jobs in the toy industry

Toy Industry Walks Through the Fog of Uncertainty

Most toy industry executives are telling me that while they certainly would have preferred to still have Toys “R” Us as a viable entity, that they have mostly replaced the shelf space and think that the year will turn out alright. That said, they want to make sure that they are on firm footing before they start investing in additional staff. They would like to put behind them the uncertainty of whether new product placement equals new sell through.

The good news is that consumers still want toys. We just have to figure out how to best get those toys in front of them and make them take notice. From cell phones to video games to WhatsApp to Fortnite to over scheduling by parents: kids have a lot more things competing for and dividing their attention than the days when we would just go out and play. To complicate things further, the array of choices is changing at an increasingly rapid pace. The challenge for Marketers is how to get their wares noticed on a increasingly pixelated and changing pallete of potential diversions.

At the same time, the retail landscape is undergoing revolutionary change. E-commerce is booming but physical stores still do the bulk of consumer sales. Buy online and then get in the car and drive to the store to pick it up is also increasingly popular although for the life of me I can’t imagine why. Manufacturers have to figure out how to best operate in this changing environment. Complicating that further is that you can’t just change from A to B. The retail formula is changing constantly and more rapidly all the time. The only certainty is the ever-increasing velocity of change.

Thus far, the holiday shopping season appears to be off to a strong start. Foot traffic over the Thanksgiving weekend was down somewhat but retailers began offering deals earlier which pulled some sales forward. The Black Friday weekend is still a good indicator but consumers are broadening their shopping window so there is much less of a pronounced spike.

black friday

In the meantime, online sales have been exploding with approximate growth of 25% over the long Thanksgiving weekend plus Cyber Monday. We should expect a strong holiday sales season. The economy is humming, and the consumer is flush with lower unemployment, lower taxes, lower gas prices and as of the last few months higher wages. Event more importantly, the consumer is willing to spend. Top line numbers for retailers should be strong but profit margins for retailers of all stripes may be challenged by higher labor costs for brick and mortar locations and higher freight costs for items purchased online. Retailers may be willing to pass some of these cost increases on to consumers, but it is likely that for the larger portion they will be looking toward vendors.

While the overall holiday sales environment looks quite positive despite potential back end shearing by retailers, there is another big concern for toy manufacturers. That is a potential Trade War with China. As of now, it appears that Xi Jinping and the Trump Administration have made small concessions that permitted each other face saving gestures and agreed to a temporary cease fire.

trump xi pic

That allows toy manufacturers to breathe a little easier for now but kicking the can down the road doesn’t alleviate uncertainty. In ninety days, when a full agreement still hasn’t been reached, tariffs on the $200 Billion of goods now set at 10% will be increased to 25%. The good news is that toys, as it stands now, still will not be affected. Unknown is what happens next. How long will the next negotiating window be? What will the consequences be if a deal is still not reached? Most likely, the next step of tariff escalation will include the toy business. Will the toy industry be able to ship goods for the holiday season of 2019 by, let’s say, June 1st? Especially, when you realize that vendors and retailers may be at cross purposes. Manufacturers will be trying to ship products as early as possible to try to beat the clock while at the same time retailers tend to try to postpone commitments to buy as long as possible.

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If there is any kind of silver lining in this fog uncertainty, it is that the toy industry is more agile and better equipped to navigate uncertainty than most other manufacturers. After all, even in a year that is all blue skies and smooth sailing (and I can’t remember that ever happening) we are in a seasonal fashion business. Turbulence is our middle name. We are used to it.

My view is one of cautious optimism – but that’s pretty much my default setting. Things tend to work out… eventually. The worry is how long will it take.

Crossing the River by Feeling the Stones.

Tom Keoughan

 

By | December 4th, 2018|About Toy Jobs|0 Comments

Dallas Fall Toy Preview AND The Zombie Awakens

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Day one, morning at the Dallas Fall Toy Preview was mostly grumbling as exhibitors complained widely that: “This place is empty.”, and “There’s nobody here.” Indeed, the main floors on 12 and 13 looked like a ghost town. I found it much busier down at the 4th floor Diverse and McManemin showrooms. That’s likely because with twenty to thirty companies crowded into each space there was a much higher population density.

Activity had picked up by evening and interestingly there seemed to be more people at the Tuesday night cocktail party than there were in the building all day. This led me to quip: “if they want to increase attendance, maybe they should serve beer.”

By Wednesday afternoon, the sentiment had changed. Most exhibitors I spoke with were saying “We had really good meetings”. Several companies stated that while they could skip the show and just travel to all the different retailers, they like that fact that with the Dallas showroom space they could put their entire line of product offerings on display.

It was good to see several TIA Board members actively starting discussions and eliciting feedback about the future of the show. As usual, there was talk of moving the show to Los Angeles. There are two insurmountable problems with that. First, the large LA based companies don’t really want their nimbler competitors around trying to “distract” retailers with their often more creative wares. If the show was moved to Los Angeles in an attempt to consolidate what has turned into four October trade shows, then the big LA based companies would simply change their dates thus defeating the whole purpose.

Second, a lot of companies have opened showrooms in El Segundo but they can be anywhere from a couple of blocks to a couple of miles apart which necessitates leaving the building and often getting into a car and dealing with LA traffic. I seemed to be the only who thought that could be solved by running a continuous string of shuttle buses. Then the real answer came out. “Buyers don’t like it. They don’t want to travel from block to block and building to building.” That’s it. Retailers are the ones we want to attract and convenience. If we want to change the Dallas format in in such a way as to attract more buyers, we can’t do it in a way that they have already told us they don’t like. For the time being, at least, LA is out.

