jobs in the toy industry

It Wouldn’t Be Toy Fair Without Snow

The New York Toy Fair brought both the annual snowfall and a sense of realistic optimism which was far more encouraging than last year’s dour face fest. The mood was upbeat but realistic and mostly devoid of trade show happy talk (We’re doing great! Everything’s fantastic!) although a few other toy industry commentators did suffer from a little “irrational exuberance.”

Traffic was very strong on the three days that I was there. I even saw smiles in the “basement of gloom” as downstairs traffic was much improved over last year. Several toy industry executives commented that the quality of the traffic was quite high and that there were a lot of mass market buyers in attendance. Exhibitors also said that smaller specialty stores were writing a lot of orders.

I’ve lost some weight so that my feet weren’t as sore as usual as I traversed the world’s hardest floors. There were a few clients and prospective clients that I didn’t get to see because they were always busy with customers. I don’t look at that as a bad thing: sell away, grow your businesses, add more employees – I am very happy with that.

There were a sizable number of mass market toy manufacturers not “showing” but still skulking through the aisles and taking meetings in the food court and other clandestine corners. Personally, I miss that room on the 13th floor of the toy building that had all the big leather comfy chairs. It was down the hall from “the mayor of the toy building” Bob Gellman’s showroom. It was great to see Bob at the Javits Center in 2010.

One complaint that I heard from several attendees and would like to echo myself is the demise of the printed Toy Fair directory. This was a very handy and useful tool that sat on or near the desk of many a toy executive, me included. Although billed as part of a “green initiative” this was clearly a cost cutting measure. One booth attendant told me “we tried to move it online but most of the companies didn’t sign up.” I do applaud “the virtual tote bag” program. What could I possibly do with another Homer Simpson key chain? Doh! We should try to differentiate between useful and just plain waste.

Part of the reason for Toy Fair’s optimistic tone was likely due to Wal-Mart’s strong showing for both the fourth quarter and the year. As the world’s largest retailer Wal-Mart’s financial reports are a closely watched barometer of the economy as a whole. For the fourth quarter total sales rose 4.6% with a 22% increase in profit. On an annual basis, Wal-Mart’s total sales rose only 1% (we all need to remember how awful the first seven months of 2009 were) and profits were up 7 percent. While the fact that same store sales (which don’t include the effects at Wal-Mart cannibalizing it’s own stores) for the fourth quarter were down 1.6% may be of interest to Wall Street analysts; as suppliers the toy industry is much more concerned with how much total stuff moved off total shelves. So, not a bad year for the world’s largest retailer in the midst of the worst economic climate since The Great Depression.

In other Wal-Mart news, toy industry executives were initially concerned with the announcement of a global sourcing partnership with Li and Fung. The unit will be called WSG and Wal-Mart has the option to take full control of it in 2016. Initially, that sounded a bit ominous to everyone but it appears that WSG will be focused on non-branded private label merchandizes. Due to Wal-Mart’s shrinking of the toy department, that’s not really what they’re buying for the toy aisle anymore anyway. In the short to mid-term though, I can envision Wal-Mart putting together direct to retail deals between licensors and its WSG unit. This could easily affect things like kids licensed backpacks and stationary and other items not requiring much tooling (or risk) and could possibly be expanded down the road.

As far as toy industry hiring, we are beginning to get some job offers. New search starts are continuing but at a slower pace than the first of the year new budget bump. I continue to see this as a recovery year where hiring will continue to gradually improve especially in the second half. It’s still not good out there but it is much better than last year. We all have to muddle our way through and hopefully by 2011 things will be mostly back to normal.

Muddling through,

Tom Keoughan

By | March 3rd, 2010|ToyJobs Blog|Comments Off on It Wouldn’t Be Toy Fair Without Snow

Poor Economy Continues to Dog Toy Industry

The economy remains stagnant as continued layoffs and tight credit have left consumers cautious. Even the currently employed have stopped spending and are hoarding cash because it seems that on any given Friday anybody can be laid off.

