Mattel Archives - Page 2 of 2

Mattel v. China and the Blame Game

Mattel hasn’t made it any easier for themselves or anyone else in the toy industry. When CEO Robert Eckert landed on the front page saying “the company discloses problems on its own time table because it believes both the law and the CPSC’s enforcement practices are unreasonable”; it was the height of the folly. I’m not saying that I disagree with what he said. After all, Congress has gutted the CPSC’s budget over the years and left it with a single lonely toy tester. Even some of the Commission’s own buildings are embarrassingly not up to code. That said, Mr. Eckert’s timing could not have been worse. What was he thinking? Clearly this was the time to take a constructive approach with the CPSC and an apologetic one with the public. One suspects that after that quote Eckert got a lot of heat in the boardroom and that one of the directors probably gave him a whack with a rolled up newspaper before he was trotted off to Washington for his contrite appearance before Congress.

Mattel, however, was still playing the blame game and pointing the finger at Chinese manufacturers. China is a pretty easy target since it has major quality control problems at an incredibly large number of factories manufacturing all sorts of consumer goods. While Mattel was playing its China card it was soft pedaling the fact that the vast majority of its own recalls were the result of product safety issues (design problems) rather than manufacturing quality problems in China. Nobody has bothered to really educate the public on the difference between a product safety issue and a quality control problem. Certain Northeastern senators who are running for President seem congenitally unable to grasp the difference.

Mattel had magnet issues. The magnet problem in toys came to the surface in 2005 with a number of injuries and deaths resulting from children swallowing magnets from Rose Art’s Magnetix. In October of 2006, several children were injured after swallowing magnets from Mattel’s Polly Pocket line of products. Mattel issued a recall on the Polly Pocket products but they had a much bigger magnet problem stretching from Batman to Barbie and beyond. At the time, Mattel did not recall these products and decided to, in gambler’s parlance, “let it ride”. To be fair, there were no injuries from these products but the magnet issue was out there and it would have been much more responsible for Mattel to take the financial hit and issue a recall then rather than crossing its fingers and hoping that no children got hurt. Only about a year later when Mattel was under the harsh glare of the spotlight did that recall finally come.

China has not been happy about all the fingers pointing their way over its huge quality control problem. Just as Mattel tried to scapegoat China and de-emphasize its own culpability, now China in demanding (let’s face it they demanded that apology) and receiving a very public apology from Mattel is trying to use Mattel as a scapegoat to deflect attention from the country’s massive quality control problem. In just the last thirty days China has yanked the export licenses of 300 toymakers and shut down about 2,000 unlicensed toy factories. Obviously they have a major problem. Mattel has countered with yet another waffle and is now claiming that their apology has been “mischaracterized”.

The fingers have been pointing everywhere. Everywhere that is except to the place that is the likely cause of at least the Chinese quality problem in the first place. As for Mattel’s magnet recall, I’m afraid they own that one themselves. Miraculously no fingers except for a few hushed industry insiders have been pointing to Bentonville, Arkansas. The media hasn’t seemed to want to touch it. The politicians (especially former board member Hilary Clinton who has her own China problem in the guise of Norman Hsu) certainly hasn’t wanted to touch it either. U.S. toymakers remain mum about it because they’re fearful of retaliation when it comes time to sell next year’s product line. Walmart and its fellow mass market retailers are the white elephant in the room that no one wants to discuss. Finally, union backed WakeUpWalmart has started running ads on the topic. Unfortunately, WakeUpWalmart is so hopelessly biased that they can’t be taken completely seriously even when they’re right.

By keeping its price points artificially low in an era of rising costs, Walmart puts margin pressure on U.S. toy marketers who in turn send that margin pressure down the line to Chinese manufacturers and suppliers. It’s as if at each step in the chain everybody has his hand in the next guy’s pocket trying to steal his profit margin out of theirs until the last guy in the supply chain is left with razor thin margins along with rising costs. This incredible pressure on the manufacturers is what leads to cutting corners and scrimping on both the quality and amount of materials used. Add to this the fact that most Chinese factories of any type are staffed by basically impoverished people who might be more than a little inclined to take a quick backhander and it’s easy to envisage a system that is either just barely in or just barely out of control.

This is where the TIA could step up and do something useful. As a responsible toy industry spokesman (yes, quite a new role for the TIA) it could bring very public pressure to bear on retailers to lift price points which will not only increase the retailer’s own profit margins but let everyone in the supply chain breath a little easier. If they were to do this as an industry-wide spokesman then retailers would not be able to retaliate against individual suppliers. They could commission studies to determine if consumers are willing to pay a dollar or two more for a toy if it meant a higher level of quality and safety for a product that they are going to give to their children. Personally, I believe that a mother purchasing a toy for $7.99 is more than willing to pay $8.99 for it anyway. I think we all know this to be true. If the TIA were to commission such a study and make it very public it would gut the mass market retailers’ monotonous cry of “we need our prices that low because the consumer demands it.”

Obviously, the toy industry needs to change its quality control procedures as well and that seems to be happening. In a sense, that’s really only treating the symptoms. By going after the roots of the problem as well, a better long term solution for everyone can become reality.

