Fall Toy Preview

TIA Moves October Show – Betrays Toy Industry

Before venturing to the February Toy Fair, many of the industry executives that I spoke with told me that this was the last February event that they were going to show at.  In fact, some companies didn’t even show this year.  The thinking was that this was primarily a specialty show and many of the mass market buyers were not going to attend…and besides, “we just saw them in Hong Kong anyway.”

The big surprise turned out to be that the February show was the most successful one in recent memory.  Most of the buyers did indeed come.  By the end of the show, most of the execs who said this would be their last one were singing a different tune.  There are always buyers threatening not to come to this show or that show, but at the end of the day, most of them do attend.  I did hear complaints from some of the toy companies that scattered themselves at various showroom locations and hotel rooms around Manhattan.  Buyers were late, buyers were no shows.  One toy company was even trying to shuttle buyers to New Jersey – what were they thinking?!  The moral of the story is that if there is a toy show, most of the buyers will come and if you’re a toy company, you should be there, but if you’re going to be at the show – BE AT THE SHOW; not at some random location somewhat near the show. 

That said, most mass market toy execs that I spoke with would much prefer a showroom to the Javits Center.  Maintaining a showroom year round is less expensive than doing two shows at Javits and you get a New York office to do occasional business in to boot.   The people that I spoke with don’t like rushing to set up, rushing to tear down and rushing to pay a Teamster a couple of hundred bucks to plug an electrical cord into a socket sometime, hopefully today.  For most mass market companies a showroom in very close geographical proximity to a lot of other toy company showrooms seems to be the preferred way of doing business.  Let’s also remember that until the whole 200 5th Ave. fiasco (originally sparked by the TIA in the David Miller era), everybody spent most of the week in the Toy Building and would head over to the Javits Center and try to blow through there in a day.  Things worked pretty well for a very long time and it seems to me that a combination of showrooms in one building or two buildings that are very close to each other along with the Javits Center could work very well again.  Some companies prefer the Javits and some prefer showrooms, it seems reasonable to be able to offer both. 

Jay Foreman’s concept of a toy district sounds a little scattered but my guess is that if you asked him (and I haven’t) that what he’s suggesting is two or three buildings in very close proximity which house clusters of toy showrooms.  That could very easily work, but I would suggest a “coat test.”  If the buildings are close enough to just skip a few doors down in February without putting on a coat, fine.  If buyers (and everybody else) have to repeatedly put on and take off and possibly check and uncheck coats all day and all week, then things will likely begin to break down. 

Unfortunately, the possibility of a toy building or district has been torpedoed by the TIA’s decision to move the October Toy Show.  With only one trade show in New York the economics of a permanent showroom no longer makes sense.  First, let’s remember that the October Toy Show was first started by the Toy Building and was only hijacked by the TIA (another revenue raising opportunity!) after the building was sold.  After much rancor and debate, the entire TIA Board initially voted to keep the October show in New York.  There were apparently some complaints about scattered show sites by buyers, and I don’t doubt that there were, but just how many or how loud those complaints were has not been revealed.  One TIA board member told me that the criticism was not as forceful as people have been led to believe.  I would add that the retailers can solve this problem very easily by telling toy companies that they will be going to A and going to B (and perhaps C) and if you want a chance to meet with us you will have to be in one of those locations.  “We ain’t going to some half baked hotel room in Jersey City.”  Basically, if you are going to be at the show – BE AT THE SHOW!  Toy companies would fall into line pretty quickly.  After all, it’s in their own best interests.

Unfortunately, in an incredible display of hubris the five members of the TIA Executive Board took it upon themselves to make this decision for the entire industry.  The decision was very much out of the blue.  In fact, a quick poll taken by Playthings.com indicated that 44% of the industry was “angry.”  That’s not unhappy or disappointed or surprised, but “angry” about the decision.  It also seems strange that after the earlier vote by the entire TIA Board to keep the show in New York, that the five member TIA Executive Board hijacked this vote and unanimously elected to move the show to Dallas.  Hmmm.  There is much speculation about the motives of TIA Board Chairman Danny Grossman, a Californian and his Californian predecessor Arnie Rubin, but since this seems to be based mostly on gossip and rumor I am not going to comment here.  We do know that Mr. Grossman was quoted in Playthings as saying “The 10 largest companies don’t want showrooms in New York.”  We also know that statement is inaccurate because Jakks Pacific, through its spokesman Jay Foreman, has made it very clear that they do want a showroom in New York.