Company owners told me they like Dallas because it is convenient, it’s centrally located, and both travel and hotels are relatively inexpensive. They also like the ability to put their entire product line on display. Their complaints were: “More Buyers”, and that renting booth space was very expensive.

From where I stand, I like the show as it currently is. I can fly in and stay in an inexpensive hotel and spend two days meeting with fifty toy company owners and Presidents because they have a lot of free time on their hands. That’s great for me but I’m acutely aware that y’all aren’t having the show for my benefit. If the show doesn’t make financial sense for toy manufacturers, then it will cease to exist. So, here’s my two cents on possible ways to improve the show for my clients:

  1. More Buyers. It was great to have Wal-Mart, Wal-mart.com, Target and Target.com in attendance but booth space is expensive so if more mid-tier retailers are represented that helps to justify the costs. It would be particularly helpful if Sales Execs could use the show to avoid an additional schlep to Menomee Falls, Wisconsin or Grand Rapids, Michigan. What can we do to attract broader retailer participation?
  2. Condense the Show in Space and Time.  Most manufacturers had two or three appointments on Thursday morning but also had plenty of downtime on Tuesday and Wednesday. The show could easily be compressed into two days. I confess that I have no knowledge of how this would affect the T.I.A.’s financial considerations but my understanding is that this show isn’t a big money maker for them anyway. Also, the show could easily be fit on just the 12th and 13th floors. That would create a busier and buzzier environment. How could the showrooms on the 4th floor and what’s left of the 8th floor be motivated and compensated to move upstairs?
  3. Serve Beer. But maybe don’t start until lunch. 😊

The big buzz in Dallas was various announcements about the potential rebirth of Toys “R” Us. Phase one will be a shop within a shop launch of Toys “R” Us private label brands at “a prominent Midwest based retailer.” Meijers? Kohls? That sounds like a Hail Mary pass to me. I can’t imagine that the public is exactly riveted by brands like Fastlane or Animal Alley.

zombie

Much more interesting is the prospect of opening 200-300 stores in 2019 under the Toys “R” Us banner. At this point, plan specifics are preliminary and unsurprisingly very sketchy. That said, we should remember that Toys “R” Us was a viable business if it hadn’t been loaded with all that debt. Now that debt is gone, they are mostly off the hook to vendors for 2017 shipments, they have wriggled out of their leases and there is an awful lots of inexpensive retail space to let.

A lot of people had the immediate reaction, “Why would companies want to deal with them again?” Really? I can’t imagine a single toy manufacturer that wouldn’t happily line up for a retailer with 200-300 doors – provided that the terms were right. That said, the new owners of Toys “R” Us should come to realize that there is a lot of bad blood between vendors and a certain Sr. Merchandising Executive who actively chased in shipments that he had to have known weren’t going to be paid for. TRU’s owners may have needed him to hold things together thus far, but if they want to re-establish trust with their vendors, he will have to be jettisoned. All trust there is gone and is unlikely to be repaired. It may be time for the man in the Geoffrey mask to go.

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As I write this, Sears/Kmart is back on the ropes and wobbling badly like an aging prize fighter. They have announced they will close roughly 150 stores with an additional 250 stores put under review while about 300 stores that are considered more viable will remain open. Many toy companies continue to sell to Kmart while keeping receivables on a very tight leash, but I can’t help but think that I’ve seen this movie before… and I’ve seen it just recently.

Fortunately, other retailers are picking up the slack, Wal-Mart is increasing its toy department by 30% and Target is doubling its toy selection. Kohl’s and Penney, Five Below and Best Buy are all increasing toy sections for the holiday sales season and other retailers are following suit, Party City will open up to 50 pop-up stores for the holiday sales season and if successful, I would have to think that Spencer Gifts will follow suit with its Spirit Halloween division next year.

               U.S. unemployment rate, seasonally adjusted. Source: Labor Department

unemployment rateThis along with the lowest employment rate in fifty years, the highest consumer sentiment in 18 years and rip-roaring consumer spending should help toy manufacturers in 2018. The National Retail Federation expects that holiday sales-excluding autos, gas, and restaurants – should be up to 4.3 to 4.8 percent over 2017.

Most toy company executives are telling me: “though we would have done better without the demise of Toys “R” Us we think we will do okay.” They also say that they want to make sure that they are going to be okay before they start investing in additional staff. Toy industry hiring which was dead in the first half of 2018 picked up nicely in June but has not been as robust as it should be. I suspect that it will continue at the “better but not normal” rate until we make it through the holiday sales season and the January/February trade shows.

Steady as She Goes,

Tom Keoughan

By | October 17th, 2018|About Toy Jobs|0 Comments

Toy Hiring Gaining Traction

The sudden demise of Toys “R” Us has been very disruptive to the toy hiring market. It’s crazy out there. Many companies have laid people off but lots of companies are hiring as well. Oddly enough, many companies are doing both as they reorganize their rosters for the changes and challenges ahead.

Santa-Clarita-Toys-R-Us-Closure-

By the beginning of 2018, most toy manufacturers expected that Toys “R” Us was going to be a bit shaky moving forward and had instituted plans to limit any potential damage by shipping less, later and tightening payment terms. They were hedging their bets but remained confident that business would continue amongst constant reassurances by Toys “R” Us Execs to: “Remain calm. All is well.” Then shortly after the completion of the January and February Toy Shows, Toys “R” Us declared bankruptcy. While everyone knew that things were wobbly, nobody expected Toys “R” Us to fall so far and so fast. After all Kmart has been wobbly but still standing for over a decade.

In a typical year, very little toy industry hiring gets done in January and February as Toy Execs are overbooked and over busy crazily traveling the globe to attend anywhere from three to five shows. Not only are they too busy to hire they also would prefer to wait and see how retailers react to their wares before opening their wallets to add to staff.