See y’all in Dallas.

Tom Keoughan

By ToyJobs|2020-11-20T08:51:05-06:00September 25th, 2007|ToyJobs Blog|Comments Off

TIA Moves October Show – Betrays Toy Industry

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

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

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

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

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

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

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

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

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

All the best,

Tom Keoughan

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

Fall Toy Preview: A Success…But

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

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

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

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

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

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

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

All the best,

Tom Keoughan

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

The Consumer Electronics Store that Stole Christmas

In what looks like a repeat of last year, the toy industry’s big challenge this year appears to be the consumer electronics business. All indicators are that consumers will be torqueing their credit cards on wide screen TVs and DVD players. There is also the launch of next generation video game platforms. With “Bobby” getting a $500 Sony PlayStation 3 along with a small stack of video games/accessories, and Dad buying a mammoth flat screen TV “for the family” (even though it seems to only be able to tune in football games and golf); chances are there’ll be a lot less toys under the tree this year; especially when you factor in hundred pound fruitcakes and embarrassing holiday sweaters.

On the bright side, Christmas 2007 will not have new video game platforms launched and two years worth of widescreen TV demand will already have been satiated.

MGA’s pending purchase of Little Tikes should be interesting to watch. We have no doubt that Isaac Larian will take great glee in trying to poke Mattel’s Fisher Price unit in the eye. Fisher-Price, however, is a colossus. Its brand recognition, product line and execution are all very strong. Mattel President Neil Friedman knows exactly how to manage this business although it is possible that he may be distracted while trying to rescue Barbie and the rest of Mattel’s El Segundo operation. MGA doesn’t have a lot of experience running its own manufacturing plants. The bulk toy business means lots of expensive plastics, resins and transportation. Manufacturing plants also mean lots of employees to manage–never an MGA strong suit. This being said, there is plenty of fixing up that can be done. Little Tikes and indeed all of Newell Rubbermaid’s operations were put into a downward spiral due to the disastrous management policies of fired CEO, Joseph Galli.

Over at Mattel, Neil Friedman has the Fisher-Price division in very strong shape – strong brand recognition, strong new products and strong execution. The new TMX Elmo looks to be a runaway hit and the Kid Tough Digital Camera looks very strong. Hopefully, Friedman can work his magic on Mattel’s El Segundo operation for 2007. This year’s El Segundo product line isn’t his and previous “leadership” has left him with such apparent boondoggles as – “Tanner” – The Defecating Dog!…He Eats, He Poops!” What were they thinking? Seven year old boys are going to love this and little sisters everywhere are going to be repeatedly tortured. Also, in stores now – Botox Barbie! Stick your finger in her back and watch her face…you just really have to see it for yourself. Products like these are like landmines left for new management by the Bousquette team as they were chased from the building.

Finally, noted jackasses Charles Schumer and Lindsay Graham delayed action on a bill to levy a 27.5% tariff on all Chinese made goods. Do these idiots have any idea how many thousands of US owned businesses design, market and sell products that they have contract manufactured in China? The Schumer-Graham bill would gut their profit margins (you can bet Walmart isn’t going to move its precious price points) and drive many, if not most, of these companies out of business. If anything gives China an unfair advantage in world markets it’s the fencepost level stupidity of America’s lawmakers. Somebody ought to vote these geniuses out of office…and fast.

One also wonders if there is anyone even slightly awake at the TIA. Do they have a lobbying effort on this? Has anyone heard about it?…didn’t think so.

See you at the October show,

Tom Keoughan

By ToyJobs|2006-10-03T09:00:19-05:00October 3rd, 2006|ToyJobs Blog|Comments Off

Running Harder to Stay in Place

While the rest of the world has spent the summer focused on Lebanon, bomb plots, heat waves and Mel Gibson, toy industry hiring has continued at a rapid pace. After the expected summer slowdown, Toyjobs is currently tracking to have its second best year out of twenty-five. This is not because 2006 seems to be such an extraordinary year for the toy business, although “Pirates” is doing extremely well and “Dora” continues to be strong. The year seems best characterized by “running harder to stay in place.” The best explanation I can give is: retailers are demanding more and more specials, custom jobs and private label products; they continue to put off actually committing to those demands until the last possible second; as such companies need more capable pairs of hands just to get the work done. Another big reason for heightened hiring is that in difficult times it’s always easy to blame and change your sales team whether it’s their fault or not.

With Mattel’s purchase of Radica, one w`onders what will become of Radica’s Texas offices and staff. I’m sure that Mattel is telling everyone that they are part of some big future plan and that their jobs are secure but that is standard practice for a purchasing company whether it is true or not. My take is that Mattel is mainly interested in acquiring Radica’s ability to develop technology or the electronic guts of things. That part of Radica’s product development is based in Asia. What happens to Texas over the next two years remains to be seen. Another big rumor that is bouncing around these days is that Mattel is looking to acquire Leapfrog. Certainly at its current stock price, Leapfrog is a lot cheaper than it used to be. The purchase would also give Mattel a lot of additional space on retailers’ shelves. It is important to keep in mind that while the Leapfrog Class A shares are publicly traded, the Class B supervoting shares continue to be owned by Knowledge Universe and its affiliates who also control the Board. It’s unlikely that they would be willing to let the Company go at anywhere near the current price.

