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Brief Rain Delay – Waiting for Takeoff

While the headlines blared “Retailers’ Holiday Sales Disappoint” this was based on same store sales which were up but not as much as anticipated. Those projections seemed to be based on mostly wishing. However, same store sales is a retail metric meant to measure a retailer’s health. If you “make stuff” that you sell through retailers, a more meaningful metric is total sales, which measures all the “stuff” sold in all of a retailers’ stores. If a retailer builds more stores and in total sells more “stuff” as “stuffmakers” it’s not our primary concern that the retailer didn’t sell quite as much as they wanted in each store. We want to know how much “total stuff” of ours they sold.

Same stores Sales increased by 4.5% according to Thomson Reuters but this was skewed upward due to Costco being the most heavily weighted company in their index and Costco knocked it out of the park. Same store sales minus Costco increased 2.8%. Those aren’t break out the champagne numbers, but they’re not too shabby. Total Sales should be up by more. Unfortunately, the best chart I could find only runs through November 2012. New data will be available on February 13 (Click Here For Chart). We will also publish the new chart new chart next month.

The holiday sales season was characterized by heavy online shopping in November and early December followed by strong bricks and mortar purchases at discounted prices during the two weeks leading up to Christmas. Toy sales followed this pattern and were flattish overall with a weak November and strong late December.

Why is this man smiling?

Leapfrog was a huge winner with four of the top ten toys of 2012. Costco, Kohl’s and Macy’s did very well on the retail side. Amazon sales were quite strong but, as always, profitability is suspect. Times were tough for Hasbro who experienced weak holiday results and is planning to cut 10% of its workforce. Toys ‘R’ Us posted poor results both in the US and internationally. Sears/Kmart remained wobbly.

Both TRU and Best Buy accused Wal-Mart of posting online bait and switch ads. They claimed that the retailing giant would run internet ads claiming lower prices but then their stores would have either different models or be out of stock. Wal-Mart’s rather disingenuous response was “our ads don’t claim to compare identical products.” Wal-Mart had been accused of similar tactics back in the old print ad days of the mid-nineties. We’ll have to wait and see how this plays out.

As Toy Executives return from Hong Kong, I’m hearing that while late December toy sales were very strong that they didn’t make up for the rest of the holidays sales season. Retailer’s are carrying too much inventory which is compromising open to buy dollars and little early year restocking will be necessary. This will hurt toy company’s in the first half which has always been a difficult period for them anyway. The other thing I’m hearing is that in 2013 Teenage Mutant Ninja Turtles are going to be huge

Looking forward, we’re a long way off from Christmas 2013 but the elimination of the payroll tax cut could hurt consumer spending since in the current economy many households are living paycheck to paycheck. Europe is in recession which will impact the largest toy companies and smaller ones at the margin. That said, the economy has stabilized and continues to improve. Bipartisan shenanigans in Washington will continue to dampen economic growth during the first part of the year. That, as well as, the European situation and existing retail inventories should cause things to continue to muddle through until May or June. As we move past those headwinds, the economy should gain strength in the second half. I then see blue skies in 2014 although it’s really much too early to make a firm call.

Toy industry hiring should follow these economic trends which, for now at least, seem to match up well with the toy world’s annual business cycle. Look for companies to be cautious but to add where they have to in the first half and regain confidence and increase hiring as the year moves forward. Let’s keep our fingers crossed

Seeing lights at the end of the tunnel,
Tom Keoughan

By ToyJobs|2020-11-20T08:51:01-06:00January 28th, 2013|ToyJobs Blog|Comments Off

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 ToyJobs|2009-10-30T10:47:22-05:00October 30th, 2009|ToyJobs Blog|Comments Off

“Less Bad” is the “New Normal”

Clichés spring like “green shoots” from the mouths of journalists, TV talking heads and mush mouthed politicos. The media seems to have abandoned its age old “bad news sells” model with the sudden realization that too much bad news may put them out of business. They have joined with beltway types to try to talk up consumer confidence in the hopes that a return to shopping will jump start the economy in a way that the current stimulus package will not until 2011.

In many ways it seems to be working. The rate of new layoffs is slowing even though I would like to see a couple of more months of data before declaring it a trend. The headline unemployment number is 9.4% and that is very scary but perhaps not as scary as it seems because it is a cumulative number which includes everyone who was laid off prior to the most recent month. On the other hand, the official unemployment number is not what we should be looking at in the first place.