As for Mattel and Hasbro, they represent only their own interests.  For years they have not had show rooms in the Toy Building nor have they supported Toy Industry trade shows.  They know they are going to get their face time with the buyers and would prefer not to have that face time at a trade show where buyers will be distracted by their competitors. 

Danish company Lego has never really integrated with the American Toy Industry.  They do things their own way, and in fact, thinking back to my 26 years in the toy business, I don’t think they have ever hired anyone from another toy company.  All of that is fine, but is that one of the five votes you want representing the industry as a whole?  As for Robert Pasin of Radio Flyer, I just don’t know enough to comment.

One thing that does seem clear is that most of the mass market Toy Industry prefers to work out of showrooms in close proximity to each other – preferably in New York.  Leadership in the Toy Industry will not come from Mattel or Hasbro or need I mention MGA (egads!) – they have very different interests from the industry as a whole.  Leadership needs to come from the second tier companies who are big enough to have some clout but young enough to remember what it was like to be a little guy.  Spinmaster, Jakks Pacific, Mega Brands, RC2 – it’s time to stand up and take charge!

All the best,

Tom Keoughan

By | March 20th, 2007|ToyJobs Blog|Comments Off on TIA Moves October Show – Betrays Toy Industry

Fall Toy Preview: A Success…But

I always dread the Javits Center:  home of “the world’s hardest floors,” so with all of the Fall Toy Preview pre-show negativity, I started out expecting the worst–but that’s not the way it turned out.  When I arrived on Friday, everyone seemed to be having a good time.  I don’t know if it was good for business or not, but the open forum led to a clubby old home week feel with a lot of backslapping and storytelling including more than a few amusing but outrageous lies.  It was sort of like a cocktail party without the drinks; which surely came later.  That was Friday and it was a lot of fun, but by Sunday…and Monday…the whole thing was wearing a bit thin.

About half of the companies I spoke with said that the show was an incredible waste of time and money.  The other half thought that the show was great.  I’m not sure what the “differentiator” was, but maybe it was that some companies came in with the proper expectations and knew how to work that kind of show.  Those companies with open booths did get significant walk-up trade (I asked) while those who had completely closed booths did not.  I saw more than one buyer circling those ugly white walls trying to find an entrance.  Hopefully, they didn’t just give up.  With knockoff anxieties running high in this age of cell phone cameras, a hybrid booth seemed to work out the best.  A good example was Radica which had a small open section with their well known and well liked Sr. VP of Sales standing out front attracting buyers, industry notables and others (like me) thereby generating a small crowd and a bit of a buzz and then funneling the buyers “inside” to meet with his sales troops.  Before the show, all I heard was that none of the major retailers were coming, but I saw some pretty good looking dance cards.  Walmart, Target, Toys ‘R’ Us, Meijers, Borders, Walgreen, etc.  Hey, that’s not bad business.

Toy companies who located away from the Javits Center fared less well.  The toy building was a dark, dismal, dusty, empty and echoey affair and the seven or eight companies showing there should thank Playalong for drawing buyers to the building.  From companies located in hotel rooms and other locations, I mostly heard tales of late appointments, missed appointments and a lot of time spent standing around bored.  Each company can decide for themselves if it makes sense to attend the show, but the moral of the story is “if you’re going to be there…be there!”

It was a great show for me with the open atmosphere and a lot of senior toy executives standing around without a whole helluva lot to do much of the time.  I figured that all of the curtains and doors were meant to keep me away from their Brand Managers.  Fortunately for me, that didn’t really work all that well.  So while I had a great show, I somehow suspect that the industry as a whole shouldn’t base its decisions on making me happy.

Mostly what I heard is that although this show worked out much better than expected, the Javits Center is difficult to deal with, expensive to deal with and at the end of the day if you exhibit at two shows, no cheaper than maintaining a showroom year round.  The consensus was that the TIA should commit to keeping both tradeshows in New York and should commit to the Javits Center for three or four years thereby giving the industry time to find a sound and properly priced building or group of spaces in adjacent buildings.  In Manhattan, space does become available and it makes a lot of sense to wait, watch, evaluate and then pounce on a sound, viable option rather than trying to force a bad decision down everyone’s throats due to artificially created time constraints.

The ability of the toy industry to get together and “pounce” is sure to give rise to more than a few derisive chuckles and worse (please include me as a chucklehead).  What the industry needs is leadership, and not from Mattel or Hasbro.  It is not in Mattel or Hasbro’s best interest to be part of a toy center.  Buyers are going to come and see them wherever they are and Mattel and Hasbro want to dominate those buyers’ attention and time.  Leadership needs to come from the second tier companies:  Jakks, Spinmaster, Megabloks, etc.  If they can come to a decision and commit, then all the small and medium sized companies can feel comfortable about making what would be a very productive decision to follow.