Kudos to Ted Kieswetter for a very successful career and a successful exit strategy. For over thirty years, he has built International Playthings into the strongest company in the specialty toy business. He has always carried himself honorably and with both a sense of humor and a touch of class. He has been a great ambassador both for International Playthings and the specialty toy business as a whole. He will be greatly missed.

I also feel compelled to mention a disservice done to another longtime toy industry standout. In early August, Action Products issued a press release stating that Larry Bernstein (Big Larry) had been ousted as President and that Chairman Ron Kaplan would be stepping in to run daily operations. The release stated that the reason for Bernstein’s ouster was that sales were down from $3.8 million to $3.2 million during the first half. Just to illuminate things, Larry Bernstein only started at the company in November of 2005. Any of the products that weren’t selling in early 2006 were developed before he got there and under Kaplan’s stewardship. If sales suddenly take off in 2007, I don’t suppose that Mr. Bernstein will get credit for the products developed during his watch. Action Products has blown through numerous short term Presidents (Ron Tuchman comes to mind) since Ron Kaplan took over from his parents. I guess my point is: It’s your company and you can do what you want, but you shouldn’t go taking potshots at a guy who parachuted in to try to save your bacon, when it is likely that it is you yourself who is the problem. You may be able to fool yourself but people who know the toy business…know better. Before I get off my soapbox; I’d like to add that I fully expect that my brief outburst will result in yet another self serving Action Products press release.

The sad saga of former Walmart Vice Chairman Tom Coughlin has finally (hopefully) come to a close. Late last week, the judge sentenced him to twenty-seven months which can be served in home confinement due to poor health. The Wall Street Journal reported that Coughlin, who was all tearful apologies in the court room, changed his tune as soon as he got outside and again claimed that he had been reimbursing himself for a clandestine scheme to fund anti-union activities. I am sure that the judge was not pleased with his performance. While I would have little trouble believing that Walmart has fought the unionization of its stores covertly as it has done openly, if Mr. Coughlin wishes to try to regain his reputation he will need to provide documentation. Without that I have to believe that it’s just a load of hooey. Of course, a little problem he has is that providing such documentation could easily lead to federal criminal charges for violating labor laws and racketeering. Hopefully, Mr. Coughlin has more than just that one Celine Dion CD to listen to and that one jug of vodka to drink during his two plus years of home confinement. If he runs low on provisions, he can always send someone down to the local…Walmart. He had better bring cash though; I don’t think they’re going to be accepting any gift cards.

Finally, on to more important matters. So, is the Eleventh Avenue Toy Center going to work out? It’s up to you readers to decide. One common complaint is that it’s in a pretty bad area but I think you have to move past that. Their aren’t a lot of great choices available. Not many great choices are likely to become available. I know you don’t want to pay the price per square foot that a great choice, even if it were available, would entail. On the location’s positive side: it is pretty close to the Javits Center and there is plenty of parking nearby at the Intrepid Aircraft Carrier.

A much bigger problem is that there has been a degree of bungling in what is being offered. When a company would request 1,000 square feet of space it would get 600 square feet of usable space plus 400 square feet of hallways and common area to pay for. This effectively drove the price per square foot from $40 to approximately $70 AND you didn’t have all the showroom space you needed. Every building has common space that needs to be paid for but from what I understand; 200 5th Avenue was more like 25%. Bumping it up to 40% is a big bite. Those better be really nice “luxury” hallways. At the very least, communication could have been handled better so that both renters and rentees were talking the same language about what their space requirements were. I don’t know if the value proposition works out for you or not. I don’t need any space and as such don’t have any skin in the game. I think it is important that the toy business has a home and is able to come together in one building. If the numbers work for you, then it’s time to get moving. Spinmaster and Mega Bloks/Rose Art have signed on and as fairly large players, can provide an anchor for the building. So get your calculators calculating and your bean counters bean counting because time is of the essence.

All the best,

Thomas Keoughan

P.S. The following article has absolutely nothing to do with the toy business, but it makes fascinating reading. Please feel free to skip it or take it to the beach. Call it a light summer read.

By ToyJobs|2006-08-15T09:00:18-05:00August 15th, 2006|ToyJobs Blog|Comments Off

Torrid Toy Hiring Despite Challenges

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

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

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

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

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

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

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

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

All the best,

Tom Keoughan

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

Happy Talk Returns to Fall Toy Preview

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

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

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

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

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

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

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

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

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

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

All the best,

Tom Keoughan

By ToyJobs|2020-11-20T08:51:05-06:00November 9th, 2005|ToyJobs Blog|Comments Off

Toyjobs Posts Second Best Year Ever

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

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

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

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

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

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

All the best,

Tom Keoughan

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

Total Turmoil in Toyland

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

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

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

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

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

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

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

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

All the best,
Tom Keoughan

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

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