A broader statistic which gives us a much more realistic view of the unemployment picture is U6. U6 includes people who have been looking for a job for so long that they have either given up in disgust or decided to just sit back and wait for things to get better before they even try. They are not actively looking for a job but they would take one if it was offered to them. The “regular vanilla” unemployment figure does not include these people. U6 does. It also includes people looking for full time jobs who have only been able to find part time jobs but really want full time jobs. The “regular vanilla” unemployment figure does not include these people. Huh. U6 does. U6 for May was 16.4%. Whoa! 16.4% is a HUGE number! More than one in six Americans is either unemployed or underemployed (do you want fries with that?). It suddenly becomes very clear why the government talks about the “regular vanilla” unemployment figure and why you have never heard of U6.

So, things have indeed gotten very bad although for the time being they have ceased getting worse. It has to be considered very good news that the global financial system is no longer teetering on the brink of total collapse. That said, we still have a severe recession to work through. To paraphrase Warren Buffett (I’d quote him but I can’t write that fast) “The financial climate is much improved from the October through March period which sets up the stage for the economy to grow stronger. That hasn’t happened yet but we’ve reached the point where it can.” Many are predicting a soupbowl shaped recovery. The economy came down hard and will drag along the bottom for quite a while before it starts back up the other side. That sounds just about right although I have no way of knowing. In fact, I’m still a little leery of other shoes yet to drop (commercial real estate, credit card debt, and we still haven’t exactly gotten rid of all that toxic waste yet, have we?). If I seem to be prevaricating and slowly feeling my way along like a blind man in the dark, well, I am.

This leads everybody from consumers to manufacturers to retailers to remain extremely cautious. For their part, retailers are taking longer than ever to finalize orders. Of course, they don’t see themselves as being late. They just want to push as much risk as possible onto their vendors (ahem, “partners”). With so many Chinese factories having closed, so many laid off Chinese workers, and the lengthened quality regimen, we are fast approaching the point when manufacturers will be physically unable to deliver goods by the time that retailers want them. Later commitments don’t mix well with longer cycle times. The prevailing retailer attitude seems to be “We don’t care – get it here or somebody else will fill our shelves.” But who? And with what? Why, the big boys, of course. Mattel, Hasbro and Lego (do we still consider Leapfrog a big boy?) can afford to tool up and manufacture earlier because they get to amortize costs over a gazillion units sold. They also get earlier commitments from retail than the rest of the toy industry. This means that the shelves will be filled with less variety this year.

Another onerous note is that Wal-Mart is reducing its toy space by more than half. The toy department itself has never been all that profitable for Wal-Mart. Instead it has been used as a loss leader to drive foot traffic during the last four months of the year. Over the last five or six years, Wal-Mart has committed heavily to the grocery business. Grocery is also a low margin business but one where Wal-Mart has an advantage because it is not unionized . . . . . yet. The move into grocery has worked out brilliantly as a traffic builder. The average Wal-Mart customer now visits their stores once a week rather than once a month. The toy aisle is no longer needed to drive traffic. Of course, they’ll keep their hand in and stock the obvious big company items backed by big advertising dollars but they’re not going to think too hard about the toy industry anymore – no more guessing on what will be a hot seller. They’re just going to focus on moving merchandise – like big jars of pickles. This will obviously benefit big toy companies who are able to make big TV advertising commitments. Toys ‘R’ Us also stands to benefit – if they are able to execute. It’s as if Wal-Mart is taking its foot off of TRU’s throat after nearly destroying them. It’s certainly not an act of good will, it’s just that toys aren’t that important to Wal-Mart anymore.

As for toy company hiring, we are still going through a dark period where there have been many layoffs and very little hiring. As I have said in this space before, most companies tell me that operationally they need people but their banks won’t let them hire anyone. Most companies operate on lines of credit, letters of credit and bank loans. This year many banks have said something on the order of “we’ll give you seventy percent of your usual line of credit but you’ve got to cut costs by twenty percent”. Due to the seasonal nature of the toy business this has pushed many companies to the brink of solvency. Many companies are meeting with their banks every two weeks to be told which bills they are allowed to pay. It’s almost as if the banks think we don’t know who caused the financial crisis in the first place. It would be nice to see them get their own houses in order before making judgments about others.