The Toy Industry…pouncing…yeah it’s pretty funny stuff.

All the best,

Tom Keoughan

By | November 15th, 2006|ToyJobs Blog|Comments Off on Fall Toy Preview: A Success…But

Happy Talk Returns to Fall Toy Preview

The buzz around the Fall Toy Preview was generally very positive.  Most of the senior toy executives that I spoke with said they had very productive meetings with retailers and that business looked strong going into 2006.  This was a marked departure from the last couple of years when the mood was very downbeat and most toy execs were mainly grousing and complaining.  Of course, it’s important to keep in mind that no one was writing orders.  Retailers were making “happy talk” with manufacturers and manufacturers, in turn, were making “happy talk” with me and anyone else who would listen.

All of this “happy talk” strains credibility.  Walmart was beginning to discount even before Halloween consumers have been squeezed by high gas prices and will likely be squeezed again by the high price of home heating this winter.  Manufacturers’ costs have increased due to high resin and transportation prices as well as the Chinese government’s challenging allocation of electricity.  Large retailers, for the most part, have not allowed manufacturers to pass these higher costs on.  For 2005, at least, it looks like lower sale volumes and tighter margins.  Let’s not forget that 15% of the country has been blown into the sea.  This could easily lead to a Christmas of clothes, shoes and necessities sprinkled with a few token toys.  Still it is encouraging that rather than doomsday scenarios “happy talk” has returned.

Neil Friedman has been elevated to run most of Mattel.  He has done a terrific job with Fisher Price, but one has to wonder if this is a promotion that he entirely wants.  Barbie as been a disaster in the last few years and will be extremely difficult to turn around in the short term, if that’s even possible.  Mr. Eckert pretty much set up Matt Bousquette to take the fall this time but if the slide continues he will likely find it difficult to dodge the bullet next time around.  The silver lining for Mattel’s California employees is that Neil Friedman is a true gentleman and will likely put an end to the Stalag El Segundo atmosphere that flourished under Bousquette.

Walmart continues to take its lumps in the publicity wars.  First, a confidential memo from their EVP of Benefits leaked out which pretty much recommends age discrimination as a company policy.  It goes further to suggest that retail employees with seniority be squeezed out because they earn more than junior employees and are no more productive.  To discourage unhealthy and more mature job applicants (and one has to believe to ease current senior retail employees toward the door), it is suggested that Walmart arrange for “all jobs to include some physical activity (e.g. all cashiers do some cart gathering).”  Walmart also acknowledged that 46% of the children of its 1.33 million U.S. employees were uninsured or on Medicaid.

Next up, an Arkansas judge dismissed Walmart’s suit against former Vice Chairman Thomas Coughlin which clears him to receive over $17 million in retirement benefits which were being held back by Walmart.  Apparently at the time of his retirement, Coughlin and Walmart signed a general release from liability agreeing not to sue each other.  A federal grand jury continues to investigate allegations that Coughlin misappropriated up to $500,000 from the company through misuse of corporate gift cards, falsification of expense accounts and vendor invoices.  One has to believe that Walmart has extremely smart lawyers.  Those lawyers knew what was in that agreement and knew what it meant.  They probably wrote it.  Walmart decided to file suit against Coughlin knowing that winning was a very, very long shot.  What’s interesting is that they decided to file that suit only after Coughlin announced that his defense in the federal probe would be that the allegedly misappropriated funds were in fact reimbursement for monies he paid to employees of various unions to provide him with lists of Walmart employees who were involved in union organizing activities.  (This all smacks of something out of the 1930’s).  Only then did Walmart begin to go after Coughlin in the courts.  This story is far from over.  Just this week, Robert Hey who reported to Coughlin from 1997 through 2004, pleaded guilty to three counts of wire fraud in the case and is cooperating with the federal investigation (i.e. he cut a deal).  This will likely lead to charges being filed against Coughlin.  If Coughlin uses the so called “union project” as his defense and can provide documentation of that, it could be a major crisis for Walmart.  If one peers far down the highway it could end up with the unionization of Walmart which would significantly reduce their competitive advantage particularly in the grocery business which is their main traffic driver.  A somewhat less powerful Walmart is not necessarily a bad thing for toy manufacturers. 