Retail sales continue to be poor and have even worsened after the brief January, February upturn which followed a dismal autumn. March retail sales fell 1.1% from February and were down 9% from the same month year ago. The only bright spots were the usual suspects, discounters Wal-Mart, Costco, the Dollar stores and drug chains.

On the brighter side the financial situation does seem to be stabilizing although still not recovering. The LIBOR rate (the interest rate at which banks lend to each other) is now in close to normal territory and the stock market has been recovering as bargain hunters have appeared. Of course, all evidence of “stabilization” could evaporate in a day and we could be back in the freefall zone of last autumn.

The employment situation continues to be bad with lots of people looking for work but few available jobs. Companies are still saying that although operationally they need additional people they are not hiring due to financial concerns and banking restraints. In “the tiniest glimmer of hope” department, Toyjobs has just recently noticed a slight uptick in the number of new search starts. It seems as if during the first quarter 98% of companies had a hiring freeze but now that we’re in the second quarter only 85% do. That is not exactly overwhelmingly good news but we can hope that it becomes a trend that continues.

In a humorous note, Reuters reported on April 17th that Isaac Larian of MGA has offered Mattel an opportunity to pay MGA for the Bratz line after the court awarded Mattel $100 million from MGA and ordered MGA to stop making Bratz, which the court determined was misappropriated from Mattel in the first place. That order was later suspended until the end of 2009. Toyjobs only comment is: “Gee, what a kind and generous offer from Mr. Larian. Bless his heart.”

Muddling Thru,
Tom Keoughan

By | April 14th, 2009|ToyJobs Blog|Comments Off on Poor Economy Continues to Dog Toy Industry

Toy Industry: Bleak Forecast 2009

In 2008 the toy industry and indeed everybody had to endure the worst holiday sales season since 1992.  This was truly an awful year where both comparative sales and total sales were down sharply for most retailers.  In some recent years we have seen weak comparative store data even though total sales were fairly strong.  I’ve always argued that comp store sales is a flawed indicator because it fails to take into account the cannibalization of sales that occurs as large retailers continue to build more and more stores closer and closer together.  Think Wal-Mart or Starbucks.  In 2009, we may see a “reverse cannibalization effect” as retail chains shut down large numbers of stores and entire chains go out of business.  It’s my feeling that total store sales is an obviously better measure of how much total “stuff” is sold by a retailer to consumers.  In any case, 2008 was a horrible year for retail when measured by either yardstick.  Only the deep discounters like Wal-Mart, drug chains and the dollar stores had good or even decent years.  Surprisingly, even the warehouse clubs did poorly.

The combination of a terrible holiday sales season and the credit crunch economy proved too much for several weaker retailers who were forced into Chapter 11 or even liquidation.  KB Toys, Circuit City, Linen & Things, Office Depot and Gottschalks all went under.  The retail death watch continues with Dillards, Claire’s, Duane Reade, Talbots, Bon-Ton Stores, Pier One Imports and even Borders all rumored to be teetering close to bankruptcy.  In addition to outright failures many retailers will close a significant number of stores.  It is estimated that 200,000 stores will close by year end.  Fewer stores means less shelf space to fill which translates to less overall sales for toy companies.  As always there will be winners and losers.                           

Most companies are not self financing and rely on bank loans or lines of credit to finance operations.  In the current financial climate where banks reticent about lending even to the strong, I would expect weak and marginal companies to struggle.  Starting this past September we began to see toy companies either fail or be bought out by stronger rivals.  I would look for the trend of acquisitions and company closings to continue and even accelerate.       

With the news that several key retailers were not going to attend the January Hong Kong Toy and Gamers Fair, toy executives spent the month of December scrambling to get the 2009 sales season rolling with those major retailers that weren’t going to attend.  Once in Hong Kong, some complained about the retailers who weren’t in attendance and some even said that the show was a waste of time.  Other, more optimistic types saw it as an opportunity to really focus on second and third tier customers.  It was also noted that the international retail presence was particularly strong.              