Toyjobs has noticed that the hiring climate has grown tricklingly better during May and early June. I would anticipate that by the end of the second quarter retailers will have mostly finalized their orders and toy companies will be able to approach the banks with a better story to tell. This leads me to believe that by late August/September toy industry hiring will have improved noticeably although it will still be a long way from good (it’s easy to improve noticeably from zero). 2010 should be better as we move along the gradually inclining slope of the soupbowl curve. Unfortunately, retailers will continue to push off purchasing commitments as long as possible. Toy companies won’t be able to breathe easier until July/August meaning that it likely won’t be until late August/September that there is a true resurgence in hiring.

Muddling thru,

Tom Keoughan

By ToyJobs|2020-11-20T08:51:04-06:00June 8th, 2009|ToyJobs Blog|Comments Off

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 ToyJobs|2007-03-20T09:00:27-05:00March 20th, 2007|ToyJobs Blog|Comments Off

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 ToyJobs|2020-11-20T08:51:05-06:00November 15th, 2006|ToyJobs Blog|Comments Off

Torrid Toy Hiring Despite Challenges

Toy industry hiring has started off at a torrid pace. Here at Toyjobs we are currently on track to beat our best year ever (2000). It’s still early, and we haven’t hit the summer slowdown yet so realistically we are unlikely to eclipse the old mark. Frankly, we don’t even want to. Having a year like that takes a heavy physical, mental and emotional toll. Friends and family begin to get cranky – and I begin to get cranky too. As long as we keep raising the bar on our second (2004) and third (2005) best year’s, I’m a happy camper. It seems quite likely that we will be able to do that despite all the continued challenges facing the toy industry.

Oil, resin, transportation, labor and Chinese electricity costs continue to be high and this is keeping pressure on margins even as retailers continue to play hard ball on pricing while buying less goods. Toys ‘R’ Us store closures mean less shelves to fill and Walmart is actively cutting its inventory.

The results of this can be seen at some of the larger toy companies. At Mattel, Barbie continues in her death spiral (down 8%) while Hot Wheels and Matchbox also slowed (down 4%). Even American Girl which had been a star performer had sales weaken by 9%. The only bright spot was Fisher Price where sales were up 12%. I wonder if Neil Friedman is beginning to get all misty eyed while day dreaming about Buffalo winters. Hasbro did marginally better but still lost money in the first quarter. It looks like Rose Art sold out just in time with 5 Magnetix lawsuits to date. Over the years, Larry Rosen has been described using many adjectives (not all of them printable here) but to be fair; shrewd should always be counted among them.

The tough industry climate is also reflected in the fact that the toy business is now homeless. The TIA has to be viewed as the main villain here. They took an exorbitant amount of time to come up with a single option that was acceptable to almost no one but themselves. It was incredible to see that a working group consisting of mostly the same people as the TIA search group was able to come up with three or four new possibilities in the blink of an eye once they were free of TIA oversight. Unfortunately, what I’m hearing (not confirmed) is that all of those options have slipped through the industry’s fingers because it took too long for everyone to get their act together. It’s not easy herding cats.

The always opportunistic TIA in its seeming role as a for-profit trade show management firm, rather than that of the toy industry advocate that it should be is now charging an arm and a leg for Javits space that was made necessary by their own incompetence in finding a new home for the toy industry. Also keep in mind that there will be additional costs of building an appealing and closed trade show booth unless you want to get knocked off by everyone with a cell phone camera and an Asian connection. Once you have spent the money on that sleek new booth it will be easier for the TIA to overcharge you for space again next year…and the year after that…and the year after that…

Finally, we get to Walmart. It’s always fun to throw a few rocks at the big bully as long as you can run away and hide before he beats you up. According to CEO Lee Scott, “Walmart is making real changes.” Let’s look at them in order:

Walmart will increase surprise inspections at foreign factories in an effort to make sure that its suppliers uphold labor and environmental standards. Gee, this is almost too easy. Apparently, Walmart will NOT be conducting any inspections of its own stores which have been under severe publicity pressure due to its poor treatment of store employees and weak environmental record.
Walmart will increase diversity in its workforce. Yes, Walmart will constantly be on the lookout for any group of people it can employ at lower wages and with fewer benefits.
Walmart will expand its share of the Hispanic market. Duh, Walmart will try to sell more goods to more people. It will also try to employ more Hispanics at lower wages and then sell products to them at “everyday low prices.”
Walmart will sell more environmentally friendly products. Apparently Walmart believes that gasoline price squeezed consumers will be more anxious to spend $2 on an energy efficient light bulb than 19 cents on a standard one.
Walmart will help competing local companies stay in business. Uh-huh…and pigs will fly.

