New York Toy Fair

The annual toy industry migration from Hong Kong to London to Germany finally reached its inevitable end at The New York International Toy Fair. All reports were that the outlook for the industry in 2019 gathered optimism and enthusiasm as the trade show season moved along.

The New York International Toy Fair opened with the TOTY Awards. A terrific event, as always, which was this year again held at the venerable Ziegfeld Ballroom. There was a big, buzzy crowd in attendance as companies vied for various Toy of the Year Awards.

One highlight was the Doll of the Year Award which went, unsurprisingly, to L.O.L. Surprise! The award was accepted by Isaac Larian of MGA who approached the podium and said – the least he ever has. It was a comically gracious moment…only to be later ruined when he climbed the stage out of turn and out of line to display his usual boorish behavior. That said, let’s give credit where credit is due – both under the byzantine TOTY process and by popular acclaim L.O.L. Surprise! garnered three TOTY’s and was the overall Toy of the Year. Mattel and Lego also had good nights as they each came home with three TOTYs.

I always enjoy seeing smaller and up and coming companies win these awards so it was good to see wins by Zing and Tastemakers. The Rookie of the Year Award went to Victury Sports. This startup makes the OllyBall which can be played with indoors without breaking lamps, mirrors, and cherished family heirlooms. Just think about how much trouble we wouldn’t have gotten into as kids! Do Play Ball in the House!

Amongst the three new members inducted into the Toy Industry Hall of Fame was Joe Mendelsohn, former president of Kenner Products. In the 1970’s and 80’s, Kenner Products was The company. They had a fun Ideation and Product Development Group, professional Marketers, the toy industry’s best Engineering team and a rogue’s gallery of affable Sales talent. They came up with new and exciting product year after year after year. When the crowd gave Joe Mendelsohn a long standing ovation I took it to be a standing ovation for the entire Kenner Products team.

On Saturday, we moved on to the Toy Fair proper and the much dreaded Javits Center floors (hardest floors on the planet). In contrast to last year, day one was high energy and crowded. Strong attendance as well as optimism and excitement continued through the show’s end. Kudos to Steve Pasierb and his team and to the TIA Board for putting on a strong and productive show as well as the top notch TOTY event.

On Sunday night, anybody and everybody could be found at the Wonder Women in Toys Awards. I don’t know the official numbers but is it possible that this event was even more well attended than the TOTYs? Genna Rosenberg and her team did their usual exquisite job planning and pulling this thing off. The entire group of ladies making this show work do it while seeming so serene although I suspect they must be paddling like crazy underneath.

A shout out to Marian Bossard of the Toy Industry Association for winning the Wonder Women of Sales Award. Marian is one of the key people making all of the toy industry’s tradeshows and events go as smoothly as possible for the rest of us. Congratulations to all of the Wonder Women. As an employment expert, I suggest regularly wearing your pink capes to the office around salary review time!

One of the few negative undercurrents of the show was the question of “what’s going on with Toys ‘R’ Us?” As best as I can tell, they are going to continue on as an asset light IP company. In other parts of the world, they have licensed out their name to retail operators who will open and manage stores. They are looking to initiate the same type of arrangement in the U.S. They will also have an online retail entity which they will presumably either run themselves or partner on with their bricks and mortar licensee. TRU is also of the opinion that they have valuable product IP which they can sell to other retailers. Personally, I don’t think that the world is exactly clamoring for FastLane or Animal Alley. I suppose that they will sell in (saddle with) that merchandise to their retail partner.

After being so badly burned, will manufacturers actually do business with TRU? After all, Toys ‘R’ Us has the same ownership and largely the same management. Many have told me that it has been beyond difficult to see Richard Barry swanning around at Toy Industry events. Will they be able to just clean the slate of retail leases and then like a gang of deadbeats stiff their suppliers? To make matters worse, they then went out and sold their suppliers unpaid for merchandise at a discount, hindering said suppliers from selling their own goods elsewhere. Trust has been completely broken. It will not be repaired easily – perhaps ever.

I’ve heard many in the toy industry say that they won’t do business with Toys ‘R’ Us. That said, while I don’t know how many stores will be opened, I can’t see many toy companies not wanting to sell in to 50, 100, 200 doors. Perhaps one toy industry exec put it best when he told me: “I’ll be happy to do business with them depending on who their retail partners are and whether they have deep enough pockets to pay their bills.” Even so, I expect that they’ll be kept on a tight leash with short payable terms and little acceptance for chargebacks and the games they used to play in the warehouse.

What does this all mean for upcoming toy industry hiring? I am broadly optimistic. 2018 holiday sales numbers were not as bad as they could have been and the government statistics on retail sales seem to be a bit wonky. The negative government data, which was partly gathered during the partial government shutdown, looks to be at odds with strong retail sales numbers reported by Mastercard and by many individual retailers. It was also in complete disagreement with sales numbers reported by Amazon.

Much of the toy industry has made adjustments and is finding their way through a rapidly changing retail environment. After all, kids still want toys, we just have to find different ways (plural) to get those toys in front of them. The largest toy companies (Mattel, Hasbro, Lego) will not be able to readily replace the sales lost at Toys ‘R’ Us. They will now be big companies growing off a smaller base. Small fry beware! The big fish are stodgy and slow moving. It will take a couple of years but when they figure it out (and they will), they will be tenacious.

Meanwhile, this is a great year for kids movies like Frozen, Toy Story 4, Lego 2, etc. which will drive product demand. Fortnite is really only just getting started. The toy industry has pent up hiring demand. Over the last two years there have been so many lay offs that many companies are now having difficulty just getting the work done. Lastly, it looks like we have dodged the tariff bullet – at least for now. We are still waiting to see if happy talk turns into treaties, but we should be cautiously optimistic that we are going to evade a trade war.

In early January, all of these factors led me to cautiously predict that about two to three weeks after the New York Toy Fair, when companies finished crunching their numbers, that my phone would be ringing off the hook, with toy companies looking to increase staffing. That would be right about now.

What actually happened is that immediately after returning from Hong Kong, toy companies started calling. They were not only looking to fill jobs but Big Jobs. Last year, companies were occasionally looking for Project Managers/pairs of hands on the lower end of the salary continuum. This year they are looking for senior executives. This tells me that toy companies have left their defensive crouch and are now looking for opportunities to make things happen. I am broadly optimistic on toy industry prospects for 2019 – with the caveat – that we must dodge the Trump tariff bullet – which at the current time it looks like we will but…

All the best,

Tom Keoughan