I was both curious and concerned that with oil, resin and transportation prices coming down that retailers might try to claw back the already less than adequate price increases they allowed toy companies in 2008.  The word back from Hong Kong was “they asked but they didn’t demand.”  Toy companies were able to cite high safety testing costs as a reason why prices shouldn’t be rolled back.  Also discussed, was that with so many Chinese toy factories closing (more coming after Chinese New Year?) that U.S. toy companies had little negotiating leverage left with those factories that remained.  Price stability will be crucial in 2009 as both lower sales volumes AND tighter margins would be a recipe for disaster.  That said, my best guess is that 2009 will be the toy industry’s most difficult year since I started out in 1981.                

Toyjobs had a respectable year in 2008.  After getting off to our fastest first half ever, we entered the third quarter and unfortunately, there pretty much wasn’t a third quarter.  We were lucky that we had, what for us was, an average fourth quarter.  That said more than half our fourth quarter placements came from a single client who was hiring due to a corporate relocation.  Overall we were about 15% off of our average for the year.  That’s not bad because our average is pretty good.  I’m happy with our results in 2008 but I am even more happy that the year is over.  The only thing that I’m not happy about is the outlook for 2009.  I foresee that by the end of the year there will be fewer retailers, fewer toy factories, fewer US toy companies and yes, fewer toy recruiters.  I hope that when it’s all over everybody reading this will still be standing.   We, here at Toyjobs, certainly intend to be.   

 

See y’all in New York, 

Tom Keoughan

By | January 27th, 2009|ToyJobs Blog|Comments Off on Toy Industry: Bleak Forecast 2009

Bleak Times: Will Walmart Steal the Silver Lining in 2009

The Dallas Toy Show began amidst the throes of the credit crisis.  The stock market was plunging on a daily basis while the economy was having a severe heart attack.  No wonder then, that most people’s attitude was initially, to put it mildly, trepidatious.  The Christmas sell through season was looking bleak.  Retailers had been reluctant to make large inventory bets and everyone from retailers to toy companies to Asian manufacturers were having difficulty obtaining the capital necessary to fund operations.

Many, if not most, small and medium sized toy companies are not self-financing and operate on bank loans and lines of credit.  We had just seen both Dolly Toys and Sababa Toys fold and MegaBrands was arguably (I’m sure that they would argue that they were not) teetering.  Banks were and are tightening up on business loans and reducing lines of credit.  They are also reducing credit card limits to consumers.  The scariest quote that I read comes from The Wall Street Journal on October 17, “Credit has gotten so tight in recent weeks that companies contemplating a bankruptcy filing can’t find the cash needed to go through the process.”  We can’t even afford to go bankrupt anymore.  Whew!

Fortunately as the show went on the mood visibly improved.  Most of the important retailers were there (with the conspicuous exception of Costco).  The majors (Wal-Mart, Target) may have only been making short, almost social, stops but toy company executives were telling me that they were having very productive meetings with second tier retailers.  This should inform toy companies how to approach the show in the future.  Wal-Mart, Target and Toys ‘R’ Us aren’t going to give you much more than a little face time here.  Accept that and be prepared to make the most of it.  This isn’t the time to sell them, but rather, know in advance what questions you want to ask and what answers you need to positively affect your business.  As for second and third tier retailers; this is the time to sell the hell out of Walgreen, Shopko and Books-A-Million.

The general mood improved as companies realized that either sitting around moaning or being paralyzed by fear was a sure road to ruin.  The only way to survive, and that survival is not guaranteed, is to go out and do business – so get to it.

Speaking of sitting around moaning; the one very justified gripe that I heard over and over again concerned the new product quality regime.  It seems like no one with any real industry experience had anything to do with developing it.  While its final goals are admirable, it is not physically or financially feasible.  Also, the smaller and medium sized firms are hit disproportionately as they have to amortize the costs over a fewer number of goods sold.  The unasked question in the room is this: What portion of everybody’s testing bill should the main offender, Mattel, pay?  It’s appalling that this works in their favor by putting undue pressure on smaller companies, mainly due to Mattel’s many screw ups.