The only “real change” that I see at Walmart is that CEO Lee Scott is heading off on a one month paid vacation. I would like to see any of Walmart’s store employees try to do that. In a related (?) story, a Walmart customer who was experiencing difficulties with a self-checkout system not working properly was arrested for allegedly punching it out. Always remember that a weaker Walmart, which still sells tons of goods but is less able to bully its suppliers, is not such a bad thing for the toy business.

All the best,

Tom Keoughan

By ToyJobs|2020-11-20T08:51:05-06:00May 2nd, 2006|ToyJobs Blog|Comments Off

Toyjobs Posts Second Best Year Ever

Toyjobs posted its second best year out of 23 in 2004 (the best being 2000). During the first half of the year, there were abundant search starts but companies were reluctant to pull the trigger on hiring someone even once they had identified the candidate they wanted. That left us at about 38% of where we like to be for the first six months. This changed in July as we posted our best single month ever. Both search starts and hiring accelerated through the end of the year and are likely to continue doing so in 2005.

Our long stated hypothesis has been that companies cut not only fat, but muscle and bone during the economic lean years of 2001-2003. During 2004, the economy turned; 3.2 million new jobs were created — the strongest performance since 1999. While toy industry recovery has been much more muted, recent estimates are that traditional toy sales fell approximately 5% industry wide owing to structural changes initially driven by Walmart’s use of toys as a loss leader — manufacturers had squeezed their staffs to the point where they just couldn’t get the work done. This was exacerbated by retailers’ demands that toy manufacturers do an ever increasing amount of their work for them.

Most of this hiring came from small and mid sized firms. The big four (Mattel, Hasbro, Lego and Leapfrog) appear to be in crisis. Some of this is due to the law of large numbers, i.e. it is very hard to add 15% sales growth annually when you are as big as they are. For three of the aforementioned groups another problem is that they are public companies. No matter how many times they tell Wall Street that they are steady 10-15% growing consumer brand companies, they are not (the wants and whims of children are notoriously fickle.) The toy industry is a fashion business and neither Mattel nor Hasbro is P&G. Large publicly traded toy companies end up being forced to make short term decisions in order to support their share price at the expense of growing their business in the long run. There is also a strong tendency to play it safe and you don’t win in a fashion business by playing defense.

All of this creates opportunity for small and medium companies who have good, innovative products and are nimble enough to operate the way that retailers want them to. Unfortunately, retailers have their hand on the spigot and the word “partnership” no longer appears to be in their vocabulary. Toy manufacturers have been telling us that despite higher costs (resin, oil, transportation, electricity in China, etc.) they are finding it very difficult to push through price increases. Retailers are demanding that their prices to the consumer remain static and want their 55% margins as well. One of the few solutions for manufacturers is to move production into North China, but there are some fears that this may lead to quality control problems. Another solution is to pray that the price of oil comes down, but only after deal sheets are written.

Toy building rumors abound. With the sale set to close in March, management is not accepting new leases. Only the building’s exterior and lobby are protected by their landmark status and the main scuttlebutt is that 200 5^th Avenue will be converted into condos and 1107 either condos or possibly a hotel. The big question is when? What I’m hearing is that the toy building will continue to be the toy building through February Toy Fair 2006, but after that, all bets are off. Also, after the deal closes, I hear that new ownership plans to slash toy show budgets and generally make the building an unattractive place to do business in an attempt to push down the prices which they will have to pay out to existing leaseholders. How charming.