WSJ store closing graph

Usually, about two weeks after the final trade show in New York, manufacturers put the finishing touches on plans and projections and the phones begin to ring here at Toyjobs World Headquarters. With the sudden and unexpected demise of Toys “R” Us, manufacturers had to reconfigure their expectations. Publicly there was a lot of finger pointing, magical thinking and gnashing of teeth. After about two months, forecasts were changed and plans were redrawn and search starts picked up in early May leading to increased but not overwhelming hiring in June, July and August.

Toy hiring follows toy sales and I would imagine that toy sales and will be somewhat lower in 2018 as  manufacturers search and battle for shelf space to replace their Toys “R” Us acreage. I would think that challenge will continue but to a lesser extent into 2019 as Toys “R” Us begins to fade into the rear-view mirror. I envision that toy sales and therefore toy hiring will remain disrupted but steadily gaining strength over the next year and a half.

I realize that is very much at odds with recently published NPD data. Toy industry grows its sales by 7 percent in the First Half!! Yeah, but … Consumers were lured into the Toys “R” Us stores by the trumpeting of huge markdowns which didn’t really look all that “yuge” once you were in the store. I know mothers who went to Toys “R” Us every couple of weeks in search of big bargains that barely existed. After all, if you’re going to lie to your employees and lie to your vendors why not lie to the public as well. Probably because traffic, even disappointed traffic, equals increased sales. Unfortunately, those sales didn’t help the toy industry all that much. They were sales of previously shipped and unpaid for merchandise. I would envisage that most of the proceeds went into the pockets of the bankruptcy attorneys rather than toy companies. So I see that 7% Toy Industry Sales Growth as a very flawed number in this period. Sales of toys off retailers shelves was indeed a very different things than sales by toy manufacturers.

That said they toy industry is reacting to and recovering from the Toys “R” Us debacle amongst a very bright backdrop. It’s better to face challenges in an increasingly robust economic environment. After all, this isn’t 2009 and the world isn’t going to end tomorrow. Rising employment, wages and tax cuts have consumer spending on a tear and US GDP rose to 4.1% in the second quarter, Wal-Mart just hit it out of the park. CEO, Doug McMillon was quoted last week as saying “Customers tell us that they feel better about the current health of the U.S. economy as well as their personal finances. They’re more confident about their employment opportunities.”

The evolving retail landscape toward online shopping continues but many brick and mortar retailers like Wal-mart, Home Depot, Nordstrom, and Coach have recently been reporting strong numbers while others (JCPenney, Bon-Ton, Claire’s) are either closing stores or going bankrupt. Weaker competitors are being weeded out and clearing some of the over capacity that has plagued retail. As a result, the remaining chains are growing even stronger.

The good news is that consumers still want to buy toys. Toy manufacturers will just have to be ever more nimble in getting their products in from of them.

Say what you will about Trump’s antics but the economy is humming. I’m still wary about Trumpian trade issues. I suspect, but can’t know for certain, that things will get worked out with Mexico, Canada, and Europe. That said, playing a game of chicken with China is a very different deal. Eventually, after much dickering, we will probably end up with face saving half measures (or more likely quarter measures) … eventually.

Free product idea for a Skill and Action Game:

The Game of Chicken: Trump, Trade and Tariff Edition

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“Crossing the River by Feeling the Stones”

Tom Keoughan

 

By | August 22nd, 2018|About Toy Jobs|0 Comments

Turbulence in Toyland – Same As It Ever Was

 

TRU 4-18-18

I think that it’s reasonable to say that there are two main causes for the recent demise of Toys ‘R’ Us. The first was the excessive debt burden put upon the company by owners KKR, Bain Capital and Vornado Realty. TRU’s heavy debt service came at a time of massive change in the world of retail and made it difficult for the company to invest in the changes needed to survive during this period of disruption. That said even if they didn’t have the debt burden, it is far from certain that TRU would have had the correct strategy or the ability to execute it. With their brand equity they should have been a leader in toy E-commerce but have botched that so many times that recently they haven’t even been one of the top five online sellers of toys. Additionally, their stores were a mess and there really wasn’t any compelling reason to visit them. If only TRU could have figured out how to attract as many people to its stores as attorneys to its legal hearings, things might have turned out differently. I think it’s reasonably to say that the business has been serially mismanaged since the recently deceased founder Charles Lazarus and his original team retired.

Corporate bankruptcies are always messy and the Toys ‘R’ Us case is no different. I am no big fan of US corporate bankruptcy laws having been burned by them a couple of times in my career. They seem a bit topsy turvy to me. Debt holders and financial institutions who are supposed to be professional evaluators of creditworthiness are first in line ahead of suppliers who are doing business with the company in good faith. Games almost always get played. I’m not privy to the details but it is pretty easy to imagine both product and service suppliers to Toys ‘R’ Us being lead on and lied to.

So, where does that leave us today? The patient is dead but there is still time for another attempt or two at resuscitation. To the Paddles! Toys ‘R’ Us is currently undergoing liquidation (even though the bargain prices don’t seem so low) but there are apparently still a few serious and non-serious attempts to revive the collapsing retailer.
There have been whispers of Toys ‘R’ Us trying to spin out or sell its house brands either with or without its internal product development team. However, those brands are not particularly strong, and I would imagine that the chances of this being successful are slim to nil even if they try it. The world will have to learn to survive without a brand called “Animal Alley”.

In better news, Toys ‘R’ Us attorneys have said in court that they have received multiple offers for a majority stake in its Asian subsidiary. Toys ‘R’ Us Canada has also been a viable business and there is talk of multiple offers in the works for the division.