In other news of big bullies acting to the detriment of the entire toy industry: Wal-Mart launched all of retail into a toy discounting spiral on the spectacularly early date of October 1st.  What’s next?  Christmas in July?!  This, even though it conflicts with consumer behavior which shows that shoppers are purchasing closer to the time of need.  For all the hoopla over Black Friday and the Saturday after Thanksgiving, in recent years the biggest shopping spike has been the weekend before Christmas.  Wal-Mart’s annual attempt to push the Christmas shopping season ever earlier fails with consumers but the discounts can be viewed as a very effective kill the competition strategy.  Those discounts have got to hurt seasonal retailers like Toys ‘R’ Us and KB Toys.  KB has been tottering for years and with the economy in shambles one has got to wonder whether they’ll make it through this time.

Wal-Mart is also hitting Chinese suppliers with a slate of stringent environmental and safety mandates, just as manufacturers are facing rising costs and dwindling demand for their products.  Thousands of factories in southern China have closed this year due to soaring costs and tougher environmental and labor standards.  We’re all for safe products, fair labor practices and a cleaner environment; the problem is when the big bully, whether it’s Wal-Mart or the federal government, mandates costly procedures and then doesn’t help pay for them but rather just pushes the costs onto others.

In 2008, toy manufacturers’ costs soared 25-30% but retailers led by Wal-Mart only allowed price increases of 5-8%.  2009 promises to be an even more difficult year in terms of sales volume.  The potential silver lining is that lower oil prices should translate into lower resin prices and transportation costs and thus higher margins.  Unfortunately, I heard at the Dallas show that Wal-Mart is already angling to grab back those margin increases from toy manufacturers.  In a recessionary environment, Wal-Mart is going to want to set very low prices and they are NOT going to want to pay for it.  They will want to take it out of the hides of their already margin squeezed suppliers.  In order for other retailers to compete they will need to mimic the practices of the sales volume and low price leader.  I’m afraid it’s going to feel like they’re kicking you in the ribs while standing on your throat.  Sorry to be so “cheery” but I calls ‘em like I sees ‘em.

Trepidatiously yours,

Tom

By | November 9th, 2008|ToyJobs Blog|Comments Off on Bleak Times: Will Walmart Steal the Silver Lining in 2009

It’s Crunch Time in the Toy Industry

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

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

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

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

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

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

Wishing for more toy company jobs,

Tom

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

Toy Fair Outlook – Cautious

The February Toy Fair seemed to go pretty well. The Javits Center maintained its world record of having the hardest floors on the planet. I did notice that several mass market companies were not “showing” although some had representatives lurking in the aisles. Mass market companies that grumbled beforehand that this would be their last one all seemed satisfied and said that they would be back. Specialty toy companies were having a field day and seemed to be a much more jovial group. I think a company’s sense of success at the show was very much driven by their expectations coming into it. It’s an excellent show for specialty manufacturers but also a very good place for mass market companies to focus on second and third tier retailers. Over the last couple of years, most of the toy company executives I have spoken to at Toy Fair have been cautiously optimistic but this year I would characterize their mood as just – cautious.

Of course, there is good reason to be cautious with big recession thunderclouds on the horizon. I don’t get the sense that recession has hit yet. Despite anecdotal evidence of empty store aisles, retail sales were strong in February. Wal-Mart’s total sales were up 8.9%, Target up 5.9% and Costco up 11%. That said, everyone from businesses to consumers seems to be standing around very quietly wondering why they’re still on their feet. It’s like waiting for a tornado. The press may not be talking us into a recession but they are certainly hastening its arrival. It’s also a little unnerving that the balance sheet of a single company could throw us all into crisis. If MBIA receives a ratings downgrade all hell is going to break loose. I suspect there would have to be some sort of government intervention.

Add to economic backdrops the particular challenges that the toy industry is facing now – rising costs, the rising Yuan and stingy retailers only allowing prices to rise 5-8% – and you have the making of thinner margins and a very difficult year.

Because of the string of January and February Trade shows it is always difficult to get a read on toy company hiring at this time of year as companies are typically too busy to “pull the trigger.” I can say that search starts have been strong during the period and I have every indication that many of these will close during the coming month. I should be able to pass on a more definite outlook on the subject in my next communiqué. I just hope that it’s not coming from a bunker.

