Jakks Pacific

Apocalypse Postponed

Open image 1By now, the Dallas Fall Toy Preview follows a familiar script. We arrive and everybody grumbles, “There’s nobody here” and “This place is empty,” but by the time that the Opening Night cocktail party gets underway, everybody realizes that things are actually going pretty well.

This year there was strong retailer presence with very few new no shows aside from Big Lots (shrug). That said, I did notice that a few additional substantial manufacturers were not exhibiting and that the 8th floor had all but disappeared.

There were the usual questions and concerns about having three trade shows in three locations over the same two or three week period. “How will the Toy Association fix this?” Personally, I’m resigned to the view that they won’t. Mainly because most of the toy manufacturers involved are reasonably happy doing what they’re doing. Companies showing in Los Angeles are happy showing in Los Angeles and are equally happy that half of the industry isn’t there diverting attention away from their product lines. Companies showing in Dallas like showing in Dallas as long as the buyers show up. It would, however, be helpful if Kohl’s and Meijer would attend so we can avoid treks to Grand Rapids, Michigan or Menomonie, Wisconsin. From what I’ve been told there was much less of an early October presence in Hong Kong. It’s probably too early to call that a trend, especially since it’s difficult to tease out the deterrent effect of the ongoing Hong Kong street protests. We should be able to get a better read on that next year.

By Thursday afternoon, most toy manufacturers in Dallas were telling me that they had very productive meetings with retailers. They also said they were able to create additional interest by laying out their entire product range. Additionally, I heard about a lot of positive surprises coming from walk-ins. The Dallas Toy Preview remains an exercise in quality over quantity. Continued success of the show will depend on The Toy Association maintaining and preferably increasing the breadth of retailer participation.

Open image 2

Source: justplayproducts.com

Recently, consolidation has been in the forefront of toy industry news. Jazwares has bought Wicked Cool Toys and Just Play is closing in on a purchase of Jakks Pacific. It’s interesting to note that most of the major players involved are former Jakks employees. Michael Rinzler and Jeremy Padawer were long-time Jakks employees who quickly built Wicked Cool into an exciting and innovative company. Both Geoffrey Greenberg and Charlie Emby previously sold toy companies to Jakks and then worked for them for a spell. They founded and built Just Play into a toy industry powerhouse. All this makes one wonder what Jakks might have become if it wasn’t saddled with such inept senior management.

Open image 3

Source: wickedcooltoys.com

Toys ‘R’ Us continues to create headlines but I suspect little else. Last time out, we discussed their 6 store “Flea Market” model where they will rent space and then in turn rent it out to toy manufacturers to try to sell their wares. With that they will also provide “powerful analytics” but since those will be based on such a small sample they aren’t of much real value.

They have now partnered with Candytopia on a two store “experience” model. Reported entry ticket prices look like they will be deal breakers for consumers. Reportedly it will cost $20 per child and $28 per adult to enter “the experience.” That means it will cost a family of four $96 before even thinking about purchasing a “shut up” toy on the way out. This is the opposite of the old Italian Restaurant model where everyone leaves happy after a free shot of Sambuca. Instead, it sounds like a lot of unhappy kids walking out the door with a roll of Smarties. Paying $96 to end up with a car full of crying kids doesn’t sound like an exciting prospect. Maybe families will go once…maybe.

Open image 4

Source: linkedin.com/company/trukidsbrands1/

Lastly, TRU has announced that it has essentially outsourced its startup e-commerce business to Target.  That sounds to me like the actual owners of TRU Kids Brands won’t give management the money necessary to build or buy their own e-commerce platform. If the owners of the company don’t have any confidence in the holdover management from the Toys ‘R’ Us’ collapse, why should we? TRU should have had a first mover advantage in kids e-commerce twenty years ago and have flubbed it numerous times since. Unless they can come up with some spectacular content that isn’t available anywhere else (put me down as skeptical), I don’t see them becoming the hot go-to location.

TRU Kids Brands “strategy” looks like a shotgun approach of schemes by a company that has no money, doesn’t want to spend any money, but wants to convince both toy manufacturers and consumers to give them money while they milk their brand for what they can, while they can. Even before this new reincarnation, the Toys ‘R’ Us brand had been badly damaged by shoddy stores, bad management, and undercapitalization. I don’t see anything different here except a fresh coat of paint.

Open image 5

Source: insidethemagic.net

That said, it’s good to see Target really stepping up and looking to grow its toy business. The Toysrus.com deal should help them to jumpstart that, at least in the beginning. After a few years I expect that Target will have eaten whatever lunch TRU has left. Putting miniature Disney stores into its locations should be a much more powerful long-term growth driver. Unfortunately, with Target one must always bear in mind the words of Mark Tritton that will forever ring in infamy: “We will refuse to accept any new cost increases related to tariffs on goods imported from China.”

Which brings us to tariffs. Late Friday, the US and China reached a truce on trade war escalation. While an all-encompassing trade deal would be better than a partial deal, a partial deal is better than no trade deal at all. Since the details still haven’t really been worked out, it’s better to view this as a cease-fire rather than even a partial deal. But that’s still better than continued trade war escalation.

Open image 6

Source: scmp.com

Next week’s planned increase in tariffs to 30% from 25% on $250 billion in Chinese imports has been put on hold. In return, China will greatly increase purchases of U.S. agricultural products. However, planned December 15th tariff increases on a wide array of consumer goods remain on the table at this time. Both parties are said to be discussing Chinese intellectual property rights, forced joint ventures, and technology transfers and increased U.S. access to Chinese markets. Those negotiations will be hard fought, and the devil is likely to be in the details. For a final deal to be struck, the Trump administration is going to have to give up its demands that China end its support for state-owned enterprises. The Chinese are not about to change the way their entire economy is organized – especially when for the last thirty years, it has been working very well for them. Also, the U.S. will have to cease demands that China dismantle its Made in China 2025 New Technology initiative. That demand is ludicrous. Its not hard to imagine what the U.S. would say if China demanded that of us.

I have no special knowledge or shining track record of predicting the future, but if I were to prognosticate – my guess is that there will be a series of “skinny deals” which will both allow a number of declarations of victory as well as eat up the calendar moving toward Election Day 2020. Only after the election will the U.S. reduce its China 2025 and state sponsored entity demands. In other words, I believe that the process is to a degree being staged managed. That doesn’t mean that the players have complete control over it and it doesn’t mean that things can’t still go wrong. It also doesn’t help companies making plans for business year 2020. Proceed with caution. Steady as she goes.

All the best,
Tom Keoughan

By | October 15th, 2019|About Toy Jobs|0 Comments

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

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