Then we have the strange case of Isaac Larian. In what can only be described as a publicity stunt, Mr. Larian started a GoFundMe campaign purported to be an effort to buy Toys ‘R’ Us. The skinny is that if people donate enough money to buy Toys ‘R’ Us then Mr. Larian is willing to accept ownership of the company. In return, donors will receive not equity but rather bumper stickers and T-shirts which Mr. Larian imagines will be highly prized. I have to ask why such a scheme should be limited to the toy business. There are other troubled companies out there that Mr. Larian might like to own. Perhaps people will also donate money to buy General Electric for him. And why should we limit this to companies in trouble? I may consider asking donors to purchase Apple Inc. for me. It’s not surprising that this absurd effort only attracted $59,000.00 out of the billion dollars Mr. Larian has requested.

Isaac-Larian

Mr. Larian also purports to have made another more serious bid to purchase some Toys ‘R’ Us assets. While his GoFundMe shenanigans do make this plan less credible that does not mean that it is not credible at all. Mr. Larian has said that he has offered $675 million for the U.S. stores of Toys ‘R’ Us and another $215 million to purchase the Canadian operations. As the very least, the offer for the Canadian division appears to have some legs. Should either of these efforts come to pass, toy manufacturers will have to carefully consider whether to do business with a retailer owned by a major competitor. Mr. Larian has said that he will not be involved in day to day operations but people who know or have worked with Mr. Larian have never described him as being hands-off. One has to wonder if other toy manufacturers will be eager to “open their kimonos” on pricing, costs and early peeks at their product lines to a competitor in a secretive and often ruthless business. Time will tell.

Better news is coming out of the K.B. Toys camp. Strategic Marks which owns the brand has been in talks with Spirit Halloween, Party City and others to open up 1,000 pop-up stores to sell toys during the holiday sales season. This should help manufacturers in their search for more shelf space to replace that which they have lost at Toys ‘R’ Us even while fighting against their own unpaid for merchandise which is being sold at a discount during TRU’s liquidation.

Other potential turbulence in Toyland comes from the possibility of a trade war breaking out right at the beginning of the holiday shopping season. Thus far most of the tariff talk appears to be rhetoric rather than policy. Both the Trump Administration and China appear to be engaged in posturing ahead of what will likely be protracted negotiations rather than an all-out trade war. The two sides now have a period of about seven months during which they will seek to negotiate a new normal. Hopefully that will turn out to be the case because a game of chicken can end badly, especially when conducted in public by men with enormous egos. Sooner or later somebody is going to call your bluff.

What does this mean for toy industry hiring? So far, things are much better this year than last. Last year at this time, toy industry executives were telling me that they needed to add staff but were going to “hold off for now” due to uncertainty at Toys ‘R’ Us. Chapter 11 brought “certainty” but it wasn’t exactly helpful and left many companies wide-eyed and immobile like deer in the headlights. In 2018, toy manufacturers were expecting trouble at TRU and planned for it. Very few were expecting that trouble to hit as deep or as fast as it did, especially since Toys ‘R’ Us executives were leading them to believe otherwise. What I see in the toy employment now is total turmoil. Some companies are laying off. Some are hiring. Many are doing a little of each as they seek to realign their staff with their go forward strategies. Few companies are standing pat and most are making changes to meet the challenges of the shifting retail landscape. That means there will be winners and losers. There are few jobs right now for Sales Executives in the northeast, even as opportunities for people with sales experience calling on mid-tier and value channel retailers as well as E-commerce expand rapidly. Some will see new opportunities opening up while others will have to retool and learn new skill sets.

After a brief period of confusion, the toy industry is going to be alright. Consumers still want toys and five years from now manufacturers will have found new ways of getting their product to them. From the early eighties with the rapid succession of toy company shutdowns of – Mego, Lesney, Coleco and CBS Toys – the toy industry has been ever changing and always in turmoil. Same as it ever was.

“Crossing the River by Feeling the Stones”,
Tom Keoughan

By | April 17th, 2018|ToyJobs Blog|0 Comments

Toy Fair Revue and Prognostications

New York Toy Fair kicked off on Friday night with the 2018 Toy Of The Year Awards. Held at Ziegfeld Theatre, this was a fantastic event as always. The Toy Association staff led by Steve Pasierb has really got this down. I’d like to give a shout out to Marian Bossard, Kimberly Carcone, Robyn Gibbs, John Klein and the entire Toy Association staff for doing such a great job not only with the TOTY Awards but with New York Toy Fair as a whole.

Zuru WinnerTwo trends seemed to emerge among the award winners that night. First, collectibles continue to be a very hot category with WowWee’s Fingerlings and MGA’s L.O.L. Surprise! sharing top honors as “Toy of the Year.” In addition, Funko’s Mystery Minis won the “People’s Choice Award” which is chosen by tallying the votes of consumers.

The other big trend was that about half of the twenty awards were won by small and medium-sized companies. These companies have to run faster and jump higher with less resources (both human and financial) backing them up. They also have to be more inventive than the typical brand behemoth. I think this bodes well for the health of the industry which for a while in the early aughts seemed to be more about slapping licenses on sippy cups. Congratulations to the entire teams of all award winners for keeping kids smiling.

Sunday night was Ladies’ Night with the always wonderful WIT Wonder Women Awards Gala. As usual, it was held at The Lighthouse at Chelsea Piers. Please don’t move it. It’s a great venue. Event Co-Chairs Genna Rosenberg, Janice Ross, Jennifer Caveza and their entire Host Committee made it look easy despite what must have been an awful lot of work above and beyond their day jobs. Congratulations to all the Award Winners and to all the wonderful women of the toy industry.