All the best,

Tom Keoughan

By | March 21st, 2008|ToyJobs Blog|Comments Off on Toy Fair Outlook – Cautious

The Toy Industry Needs Boots On The Ground

China is not the only culprit in the recent recalls of everything from toys to toothpaste and a wide variety of other consumer products.  Shoddy manufacturing and quality control practices are endemic to the system that provides American consumers with low priced goods.  America’s mass market retailers, led by Wal-Mart, drive this by using toys as a loss leader to attract foot traffic into their stores during the holiday shopping season.  In order for their loss leader strategy to work they need to charge extremely low prices.  This is a problem in an environment of rising prices for oil, resin and transportation.  Retailers relentlessly squeeze the profit margins of American companies who in turn beat up on Chinese manufacturers and their suppliers for even lower prices.  At every stage of the supply chain from retailers on down each company has his hand in the next guy’s pocket trying to extract his profit margin out of theirs.  This puts those on the bottom rung, Chinese manufacturers and their suppliers, under tremendous pressure.  China, Inc. has been shouting to anyone willing to listen (and it isn’t many) that the overwhelming majority of their products are safe.  The trouble is that if 90 to 95% of their products are safe then the consumer doesn’t know which ones are and which ones are not and may choose to stay away from them all.

It’s easy to foresee many more recalls as toy companies rush to inspect their products.  The Chinese government recently announced that 15% of food products had failed quality checks in the first six months of the year.  It also seems that the U.K. is experiencing problems with widespread forgery of product safety certificates by Chinese factories.  Anybody who just assumes that their stuff is okay is whistling past the graveyard.  What this means for the coming holiday season remains unknown.  Many consumers will behave just as before but many will become more vigilant.  Toy companies who manufacture their products in other locales will slap “Made Elsewhere” stickers on their packaging and they will certainly be helped.  That said, I don’t see “Made in Vietnam” as having much of a qualitative difference.  High quality specialty toy companies could receive a substantial boost.  It wouldn’t be surprising to see Playmobil have a banner year.  Nimble companies could do well in the short run by filling shelf space left barren by ongoing recalls.  If toy companies act fast by publicly announcing recalls as well as emergency procedures for this year and overhauled quality programs for the future, then Christmas can be saved.  If recalls continue into October, sales of mass market toys might be greatly impacted. 

The best long term solution would be to treat the cause, not the symptoms.  This would mean convincing Wal-Mart and its brethren to loosen their overly strict adherence to particular price points.  Personally, I believe that a mother going into a store to buy a toy will purchase it regardless of whether the sticker price is $9.99 or $11.99.  This would allow the retailers themselves to make better profit margins as well as letting everyone in the supply chain from US marketing companies to Asian manufacturers breathe a little easier.  I’m not going to hold my breath waiting for that to happen.

American companies could try to induce Asian manufacturers to indemnify them against quality based recalls.  Good luck with that.  We could do nothing and wait for a real regulatory culture to develop in China but that could take decades.  Yes, China has just announced the formation of a new cabinet level panel which will study ways to address the country’s quality problems, but on the very same day they banned state media from covering a deadly bridge collapse.  At least when American bridges collapse we make it public and politicians blow hot air, if little else.

The best solution is to have boots on the ground – American boots.  It’s the Wild West (or Wild East) over there and in a land of the impoverished workers, conflicting loyalties and thick envelopes; the answer is not hiring locals and expecting them to remain loyal just because they are on your payroll.  We also need these people to be over there on a full time basis.  It obviously has not been enough to send someone to Asia four or five times a year as is now customary and expect that everything will run the same way when your back is turned.  Yes, sending in expats can be expensive but it is arguably less expensive than the financial, logistical and public relations nightmare of either recalls or lawsuits involving injured children.  This is the price that needs to be paid when manufacturing is done in a country where quality problems are a normal occurrence.

