product safety Archives

Product Safety Conundrum and a Fall Toy Preview Review

Just as the toy industry began to make headway in convincing government agencies to rationalize product safety regulations along comes Mattel with an eleven million toy safety recall from its Fisher Price unit. Jakks Pacific then chimed in with its own half million piece recall and Graco added a recall of baby strollers. One thing that all three had in common is that they all were “product safety” issues or – design flaws. Certainly, it’s nearly impossible to police every factory in the Chinese hinterlands who may slip in a little lead paint to increase their beaten down profit margins when the gweilo isn’t looking. These, however, are design flaws and there just really isn’t an excuse. I’ve heard the arguments that if you look at these toys you don’t intuitively see any danger. That may be true, but Mattel is the largest toy company in the world and has entire departments focused purely on product safety. They also used outside safety labs who were apparently asleep at the switch.

Ironically, the biggest beneficiary of the recall will probably be Mattel. Most of those toys were sold between 2001 and 2008 and the majority of them are already on the scrap heap. Under the Mattel regime, Fisher Price toys don’t seem to have the longevity they did twenty years ago (thinner walls equals lower costs). Few will be returned and there is no inventory to pull off of retailer’s shelves or languishing in Mattel warehouses. Rational changes that were being considered in safety regulations will now most likely be shelves. The current overregulation disproportionally affects small and medium size toymakers. Mattel is the only company which gets to use its own internal safety lab which I have got to believe is less expensive than going outside. It can also amortize testing costs and manpower over a gazillion products sold. Small and medium companies are hit much harder by testing costs, time to market and eyestrain (having to read through all those crazy regs). Creativity has also been blunted as companies learn to play it safe. It’s very risky to produce a new and innovative product and take a flyer to see if it sells in the marketplace. Overregulation means that a company needs pretty large presells to be sure that a product at least breaks even. The unlevel playing field benefits Mattel quite nicely. No one believes that Mattel has been orchestrating large product recalls on purpose…but it sure makes you wonder.

Switching gears (kerlunk!) – the economy continues to improve albeit very very slowly. September’s unemployment rate was unchanged at 9.6% but U6, a broader measure of unemployment which includes people who have stopped looking for work and those settling for part time jobs rose to 17.1% from 16.7%. Government shed 159,000 workers half of whom were temporary census workers the rest are layoffs primarily from state governments and municipalities who have seen their tax revenues shrink. The somewhat good news is that private employers added 64,000 jobs. Unfortunately that is not enough. The US needs to add 200,000 jobs per month simply to keep up with the population growth of the workforce. It seems that we’re running harder and not even staying in place.

Despite what the media may say, the real disappointment isn’t consumers, who have good reason to be conservative given widespread unemployment and their damaged balance sheets. The real problem with the economy is large companies who are flush with cash but seem to be too scared of their own shadows to start spending. Economists are seeing an increase in the number of job postings but companies are very slow to fill them. It’s estimated that if openings were turning into jobs at the pace they usually do, the unemployment rate would be about three percentage points lower. One reason that companies are dragging their feet is uncertainty over the November congressional elections. Before hiring, business needs to know if what some call “the Bush tax cuts” but is really – the existing tax code – is going to be extended.

This was echoed at the Fall Toy Preview as many of the senior executives that I spoke with were finding it difficult to make planning decisions. As for the business of selling toys, most were upbeat. Sell-in has been good although margins are down. There is a feeling that the holiday season will have a very strong price focus which should help the toy business as most companies have been concentrating on producing lower cost goods. After the economic turmoil that we’ve had most companies want some clarity out of Washington and also want to cash their big January checks before they spend them.

Down in Dallas a common complaint was the lack of trade show support by larger toy companies. For years, the behemoths, Mattel, Hasbro and Lego have not supported toy industry trade shows. That practice is now being taken up by second tier companies like Jakks Pacific and MGA. Mattel and others were having their own “toy fairs” in LA in the two weeks following the Fall Toy Preview. Some buyers even left Dallas early to travel to Los Angeles. Certainly this makes business sense for larger companies as they know they are going to get their face time with the retailers. Obviously, they would prefer that buyers be totally focused on their product line rather than be “distracted” by hundreds of smaller competitors. Alright I get it, but the toy industry may want to consider whether they want these larger toy companies dominating the TIA board. Certainly, the TIA needs their dues but one of TIA’s main functions is to organize trade shows and industry events. In choosing not to support trade shows, these companies dominant place on the TIA board is a clear conflict of interest. One of a trade organization’s most important missions is to protect the interests of its smaller and medium sized members. The big boys have the ability to fend for themselves.