WIT2018

New York Toy Fair as a whole seemed well attended and very upbeat. It also seemed that international attendance was quite high. The toy executives I spoke with exuded confidence and were bustling about their business. Now if we could just do something about those Javits Center floors.

TNT2018

Notable Toy Fair news included the election of Bob Wann of PlayMonster to Chairman of The Toy Association. Bob has toiled for both big industry players like Fisher-Price and Hasbro as well as smaller companies like Sababa Toys and now PlayMonster. He may be just the guy to balance the very different interests of those two groups. Maybe….. maybe he can even solve the annual October multiple location Toy Show mishegoss.

BobWannIn other news, Hasbro was named the global master toy licensee for Power Rangers. That might not impact the toy industry as much as Bandai losing what had been a long-time licensee. Lastly, Basic Fun announced that they had bought K’nex. K’nex has always been one of the most inventive and versatile construction toys in the pure product sense but never seemed to have been brought to market in the right way. Jay Foreman and his team should be able to change that.

Moving forward, with the exception of two monkey wrenches, both business and hiring trends look good. The toy industry only grew by 1% in 2017 but that was after three consecutive years of better than average 4-5% growth. The industry can afford to take a breather and still be able to move that trend line up and to the right. Buoying the economy is a strong labor market with unemployment holding at a 17-year low. Top-line wages are beginning to creep up AND, due to the new tax plan, take home pay is on the rise. Additionally, there is a growing wealth effect where consumers “feel” wealthier due to rapidly rising home prices and the stock market being near an all time high, despite February’s fluctuations. All this has led to skyrocketing consumer confidence, which indicates that consumers will open their wallets wider.

FeelingGoodChart

On the other hand, we have our two monkey wrenches. The first is Toys ‘R’ Us. During the New York Toy Fair, I asked everybody I spoke with about Toys ‘R’ Us. The venerable retailer had already announced that it would close 180 stores. That’s a lot of shelf space that won’t need to be filled. Most companies said that they had put Toys ‘R’ Us on a tighter payment schedule and had already forecast lower shipment levels to the retailer. Many said that they were done and weren’t going to sell to Toys ‘R’ Us anymore. I’m not sure that I believed all of them. Others cited that they would be moving to diversify their customer base. I’ve seen evidence of that. In the last year, Toyjobs has completed a lot of searches for Sales Execs specializing in mid-tier chains, E-commerce and the value channel.

ToysRUsClosing

Then on February 21st, the day after Toy Fair closed, The Wall Street Journal reported that Toys ‘R’ Us would be closing an additional 200 stores beyond the original 180. There were also rumors of laying off a quarter of the corporate staff. I’m sure that this news has sent toy executives scurrying back to their spreadsheets. Almost nobody had this baked in. Numbers will have to be crunched and decisions will have to be made. I’m guessing that many more companies will decide not to do business with Toys ‘R’ Us. Others will tighten the payment leash even further – cash on the barrelhead – a la Kmart. Competition for shelf space at other retailers will intensify. Bricks and mortar isn’t going away, just finding it more difficult to grow. Many heritage retailers had very strong 2017s. While E-commerce sales are skyrocketing, they are still less than 10% of total US retail sales. I also expect that toy manufacturers will start to really professionalize their E-commerce efforts.

The bottom line is that consumers still want toys but the way to get those toys in front of consumers is changing. It’s way above my paygrade but ultimately toy companies should think about banding together and creating their own mega E-commerce hub which will both attract consumers and keep manufacturers from getting sheared on their way to market. Think like a big media company. Content AND Distribution is far more powerful than Content or Distribution. The toy industry may be too small and fragmented for each company to do this on their own but banding together could turn out to be a “Grand Bargain.” Of course, the devil will be in the details. “Who pays for this? Who owns that?” but motivated people have a way of working things out.

ECommerceChart

As for the second monkey wrench, it goes by the name of Trump. On Thursday, March 2nd, Mr. Trump announced that he was going to institute a 25% tariff on steel and one of 10% on aluminum adding to his previously announced tariffs on solar panels and washing machines. The danger is that, if enacted, these will escalate into a full-blown trade war. Now that the economy is up and humming, this would be a very odd and counter-productive thing to do. Mr. Trump’s pronouncements aside (“trade wars are good, and easy to win”); a trade war is in nobody’s interest. It’s especially not in your interest to throw the economy into turmoil when it has been gaining strength while you have been President and you have mid-term elections quickly approaching.

TrumpThe only thing consistent about Mr. Trump is that his proclamations are much more extreme than his actual actions. I suspect that last week’s news burst was his way of opening negotiations since Chinese Trade Minister Liu He was just arriving in Washington. It is interesting to note that China doesn’t really export much steel, solar panels or washing machines into the United States. Steel exports have dropped rapidly over the last few years due to China’s own internal construction boom. They do ship a fair amount of aluminum here. That lends credence to the idea that these are really shots across the bow…. negotiating tactics. Would Donald Trump enjoy an international spectacle with him at the center? Surely he relishes the idea of global players rushing to him in order to curry favor. That said, the presence of Peter Navarro and Wilbur Ross in the Administration is troubling. So are we entering a trade war? Will he or won’t he? …..only his hairdresser knows for sure.

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SteelChart

Wrapping up, the overall terrain for business and hiring looks to be quite strong but we have two monkey wrenches coming at us fast. For Toys ‘R’ Us, toy companies can potentially ameliorate the crisis through planning, forecasting, tightening, diversifying and/or just deciding not to play. It will be a tricky navigation but presumably we should be able to come out the other side. As for Trump, there’s little to do but watch and wait to see if this is just negotiating bluster or if he has really decided to shoot himself in both feet. Hmm, I guess I’m cautiously ecstatic. Is that possible?