Lastly in Walmart World, documents from a separate federal investigation suggest that several senior Walmart executives knew that its cleaning contractors used illegal immigrants who worked as many as seven days a week at less than minimum wage.  Significantly, one Walmart exec also instructed a multistate cleaning contractor to set up multiple companies so that the contractor could continue to clean stores if one company was found to be hiring illegal immigrants and had to be dropped by Walmart.

All of this is only a quick review of Walmart activities which have come to light in just the last month.  It clearly displays a continuous pattern of ruthlessness which, as Walmart suppliers, you know all too well.

At last, we get to the continuing saga of the toy building.  Now you see it, now you don’t.  Let’s start by saying that the relocation committee has a very difficult job with very few reasonable options.  Furthermore, anyone who really thinks about it has to agree that one building is preferable to many buildings and shuffling around in the February snow.  After checking out the Church Street location, I would have to agree with the TIA that it will be a good spot … in ten years after the area is rebuilt.  But what do we do in the meantime?  What happens once all the construction begins … a logistical nightmare.  I don’t know why after mounting an aggressive campaign to present Church Street as the best of all available options, the relocation committee decided to reopen its building search only two days later.  It could have been due to a chorus of toy industry complaints, but it’s probably more likely they reached an impasse in negotiations with the Church Street owners.

The main problem and cause of much confusion (aside from the fact that the toy industry will be out on the street come March 2006), is that over the last ten years the TIA has seemingly not represented the toy industry.  Instead they seemed to operate as a private, for profit, trade show promotion company.  This has meant that even when they have something constructive to say, no one trusts them.  The relocation process is an opportunity for the TIA to both refurbish its image and return to its original mission of representing the toy industry as a whole.  Whether this opportunity will be taken remains to be seen.  That the Church Street location was, for whatever reason, not ramrodded down the throats of the toy business certainly helps.  The Conley “resignation” is probably productive, but I can’t help noticing that they are still not promoting the real dates of the February Toy Fair.

Anyway, that’s my two (or eight) cents.

All the best,

Tom Keoughan

By | November 9th, 2005|ToyJobs Blog|Comments Off on Happy Talk Returns to Fall Toy Preview

Washington Socks It to the Toy Biz

Just when you thought it couldn’t get any worse they’ve gone and devalued the yuan.  Washington politicians may have scored a few points with an undereducated public but it is the consumer, and American import businesses, who will pick up the tab.

This year’s manufacturing contracts are already set so the effects may not be immediately apparent and although a 2% devaluation may seem like small change, many experts are forecasting a devaluation of between 8 – 11% over the next eighteen months.  With Chinese factory costs for labor, electricity and everything else going up, coupled with continuing sky high resin and transportation prices that money is going to have to come from somewhere.  In a “perfect world” those costs would be passed on down the line from factories to importers to retailers and ultimately to the American consumer; in other words – inflation.  What will happen in the real world is likely to be just a little bit different.

With Walmart’s sales being pressured by high oil prices as well as owing to their generally rapacious nature, it’s an easy bet that they will not raise their price points.  It’s a little difficult for me to believe that I would decide not to buy a shiny new widget if it cost $7.99 rather than $6.99, but I guess that’s why I still have to work for a living.  All of those extra widget dollars eventually add up.

With major retailers standing firm it will be between the importers and the Asian manufacturers to battle it out for their already shrunken profit margins.  This will lead them to (and this could be Walmart’s new advertising slogan) “Make do with less!” (Ahem – sort of like Walmart store employees.)  The other course will be to remove pieces and features, use cheaper materials and thinner walls or move manufacturing to Northern China where labor and electricity are cheaper.  For consumers this means less creative, shoddier products with more safety problems that won’t last as long.  Thank you, Walmart!

An example of the new and improved World Friendly Walmart is seen in West Virginia where workers have been ordered to be available to work any shift at any time or face dismissal.  This “open-availability” policy states that “workers who cannot commit to being available for any shift between 7 a.m. and 11 p.m., seven days a week, will be fired by the end of the week.”  So much for daycare, elderly parents, little league games, doctor’s visits, dance recitals, families, communities and anything resembling life as we know it.

In our ever diminishing Department of Good News; California ports have extended their hours and weekends so that all of the goods imported through there should reach their destinations in a timely fashion.  Unlike Walmart employees, dock workers belong to a union which will guarantee them monetary compensation for working odd hours as well as some semblance of a regular schedule.