There are plenty of Quality Control people around (think the automobile industry) and while they might not qualify to be your Vice President of Product Safety, they can certainly be retrained to administer the quality control procedures necessary for a toy manufacturing line.  I’m willing to bet that they would rather be living in China on expat pay then sitting unemployed in Detroit waiting for their houses to be foreclosed on.

Tom Keoughan

By | August 10th, 2007|ToyJobs Blog|Comments Off on The Toy Industry Needs Boots On The Ground

The Return of the Texas Two-Step

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

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

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

See y’all in Texas,

Tom Keoughan

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

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

A “Confusement” of Numbers

A plethora of inaccurate or ill conceived numbers are contributing to what our dear President might refer to as “confusement” about the recent holiday selling season. Holiday sales have been categorized as soft with average same store sales increases at about 2.5 percent. Retailers and Wall Street analysts had apparently emailed Santa a wish list indicating that they wanted 6-7 percent. Anything less would be deemed disappointing. Where do they get these numbers? Has the population increased 6-7 percent in the last year? Have earnings of the average family shot up 6-7 percent? Have their savings? With most of the real estate refinancing already done and consumers unable to use their homes as ATM machines, just where was that 6-7 percent supposed to come from?

Of course, while the above analysis seems to make sense and may be somewhat entertaining, it is completely unsound. Our overconsuming society is over-retailed. Not only do retailers compete against each other, but they cannibalize their own same store sales by plunking down yet another supercenter only five miles away from the last one. The real story of Holiday sales is quite different when you look at more appropriate numbers. Walmart’s (oh, such a terrible year) total December sales were up 8.8 percent year on year. Target was up 9.9 percent, Costco plus 14 percent, Kohls 11.2 percent, Dollar General up 12.1 percent and so on. Numbers like that don’t sound disappointing at all. It’s all about looking at the most appropriate numbers. Unfortunately, the most appropriate numbers are not always easy to come by. My personal favorite is the game of “we sold a lot of gift cards and we can’t count them until they’re redeemed.” I understand that from an accounting standpoint you can’t count them until they’re redeemed, but how many dollars in gift cards did you sell? You don’t know? Gee, I’ll bet your POS system can tell you exactly how many dollars in gift cards you sold. What you don’t know is how many will be redeemed. Apparently 20-30 percent of gift cards are never turned in. Free money – now that’s a business I like. I’ll sell you 70 cents for a dollar all day long. And hey, when does that 20-30 percent get counted? 

So the overall holiday sales figures weren’t so bad after all. However, retail margins were likely to be razor thin. Walmart was discounting toys before even Halloween. I saw big flat screen TV’s being sold for $1,000 – $1,500 dollars off – and they were selling a lot of them. Hell, I even bought one myself. Lord knows the retailers aren’t about to eat those discounts on their own. They’ll be looking for markdown money. That should be infuriating because retailers weren’t closing out unsold merchandise. They were discounting starting in October as part of a marketing strategy to drive store foot traffic. 

While at first blush the toy industry appeared to have a good year, we have to tease out the video game numbers. With several new game platforms and Nintendo’s hot product, video game sales rose 18% to $13.5 billion. Now the numbers get a bit foggier. What seems clear, or at least unclear, is that the toy business did much better than the previous two years’ 4-5 percent annual decline.

Why is it so difficult to just get the straight numbers in a timely fashion? Wall Street analysts and research firms devise all these numbers, indicators, formulas, etc. Many of them, although they seem to make sense, are ill conceived or misleading. The numbers are then slowly dribbled out over time. These numbers are used by investors from hedge funds and pension managers to Ma and Pa Kettle to make buy and sell decisions. More different numbers dribbled out over a greater length of time leads to more buy and sell decisions. Wall Street clearing houses make money on every incremental trade. Now there’s a business I’d like to be in too. Alas, too many numbers. 

That leaves me stuck in the recruiting business.  Even though it’s a lot more work than selling 70 cents for a dollar (sigh), Toyjobs had its second best year out of twenty-five in 2006.  Just don’t ask me to tell you our numbers.  

See ya’ at the Toy Show, 

Tom Keoughan

By | January 30th, 2007|ToyJobs Blog|Comments Off on A “Confusement” of Numbers