 

May you live in interesting times,

Tom Keoughan

By | March 5th, 2018|About Toy Jobs|1 Comment

2018 Optimism Once We Get Past TRU Mess

TRU
Every day we are pounded by headlines about retailers closing stores. Toys ‘R’ Us leads the charge and will be closing about 180 or 20% of its locations in the US. Walgreen, Brookstone and Hallmark have also announced closures.

Sears Kmart will be closing about 165 locations. Of course, if you are still selling to Kmart you already know that you’re sitting at the blackjack table deciding whether to draw another card when your hand stands at 15. Can I get 15 day payment terms? Can I get 10?

Wal-Mart will also be closing 63 of its Sam’s Club locations, although about a dozen of those will be converted into e-commerce distribution centers. Building out their e-commerce fulfillment network should help them deliver online orders to customers faster.

All of these store closings will mean less shelf space to fill but greater predictability for the year ahead.  No longer will toy manufacturers have to wonder: “Will they?”….They already have. Unfortunately, many manufacturers still have uncertainty on how much and when they will be paid by TRU for goods that they’ve already sold. That means that while the future looks brighter, many vendors still have uncertainty about their own current financial situation. It doesn’t help that Toys ‘R’ Us has secured a bankruptcy extension beyond April 6th. It is also unhelpful that throughout this whole bankruptcy process, TRU has been far from forthcoming and has not acted as a very upstanding citizen toward the toy industry community. “Not only are our payables way late but we will continue to nickel and dime you in the warehouse and any place else we can think of.”

There are, however, silver linings on the horizon. Holiday sales for 2017 posted strong gains. The National Retail Federation stated that overall sales when up 5.5% while according to data from MasterCard Spending Pulse they were up 4.9%. Target, Kohl’s and even J.C. Penney all hit it out of the park. Amazon continues to rocket forward. A study by One Click Retail said that the online juggernaut claimed 44% of all US e-commerce sales for 2017. Additionally, Amazon accounted for 4% of total retail sales for the year – approximately $200 billion.

Unfortunately, toy sales gains were much more muted. According to NPD they grew only 1% in the US and 1% globally in the 12 countries they track. Mexico and Russia were hot sales growth markets. Toys ‘R’ Us has to be one of the major causes of this. We have heard that TRU’s US sales dropped by 15% in 2017. And if those are the numbers we are hearing, the real numbers could be substantially worse.

Although we were coming off of our third best year ever, 2017 was a lousy year for Toyjobs. For the first nine months of the year our clients told us:  “We need additional people but we are going to wait and see what happens with Toys ‘R’ Us.” Once the bankruptcy was announced, toy manufacturers, for the most part, pulled in their horns. TRU is everybody’s second or third biggest customer and manufacturers big and small all took a hit to their overall profit margins.

Moving forward we are cautiously optimistic on toy industry hiring for 2018. Although there will be less shelf space to fill, there should be greater predictability on 2018 sales. In addition, tax relief should mean wider profit margins for toy manufacturers. That said, I wouldn’t be surprised if retailers are unsatisfied with their own expanded profit margins and also want a piece of yours. Consumer spending was up 3.8% in the final quarter of 2017. That looks to continue due to strong employment, signs of wage gains, a galloping stock market and high consumer confidence. Spending should be boosted even further as consumers see their take home pay begin to rise. The media has 90% of the American people believing that their taxes will be going up. What a surprise it will be when 85% of them actually see their tax burdens drop and their paychecks increase. Add to that, the pent up demand when toy manufacturers who wanted to add people last year now feel comfortable enough to do so. All of this should come to pass if and when the toy industry can finally get past the Toys ‘R’ Us fiasco.

I look forward to seeing everyone in the New York February cold.

Tom Keoughan

By | January 30th, 2018|ToyJobs Blog|0 Comments

Toy Hiring Mimics the Poor March Jobs Report – But We’re Optimistic

By now I’m sure that most of you have heard about the sharp deceleration in March hiring after a long string of strong jobs reports. Non-farm payrolls slowed in March to a seasonally adjusted 126,000, the weakest hiring in 15 months. Hiring estimates for both January and February were also revised downward.

My gut feeling is that things are not as bad as that report indicates, despite the press running around crying that “the sky is falling.” After all, bad news sells. The US has had a number of soft first quarters in recent years. I haven’t been able to come up with an explanation for that phenomenon that I’m satisfied with yet. Lots of correlation but unconvincing causation. Here at Toyjobs, we don’t just make stuff up but it’s still important that we recognize the pattern.

There have been lots of layoffs recently in the oil and oil service businesses and certainly that is a factor. And, for the last two years, first quarter winter weather has been horrible. Last month, job growth in construction and leisure and hospitality, two of the most weather-sensitive industries, slowed by about 90,000 jobs. Days when the office is closed due to weather also takes a greater toll than it is generally given credit for. There are the snow days themselves and then there are the next few days of playing catch up. Yes, I know everyone claims that they can get all the work done or are even more productive from home but we all know that’s not entirely true, don’t we? This means multiple days taken away from interviewing and decision making all of which pushes actual hiring down the road.

In the toy industry it is not unusual for hiring to be slow in January and February as everybody hits the road for the global trade show circuit. There is no time to interview and make decisions. A lot of companies also decide on whether to create jobs based on trade show and early year sales results. Hiring can slow even as search starts increase.