If the Fall Toy Preview was moved to Los Angeles at the same time that Mattel and others were holding their “toy fairs” then the larger companies would likely just switch weeks. I wonder if maybe all parties could be accommodated by having two shows in LA on consecutive weeks. The main show with small and medium size companies during one week. Mattel and other large companies could do their thing the following week. Any company that thinks it’s important enough to draw buyers away from the big boys would be welcome to take the gamble and show in week two. Of course, that may or may not work out for them.

“Everyone under one roof” is an admirable goal but it’s never going to happen. The toy industry can’t even get everyone in the same town at the same time. I don’t want to criticize the Toy Industry Association too much here. By all accounts, they have done an excellent job under the leadership of Carter Keithley. This is NOT the TIA of even just a few short years ago. However, TIA and the TIA board need to tackle this problem now. Meetings should be scheduled, smoke filled rooms rented, arms twisted and compromises made. Complaining quietly amongst yourselves doesn’t accomplish anything. I would recommend speaking directly with either Carter Keithley or your favorite TIA Board Member to ask how you can help.

Hoping I didn’t stir up too much trouble,

Tom Keoughan

By ToyJobs|2010-10-25T09:46:18-05:00October 25th, 2010|ToyJobs Blog|Comments Off

Fall Toy Preview: A Little Grumbling Despite The Full Dance Cards

My experience at the Dallas Fall Toy Preview was that the overall mood was “workmanlike”. While I can’t say that people were exactly upbeat, there wasn’t the pervasive sense of gloom that we’ve seen at the last few trade shows. Most people seemed to give off more of a sense of being survivors, of being beaten up but having made it through with the knowledge that the worst is over but that there are still some tough miles ahead.

In the weeks leading up to the show there was a lot of talk that Target and Wal-Mart (both extremely early price choppers this year) were not planning to attend. I hear that before every trade show and, as always, Target and Wal-Mart sent buyers although not their entire contingent. Even with that I still heard a lot of grumbling at the show despite the fact that most companies had very full dance cards. My sense is that those people and companies who were disappointed were so because they had a false set of expectations. If you go into Dallas thinking that you are going to write a Target order, I can guarantee you that you will be disappointed. This is a great show for getting retailer feedback about your offerings, giving you a chance to tweak product, packaging and assortments prior to the all important Hong Kong Toy and Gamers Fair in January. It’s also a great time to focus and have some quality meetings with second and third tier retailers. As one VP Sales said to me “even if Wal-Mart and Target weren’t here at all, I have the opportunity to meet with fifty customers in just three days. Where else would I want to be?”

With Wal-Mart de-emphasizing the toy aisle those second and third tier retailers are becoming more important. By stepping back, Wal-Mart has allowed other retailers to see opportunity in the toy business and many of them are responding aggressively. Toys ‘R’ Us is stepping into the malls with eighty pop-up stores. This will be their first year of doing this so their execution is a question mark but let’s face it, anything has got to be an improvement over the mess that was the KB Toys retail experience. Sears is testing getting back into the toy business and, if successful, will make a bigger commitment for 2010. Barnes and Noble and Borders, two retailers that definitely still get traffic, are putting a greater emphasis on toys and providing a lot more shelf space. I suspect that other retailers will follow suit now that they won’t have to compete with Wal-Mart pricing on as many products. Toy companies should be happy with the increased shelf space, diversification of customers, and the likely higher margins to be had from these retailers.

What toy companies should be complaining about is the lack of trade show support from toy behemoths Mattel, Hasbro and Lego. This lack of support has now spread to second tier players such as Jakks Pacific, Spinmaster and MGA. Certainly this makes business sense for larger companies as they know they will get their face time with the retailers. Obviously, they would prefer that buyers be totally focused on their product line rather than “distracted” by a hundred smaller competitors. Alright, I get it, but the toy industry may want to consider whether they want these large companies dominating the TIA board. Certainly, the TIA needs their dues but one of TIA’s main functions is to organize trade shows and industry events. In choosing not to support trade shows, these companies’ dominant place on the TIA board is a clear conflict of interest. One of a trade organization’s most important missions is to promote and protect the interests of it’s smaller and medium sized members. The big boys have the ability to fend for themselves.