My summer reading has included James Stewart’s book, Disneywar — although I’d be a little careful about carrying a copy around Southern California.  An alternate title might be Unwarranted Arrogance and Self Puffery for Dummies.  It seems that Disney’s success in creating enduring properties for children can at least partially be explained by the fact that the company is managed by children – very badly behaved children (and I’m talking senior management as well as past and present board members).  For those who enjoyed this tome I’d like to recommend William Golding’s, Lord of the Flies, as further reading.  An illuminating alternative analysis of Disney’s recent courtroom escapades which I copped from the Wall Street Journal editorial page follows.

The days are growing impeccably shorter and summer fun is almost over so it’s time to dust off your crackberry’s, buy new batteries for your laptops and cell phones and get ready to run another weary lap on too little fuel and too little sleep.

Fall Toy Preview is just around the corner.

See you then,

Tom Keoughan

By | August 24th, 2005|ToyJobs Blog|Comments Off on Washington Socks It to the Toy Biz

Continued Turmoil in TRUland

Within just two weeks of laying their bombshell on the toy industry, Toys ‘R’ Us was staggering around like a drunken man. The Dude was making phone calls to toy executives and back pedaling furiously. At the August 24th meeting, he told analysts that talk of selling the toy division may be premature. This is a little confusing in that it was the Dude himself who started that talk. Clarification was not forthcoming because TRU cancelled its regular Q&A session with analysts. No one that I’ve talked to believes a word of this retraction and it is generally attributed to attempt at damage control by a management that is so inept, that they can’t even figure out how to time a major announcement.

There has been talk that the Dude is planning a master stroke of adding fast food and arcade games to their stores. This sounds like one of his already failed “we’re not a store, we’re an experience” strategies. To be sure this may attract ‘tweens and younger teens, but with kids “growing up earlier” this is not a crowd that is likely to be buying a lot of Barbies, Leapfrogs, or stuffed animals. It almost appears as if heavy drinking has been substituted for sound business strategy.

In addition to TRU’s downward spiral into madness, the toy industry has been hampered by both a shortage of chips and high oil prices which is fueling increased electricity costs in China, transportation costs everywhere and an over 30% rise in resin prices. Walmart will not eat these cost increases (at least not this year) thus sparking increased margin erosion.

Also looming is TRU’s announced 150 million in writedowns. For toy manufacturers total sales will most likely be better than last year, but margins could very easily be worse.

In terms of toy industry hiring, I am happy to announce that my predictions of last month were dead wrong. Coming out of the seasonal summer slowdown hiring has accelerated and is now quite robust. There is not a lot of wholesale hiring going on but everyone seems to need an extra pair of hands or two. The coming October toy fair should be interesting to say the least. I look forward to seeing you all there.

All the best,

Tom Keoughan

By | September 20th, 2004|ToyJobs Blog|Comments Off on Continued Turmoil in TRUland

See Ya’ in January!

That seemed to be the phrase on most buyers’ lips at last week’s trade show.  Certainly, the show was well attended by retailers and most manufacturers’ dance cards were full but was anything really accomplished?  It’s difficult to make even preliminary buying decisions about Christmas ’04 when we haven’t even seen Christmas ’03 sell through yet and seasonal TV advertising is only just beginning.

On the upside, most manufacturers seemed genuinely upbeat and not just making the usual trade show happy talk.  Of course, it’s easy to be upbeat when you’re not really expecting any orders outside of Target.  Also, on the positive side of the ledger, is the ability to take retailer feedback and tweak product packaging or try to squeeze that extra nickel out of costs.  If you have a real dog you can just drop it without having to worry about cutting steel.  At the end of the day, the big question is will this “early look” speed up retail buying decisions, which have been coming later and later.  Most toy executives that I spoke with remained skeptical, although everyone seemed to be a little more relaxed and having a nice time.

There was a lot of scuttle but in the halls about having an alternative January trade show in New York in case of a SARS outbreak in Hong Kong.  I can only suggest that you contact either the TIA or your New York sales reps to ask questions or weigh in with opinions.

Toy industry hiring is continuing to accelerate.  We are up to our neck in search assignments, and with the upbeat nature of the show, the water is still rising.  Fortunately we are fast and experienced bailers.  I see this trend continuing into the New Year.  Many companies are sticking to their ’03 budgets which were formulated in dark days of November/December 2002.  The combination of looser ’04 budgets (can we breathe yet?) and way too much work to do should mean that the acceleration in hiring will continue.

See ya’ in January

Tom Keoughan

By | October 27th, 2003|ToyJobs Blog|Comments Off on See Ya’ in January!