Finally, as is well known by both politicians and advertisers, if you repeat something often enough, it becomes true. Perception becomes reality. Just when we thought we deserved a rest after an election year of misinformation spewing out of both political parties, Walmart has stepped into the breach. We reprint a letter below from Ray Bracy, Walmart’s VP International and Public Affairs which is sure to set your eyes a-rolling (privately, of course). To hear Walmart tell it, they are worker friendly, union friendly, women friendly, benefits friendly, supplier friendly, and well liked by both children and animals. Certainly we all know better than that and, I for one, have little doubt that they squeeze their employees as relentlessly as they squeeze their suppliers. Of particular interest is their claim of “unions, we are not against them.” Chain Store Age (January 15, 2005) reports that in Quebec, where employees of two Walmart stores have elected to unionize that Andrew Pelletier, spokesman for Walmart Canada, said “the company is reviewing all of its options including a legal challenge.” Of course, Walmart’s low prices remain irresistible, especially to the working poor, many of whom … work at Walmart — a modern riff on “I Owe My Soul to the Company Store.” All toy manufacturers should secretly wish for unionization to sweep Walmart, thereby putting them on a more even playing field with other retailers. Unionization would have a particular effect on the grocery business where Walmart has the ability to undercut prices of traditional supermarkets which are unionized. Low grocery prices have driven the average Walmart shopper to increase store visits from 1.5 times per month to about one per week. Once in the store buying groceries, consumers buy other things as well, thereby increasing sales and decreasing the marginal cost of operations. In the retail space anything that leads to a more multipolar world is good for everyone. Walmart Unionization…say it again. Walmart Unionization…say it again. Walmart Unionization…say it again. Walmart Unionization…

All the best,

Tom Keoughan

By ToyJobs|2005-02-02T10:47:35-06:00February 2nd, 2005|ToyJobs Blog|Comments Off

Total Turmoil in Toyland

Let’s see, what hasn’t happened in the last four weeks? Toy shows always bring out plenty of news, rumor and innuendo but this time it’s a little hard to keep up.

We opened with the bankruptcy announcements by Applause, Fun 4 All, Hedstrom, and Huffy and from there moved on to poor earnings announcements at Mattel, Hasbro and Leapfrog. Then there was Hit Entertainment’s dismissal of CEO and chief architect Rob Lawes. Add to this KB Toys announcement that it will be shutting close to 200 stores after Christmas and the discovery that TRU’s toy division is being actively shopped (although TRU isn’t saying much, maybe they’ve gotten just a little bit smarter). Also, the Toy Building has been put up for sale – something they forgot to mention at their cocktail party.

Then there are the lawsuits. The World Wrestling suit against Jakks Pacific, Stanley Shenker, Bell Licensing et al looks particularly nasty. It will be interesting to see how that plays out. Allegations are easy to make especially when there are lots of big egos involved. They can be much more difficult to prove even if true. I certainly have no way of knowing what if anything happened, but it will be interesting to watch.

Then there is the lawsuit that Mattel has filed against Ron Brawer because he didn’t care to work for them any more and found himself another job. This appears to be a nuisance suit as apparently Mr. Brawer had no non-compete or confidentiality agreement with Mattel. Never in my life did I think I’d find myself on the same side of an argument as Isaac Larian, but Mattel is really screwing up here.

If a hypothetical company, let’s call it “Stalag El Segundo” were hypothetically to start having current and former employees followed by private detectives, were to submit their current employees to grillings by teams of attorneys, were to install security cameras in many of its offices, were to begin heavily monitoring employee phone bills, e-mail and computer activity; if a hypothetical company were hypothetically to do all that, my twenty three years experience as an executive recruiter tells me that they are likely to get results that they did not intend. That companies employees might be cowed for a month or two but in such a stifling environment would quickly decide to head for the exits. It’s the sort of thing that brings joy to a headhunter’s heart.

After rehashing all that, the following may seem counterintuitive but the October Toy Show was pretty upbeat. While some people complained about the lack of hall traffic, that’s not the type of show it is. Of the approximately thirty toy company presidents that I talked to, most felt that the show was very productive. Also surprising is that toy industry hiring continues at a torrid pace.

Too many things are happening too fast to have a fully developed thirty minute answer as to why this is so (sorry, sitcom watchers). It may be that we are finally at a tipping point. Much has been said in the last couple of years in this space and everywhere else about how Walmart’s drive to use toys as loss leaders has structurally changed the business. We may now be at the point where the market is choosing winners and losers. In the current environment it is very hard to be a winner, it is also very good to be a winner. Even more difficult than being a winner is to be average and still survive. In other words, it has started to get mean out there. Companies that are developing new and flexible strategies and successfully executing them and adapting to a rapidly changing reality are moving ahead. Companies that are unable to see the changes, plan for the changes or execute on their plans have begun to and will continue to fall by the wayside.

I know the message is not particularly cheery, but it’s definitely time to toughen up.

All the best,
Tom Keoughan

By ToyJobs|2004-11-02T10:53:47-06:00November 2nd, 2004|ToyJobs Blog|Comments Off