In our isn’t that ironic file: Mattel has reached a settlement in twenty-two class action suits over their widespread product recalls in 2007. The recalls resulted in over-regulation which disproportionally affects small and medium size toymakers. While Mattel can amortize testing costs and manpower over a gazillion products sold; the smaller companies are hit much harder by testing costs, time to market and eyestrain (from having to wade through all those crazy new regs). Creativity has also been blunted because small companies can no longer produce a new and innovative product and take a flyer to see how it sells in the marketplace. The new rules mean that a company needs pretty large presells to be sure that a product will at least break even. Now do I think that Mattel intended this from the beginning? Of course not, but the fact remains that Mattel is one of the biggest beneficiaries of their own quality and product safety failures. If the court approves this settlement – it looks to me like they got off cheap.

Toy industry hiring continues to slowly improve. It’s certainly not good but it’s better than it was six or even three months ago. My continuing forecast is that hiring will continue to be weak at least until the August/September (and it may take longer) time frame. For most of 2010 hiring will be slow although not as bad as 2009. Some very important meetings are coming up in December and January. Those meetings are not with retailers and not in Hong Kong but with banks. Banks slashed loans and lines of credit in 2009. With banks still reluctant to lend, regardless of Holiday sales numbers, I can’t imagine that seasonal fashion businesses will be at the top of their lending lists.

Muddling thru,

Tom Keoughan

By ToyJobs|2009-10-30T10:47:22-05:00October 30th, 2009|ToyJobs Blog|Comments Off

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 ToyJobs|2008-11-09T09:00:21-06:00November 9th, 2008|ToyJobs Blog|Comments Off

Fall Toy Preview Successful . . . Industry Continues to Stumble

Although there was some back hall grumbling that “everyone under one roof” translates to “everyone pays the TIA” it seems that even those who were prepared (hoping) to hate the Fall Toy Preview felt that it was a huge success.

Yes, there were a few glitches such as a crazy numbering system which made it a little confusing to find your way around. Also, cell phone reception was so poor that the only way to avoid dropping calls was to drop off the railing. Such minor annoyances are to be expected at an inaugural show and should be easily fixable.

The TIA went all out and it was especially good to see them proactively seeking feedback from exhibitors and attendees. I’m always a little suspicious of the raw numbers publicized by any trade show organizer. Just as every exhibitor will tell you that business “is fantastic” and fudge his sales numbers up by twenty five percent; so too buyer attendance numbers are never to be trusted. Did you see 775 buyers milling about? I didn’t see 775 buyers milling about. That said the show seemed to be extremely well attended by major (and not so major, but important, retailers). Target seemed especially well represented. It was a little strange that several of Walmart buyers didn’t make the trip considering that they’re just down the street. The big manufacturers (Mattel, Hasbro and Lego) as usual did not really support the trade show even though they are permitted to dominate the TIA board.

For all the talk of the Dallas show’s success, several toy executives did point out that while the show itself was cheaper, if you add in the costs of the February show, then the cost of having a permanent showroom in New York that could have accommodated both shows plus other meetings throughout the year, would have been cheaper. In an interesting twist, several senior executives were seen wandering the halls in the company of Dallas Market Center staff apparently looking at permanent showroom space. Although I don’t think it will happen this year; it will be interesting to see if the TIA’s strategy backfires and the February Javits show eventually collapses. Then again, that may have been part of their strategy all along.

In other toy news, lead paint recalls just keep coming. Last Friday Mattel issued yet another major recall. Was that their fourth major recall or their fifth? It’s getting difficult to keep count. Other smaller players have continued to issue recalls as well. As we move into the holiday shopping season, it seems difficult to believe that continuing recalls at this late date won’t be on consumers’ minds.

The other thing on consumers’ minds might turn out to be all the empty shelves. With new testing regulations the safety labs are backed up and toy companies are having a difficult time getting their goods on the water. The new testing policy, while a good thing, has been difficult to implement in year one. The policy exempts orders placed before August 10 so that the majority of product made it just under the wire. That said a lot of orders are finalized at the end of July and beginning of August and for those that missed the cutoff there will be trouble. There will also be problems for any and all reorders.