That’s what we’re seeing this year. Here at Toyjobs, after an extremely strong fourth quarter, first quarter placements have been slow as search starts have been soaring. If both unemployment figures and search starts had gone into reversal, I would be concerned that the US economy was faltering. That has not been the case. Search starts have been quite robust and those searches are now beginning to come to completion. Many will be completed in April and May – a few weeks later than usual. This leaves me optimistic that poor first quarter jobs numbers represent a delay rather than a long term slowdown and that we are thankfully about to experience a rebound.

Optimistically,
Tom Keoughan

By | April 15th, 2015|ToyJobs Blog|Comments Off on Toy Hiring Mimics the Poor March Jobs Report – But We’re Optimistic

Toy Company Jobs……What Next?

Job growth was anemic in July due to large government job cuts.  There was job growth in the private sector but it was less than expected.  Businesses are waiting for consumers to start spending while consumers are waiting for companies to start hiring.  It reminds me of a junior high school dance – nobody wants to be the first to step out.

There are two things we should keep in mind.  First, all the journalistic doom and gloom keeps people’s eyes glued to the screen/page which helps sell TV, print and internet advertising.  The entertainment/news business has been going through its own protracted slump and they are pumping out the pessimism for all it’s worth.

Secondly, July and August are always slow when it comes to both retail sales and hiring.  People are on vacation, outside, at the pool or hiding in their air conditioned homes instead of skulking around retail outlets.  Companies have different people on vacation at different times and it is very difficult to get much interviewing or hiring done.  Hiring slows even more in the seasonal consumer goods business as companies wait until retailers receive their pre-holiday shipments before they pull the trigger on spending decisions.

Economic indicators have been mixed but the economy is NOT falling off a cliff.  That July employment statistics were weak really isn’t that surprising.  I would expect the August numbers to be unimpressive as well.  It won’t be until we get to the end of September and end of October numbers that we will have a clear vision of which direction the economy is headed.

Most toy companies are telling me that sales into retailers are up (sell through to consumers remains a question mark) but that there continues to be pressure on margins.  Labor costs are up and the yuan and material costs are up marginally.  Factories are trying to raise prices.

Our forecast remains that there will be an increase in toy industry hiring beginning in September and running through the end of the year.  I am a little more concerned than I was that we may need one more year to reach that point in the cycle but I am going to wait for end of September and October economic numbers before succumbing to pessimism.  While things certainly are not good they are already vastly better than last year.

You will likely notice that our Toyjobs postings are currently a little thin.  Partially that is due to a number of searches that we recently completed.  Additionally, we are currently in the gap right before shipments hit the retailers’ warehouses.  I can say that we’ve been having a number of constructive conversations with employers and I expect a fatter list of toy company jobs after Labor Day.  So, steady as she goes.  Keep manning the oars.  Things could go either way from here.  We’ll know in November.

All the best,

Tom Keoughan

P.S.  Toyjobs Executive Monthly will be switching over to a Constant Contact format with our next issue.  If you don’t wish to continue receiving this every six weeks or so this would be a good time to opt out.  Just send us an email with “unsubscribe” in the subject line and we’ll take care of it.

By | August 17th, 2010|ToyJobs Blog|Comments Off on Toy Company Jobs……What Next?

Toy Company Jobs Turnaround Continues

The headline US unemployment rate fell from 9.9% to 9.7% in May. Unfortunately most of the decline was due to the hiring of temporary census workers who will hit the streets again in early autumn. The numbers weren’t good, no matter what the Obama administration may say, but negative reaction was likely exaggerated.

When looking at anything as complex as an economy it’s important to look at multiple data points and many of the relevant numbers showed continued signs of slow improvement. Toyjobs has long been partial to U6 which includes underemployed people who would love to have full time work but can’t land any. In May, U6 dropped from 17.1% to 16.6%. We also saw an uptick in the length of the work week and average hourly earnings. Small business confidence in the US rose in May to a twenty month high. These are all “reasons to be cheerful.” It’s also important to remember that the government statistics are always inaccurate and will be revised two more times before they settle on final numbers.

It’s better to evaluate trends rather than specific points in time. Over the last few months the majority of key economic data points have been improving at a slowly increasing rate. TGBF. Things are Getting Better Faster. If we see two or three consecutive months of many economic metrics declining then it will be time to get worried. We will have the final revisions to the May data by then as well.

Let’s try to keep in mind that the big government unemployment numbers include all types of jobs like construction, as well as factories and warehouses where unemployment is exceedingly severe. Most US toy company employees are white collar workers where the unemployment rate has been bouncing around between 4.7 and 5.0%.

That’s not to say that the toy industry doesn’t have its challenges many of which lie in China. While the revaluation of the yuan seems to have been temporarily postponed due to the Europe’s sovereign debt crisis; a prolonged drought is causing Chinese manufacturing centers to operate in a climate marked by rolling blackouts. There is also a severe shortage of workers which has emboldened those still on the job to engage in strikes (see The China Report). Consequently labor costs have already risen 20-30% and will likely continue to rise. If this keeps up consumer-product manufacturers will likely seek new manufacturing centers. Factories are already springing up in Vietnam, after that?… North Korea?… Greece?… Detroit?

Anecdotally, Toyjobs has seen increased new search starts in April and May and the rate of improvement is strengthening. TGBF. Last week I spoke at the Fordyce Forum, an educational conference for senior recruiters. As I talked with the other speakers, all top recruiters in their fields, I heard overwhelmingly that their business had either already turned or was just beginning to turn.

Companies aren’t expanding their staffs from pre-2008 levels but where holes have developed, they are now filling those holes. A year ago they just left them vacant. My ongoing forecast is for a pop in search starts beginning in late August running through September and October. Most toy companies are telling me that they think they are having a good year but that, coming out of The Great Recession, they will remain cautious until they are sure. In late August and early September as goods are shipped and reorders begin the toy industry will be much more comfortable as the perceived improvement in the business becomes tangible. Until then order revisions from retailers are still a concern.

