a toy building or small group of buildings even though that is the way most manufacturers prefer to work. Their publicly stated reasons for doing so were specious. One gets a little tired of hearing that buyers were complaining about having to travel to showrooms scattered all over the place. Buyers can easily control that by telling manufacturers “I am going to A and I am going to B. If you want to meet, you will be in one of those places.” The one positive is that we can be pretty sure that the TIA will do everything in its power to make the Dallas show a huge success if only to avoid the finger pointing, howling from the rafters and boatloads of “I told you so’s.”

See y’all in Texas,

Tom Keoughan

By | May 15th, 2007|ToyJobs Blog|Comments Off on The Return of the Texas Two-Step