The toy industry, the TIA (unfortunately it’s still necessary to separate those), the ANSI (American National Standards Institute) and the Chinese government are working to enact more stringent testing procedures and that is very positive….as far as it goes. Anyone in the toy industry knows that what’s really strangling the business is retailers’ strict adherences to artificially low price points during an inflationary time. While I hear a lot of people saying “Walmart will have to let us increase prices”, that remains to be seen. In the midst of the toy recall crisis and with temperatures in much of the country still north of 80 degrees; Walmart slashed toy prices 10 to 50 percent on October 1. As the price leader and the largest retailer Walmart’s actions drive pricing decisions throughout the retail landscape. It seems clear that Walmart, which takes in about 25 cents of every dollar that consumers spend on toys, has no intention of altering its policy of using toys as (artificially) low priced loss leaders to drive foot traffic. In a sign that he doesn’t quite get it TIA president, Carter Keithley was quoted “That expense could be passed along to consumers, but we hope not. Hopefully the burden will spread around between all the parties involved.” No! No! No! Pass it on to consumers! That’s what a rational business does during a time of rising costs.

It could be quite beneficial for the toy industry if the TIA were to commission a study to see if consumers would be willing to spend a dollar or two more in exchange for safer, higher quality and yes, longer lasting toys. I think we all know what their answer would be. If done by the TIA for the industry as a whole and publicized to the hilt then major retailers would not be able to single out individual companies for retaliation. The time to do this is when the toy business is in the glare of the media spotlight. The time to do it is now.

By ToyJobs|2007-10-30T09:00:37-05:00October 30th, 2007|ToyJobs Blog|Comments Off

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

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 ToyJobs|2007-08-10T09:00:23-05:00August 10th, 2007|ToyJobs Blog|Comments Off

Washington Socks It to the Toy Biz

Just when you thought it couldn’t get any worse they’ve gone and devalued the yuan. Washington politicians may have scored a few points with an undereducated public but it is the consumer, and American import businesses, who will pick up the tab.

This year’s manufacturing contracts are already set so the effects may not be immediately apparent and although a 2% devaluation may seem like small change, many experts are forecasting a devaluation of between 8 – 11% over the next eighteen months. With Chinese factory costs for labor, electricity and everything else going up, coupled with continuing sky high resin and transportation prices that money is going to have to come from somewhere. In a “perfect world” those costs would be passed on down the line from factories to importers to retailers and ultimately to the American consumer; in other words – inflation. What will happen in the real world is likely to be just a little bit different.

With Walmart’s sales being pressured by high oil prices as well as owing to their generally rapacious nature, it’s an easy bet that they will not raise their price points. It’s a little difficult for me to believe that I would decide not to buy a shiny new widget if it cost $7.99 rather than $6.99, but I guess that’s why I still have to work for a living. All of those extra widget dollars eventually add up.

With major retailers standing firm it will be between the importers and the Asian manufacturers to battle it out for their already shrunken profit margins. This will lead them to (and this could be Walmart’s new advertising slogan) “Make do with less!” (Ahem – sort of like Walmart store employees.) The other course will be to remove pieces and features, use cheaper materials and thinner walls or move manufacturing to Northern China where labor and electricity are cheaper. For consumers this means less creative, shoddier products with more safety problems that won’t last as long. Thank you, Walmart!

An example of the new and improved World Friendly Walmart is seen in West Virginia where workers have been ordered to be available to work any shift at any time or face dismissal. This “open-availability” policy states that “workers who cannot commit to being available for any shift between 7 a.m. and 11 p.m., seven days a week, will be fired by the end of the week.” So much for daycare, elderly parents, little league games, doctor’s visits, dance recitals, families, communities and anything resembling life as we know it.

In our ever diminishing Department of Good News; California ports have extended their hours and weekends so that all of the goods imported through there should reach their destinations in a timely fashion. Unlike Walmart employees, dock workers belong to a union which will guarantee them monetary compensation for working odd hours as well as some semblance of a regular schedule.

My summer reading has included James Stewart’s book, Disneywar — although I’d be a little careful about carrying a copy around Southern California. An alternate title might be Unwarranted Arrogance and Self Puffery for Dummies. It seems that Disney’s success in creating enduring properties for children can at least partially be explained by the fact that the company is managed by children – very badly behaved children (and I’m talking senior management as well as past and present board members). For those who enjoyed this tome I’d like to recommend William Golding’s, Lord of the Flies, as further reading. An illuminating alternative analysis of Disney’s recent courtroom escapades which I copped from the Wall Street Journal editorial page follows.

The days are growing impeccably shorter and summer fun is almost over so it’s time to dust off your crackberry’s, buy new batteries for your laptops and cell phones and get ready to run another weary lap on too little fuel and too little sleep.

Fall Toy Preview is just around the corner.

See you then,

Tom Keoughan

By ToyJobs|2020-11-20T08:51:05-06:00August 24th, 2005|ToyJobs Blog|Comments Off