A troubling trend I have noticed is that an increasing number of people, on both the client and candidate side appear to be suffering from misplaced anger. Individuals, families and businesses have found themselves in a period of prolonged economic stress. Frustration is understandable as people feel that they have lost control over their lives. There is an increasing number of long term unemployed, people see their businesses under severe financial strain and even the currently employed feel the stress of doing their own work as well as the work of two other people who were laid off. One thing I can say for certain is that there are very few bankers, mortgage brokers, congressmen or (insert your favorite here) working in the toy industry today. In the toy business at least, it’s a pretty safe bet that anyone you are dealing with is not the cause of the current economic climate.

As you can see in the article below, acting out upon misplaced anger can be the start of an ongoing pattern which certainly won’t help anyone personally or professionally. Most of us are mostly keeping it together but for a few it’s important to realize that things are getting increasingly better. Don’t let this period of stress leave a permanent stain on your reputation. People would be well advised to cool it a little.

All the best,

Tom “Cucumber” Keoughan

By | June 14th, 2010|ToyJobs Blog|Comments Off on Toy Company Jobs Turnaround Continues

Revaluing the Renminbi and a Toy Jobs Turnaround Begins

Much of the news chatter over the last month has been about the pressure being put on China to revalue the renminbi. While it can easily be argued that China is manipulating its currency, there will be losers if the yuan begins to rise.

One major loser will be companies selling consumer hard goods in the U.S. (we don’t buy much food from China). If the renminbi rises it will cost more U.S. dollars to produce goods in China. That could mean higher prices for American consumers at a period in time when they can ill afford it.  Another scenario could see Wal-Mart and its retail brethren holding their price points firm thereby squeezing the margins for U.S. consumer hard goods makers. U.S. companies will then try to beat the difference out of Chinese factories that are already operating on razor thin margins. Arguably, this was a major contributing cause for the product quality problems of 2007.

While American politicians are naturally jabbering about jobs during the current period of high unemployment; the reality is that a rise in the yuan won’t help U.S. job growth as much as advertised.  China is the final assembly point for the global economy. If the yuan rises that will increase its purchasing power making it that much “cheaper” to buy natural resources and components from Korea, Malaysia, Australia etc. That will make manufacturing in China even more attractive. On the other hand, thousands of U.S. consumer goods companies may have their margins squeezed making it that much more difficult for them to hire additional employees.

The Obama administration has said that it wants to double U.S. exports over the next five years with a particular emphasis on large developing countries especially China. Since China doesn’t currently have a very large consumer economy that means we’re talking about great big stuff – infrastructure projects that benefit the likes of General Electric, Caterpillar and Bechtel. Certainly global behemoths like these are capable of making larger political donations than ABC Toy Company. Coincidentally(?), they also tend to have large unionized workforces. It’s above my pay grade to say whether we should pressure China to stop manipulating its currency or trade sales and marketing jobs for union jobs. I’m just saying that there will be winners and losers.  That’s the way the world rolls.

Meanwhile, back on the unemployment front; the job market is showing signs of life. Employers added 162,000 jobs in March, but almost one third of the growth came from the government hiring temporary workers for the census (in order to pave the way for the next round of gerrymandering?). While the headline unemployment rate (U3) has remained flat at 9.7% for the last three months; U6 (which includes the underemployed and discouraged workers) has started to creep upward from 16.5% to 16.8% and finally 16.9%. This is mainly a result of people who previously weren’t even bothering to look for work who are now beginning to restart their job searches as they begin to feel that the climate is getting a little bit better.

Indeed, there’s a good chance that we’re at the inflection point for unemployment. Increased demand on top of steep cost cutting (people) during the recession has meant a swift rebound in corporate profits. The level of profits economy-wide remains below the 2006 peak but accelerated sharply late last year. In the third quarter after-tax profits jumped 12.7% from the prior period. It is widely thought that when we get the government data, there will be similar strength in the fourth quarter of 2009 and in the just ended first quarter of 2010.

A recent surge in the hiring of temporary workers, often a precursor to full-time positions, also bodes well. Employment of temps has jumped by 248,000 since October; a 15% gain that is one of the strongest rebounds ever.

UPS, Federal Express and many trucking and rail companies have seen business activity picking up sharply. UPS reported last week that during the first quarter not only had their international business grown rapidly but that US domestic volumes grew for the first time in two years. Transportation activity has started to turn but remains well below previous levels meaning there is significant room for expansion. That seems to indicate that manufacturers and retailers (!) are still far from completing inventory restocking.

In March, the consumer seems to have rejoined the party. Consumers have shed an increasing amount of debt through defaults and government incentives for banks to forgive mortgage principal. Economists now expect consumer spending to grow at an annualized rate of 3% in the first quarter. In March there was a 1.6% surge in retail sales as shoppers turned up in surprising numbers at stores, auto dealers and restaurants.

Anecdotally, just as spring weather suddenly hit us in the second week of March, too the job market seemed to blossom as our phones started ringing off the hooks with companies inquiring about new search starts. All this is very hopeful but we can’t eat hope. Most of the toy company executives I speak with are feeling pretty good about 2010 but they remain cautious. They “think” that they’re going to have a pretty good year but they won’t “know” it until August/September. That is traditionally a time when hiring jumps in the toy industry and I expect a big pickup in activity then. In the meantime, while the climate is certainly not good; things are getting better faster. KGOY? TGBF!

Still cautiously muddling thru but breathing a little easier,

Tom Keoughan

By | April 20th, 2010|ToyJobs Blog|Comments Off on Revaluing the Renminbi and a Toy Jobs Turnaround Begins