toy fair

TIA Moves October Show – Betrays Toy Industry

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

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

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

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

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

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

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

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

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

All the best,

Tom Keoughan

By | March 20th, 2007|ToyJobs Blog|Comments Off on TIA Moves October Show – Betrays Toy Industry

Toy Industry Hiring Remains Robust Despite Icy Showrooms

Toyjobs had its third best year out of twenty-five in 2005.  It easily could have been the second best, but a few placements spilled over into early January.  We continue to see robust toy industry hiring for the year ahead.  Our continuing forecast is that during the 2001-2003 economic slowdown, companies cut back more than fat, they cut muscle and bone.  The economy rebounded in 2004, which helped all sorts of businesses, but the toy industry to a much lesser extent.  The reason for this is that it’s not the consumer who is the toy industry’s nemesis, but rather our “partner” the retailer.  I could go on a whole long tirade as to the “why’s” and “wherefore’s” of this as I’m sure you could, but I’ll spare us both and give you the “long story short” version.

In using toys as loss leaders in order to drive traffic, major retailers’ constantly demand “new” product, delivered on shorter lead times at cheaper prices and at lower margins.  They also increasingly want the product to be customized AND they like to make lots of picayune changes, especially late in the day.  This leads to all sorts of frenetic activity and requires more people to get it done.  Business is certainly not great and companies don’t really want to be hiring, but they need a couple of extra hands just to get the work done.

In the “business is certainly not great” department, while the overall holiday shopping season was a success, it was heavily skewed toward high ticket items and luxury goods.  This can set up a scenario where even though total holiday spending rises, money spent on toys decreases.  With such a large portion of holiday budgets being spent on flat screen TVs, iPods and XBoxes, there is a much smaller portion left over for less expensive items like toys.

I wouldn’t hold my breath waiting for all those gift cards to be redeemed either.  Most gift cards are redeemed within six to eight weeks when some of the heaviest post holiday discounting occurs, and it’s no mystery whose margins those discounts are coming out of.  Also, although gift cards may be the perfect present for fickle teenagers or young adults, I really can’t imagine giving a “toy age” kid (2-8 years old) a gift card to open on Christmas morning.  It sort of takes the mystery and joy out of the whole thing.  Not to mention that the best present for the gift giver is seeing the excitement in their little faces.

All this talk of retail brings us to the Tom Coughlin–Walmart saga.  Former Walmart Vice Chairman Coughlin has pleaded guilty to wire fraud and tax evasion charges in connection with the misappropriation of between $350,000 and $500,000 from Walmart through fraudulent expense reimbursements and improper use of gift cards (so that’s where all those gift cards went).

The most explosive aspect of the case thus far remains unresolved.  Mr. Coughlin has claimed that he was reimbursing himself for a secret scheme to fund an antiunion spy operation.  Many of Walmart’s antiunion activities are well known and it has been quite amusing to hear Walmart repeatedly state something on the order of “We have not found any evidence that we, Walmart were involved in any such scheme.”  Well, duh.  The FBI thus far has also not uncovered any evidence that there was any clandestine intelligence operation directed at unions, but it remains unclear whether Coughlin has cooperated with the FBI on that investigation or is making the whole thing up or is saving ammunition for the civil suit in which Walmart is trying to strip him of over $10 million in retirement benefits.  A case in which Walmart is not doing too well, at least so far.

My personal favorite part of the case is Mr. Coughlin’s visit to a Walmart store where he spent $1,000 in gift cards to purchase three 12-gauge shotguns, Stolichnaya vodka, a large Polish sausage and a Celine Dion CD.  Sounds like a big night in the Arkansas hills.  The Celine Dion CD has got to be a bit of an embarrassment, though.

Closer to home, the 2006 Fall Toy Show has been set for the Javits Center, home of the hardest floors on the face of the earth.  This will necessitate that toy companies build custom curtained booths since no one is likely to put their product on a table display where anybody with a camera phone and an Asian manufacturing contact can knock them off in three weeks.  While this has been billed as a temporary measure, it has raised suspicions that the TIA will have an easier time selling Javits as a permanent solution once everyone has paid to have those booths made.

The imminent February Toy Fair has been threatened by the current Toy Building ownership talking about cutting off heat and electricity to individual showrooms.  One way to shine some light on this very nasty business is to remember that Toy Fair used to be a big media event.  It might be a good idea to work the phones and drum up a strong media presence.  When they arrive to see all the hot new toys and find a major trade show operating at icy February temperatures, it should generate a lot of coverage.

I look forward to seeing you there–with long johns on.

All the best,
Tom Keoughan

By | January 23rd, 2006|ToyJobs Blog|Comments Off on Toy Industry Hiring Remains Robust Despite Icy Showrooms

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 | November 9th, 2005|ToyJobs Blog|Comments Off on Happy Talk Returns to Fall Toy Preview

A Tale of Two Toy Fairs

Two toy fairs occurred in February of 2005.  At the Javits Toy Fair, most of the specialty manufacturers were very upbeat as some long absent retailers returned to sacrifice their feet to the world’s hardest floors.  Just as importantly, manufacturers were writing orders.  The majority of company presidents that I spoke with wrote enough business to more than pay for the show.

Back at the Toy Building (for now) there was mostly grousing along the lines of “what are we even doing here.  None of the majors are here.”  Upon closer questioning, however, it did turn out that most companies’ schedules were pretty full.  I don’t know about you, but with such a large percentage of the business being done by three or four majors at low profit margins, I’d be trying like hell to diversify my account base.  A company can live by Walmart one year but die by them the next.   With a well diversified account base (re: small, pesky accounts with higher margins) especially if you can sell them enough to cover your company SG&A, you can live to fight another day.  Also, although Walmart wasn’t at the show, some of the more aggressive manufacturers did make inroads by selling to Walmart.com.

What will become of the October and February Toy Fairs in the future?  There is so much rumor, insider gossip and white noise out there that at least at this point it’s safe to say that nobody really knows.  One thing we can all hope for is that we won’t have to schlep to Orlando – a completely artificial land made up entirely of bad food, plastic and foam.  I’ve lived my entire life without ever setting foot in Orlando and am not anxious to start now.  As for maintaining trade shows in Manhattan, I’m all for it – but it seems a shame that so much time and effort is being spent on a glimmer of a hope for a Toy Building over on the West Side which may be built by 2012, if New York gets the Olympics, or if there’s a new football stadium that no one needs, if, if, if…Such things are pipedreams and fiascos made of.  Manhattan supporters and the toy industry as a whole would be better supported by focusing this energy on finding a building that actually exists and isn’t in the middle of nowhere. 

Two of the major toy retailers had pretty good fourth quarters in 2004.  Target had strong same store sales growth while Walmart had 9% overall sales growth and a 16% profit surge.  Walmart’s same store sales were hurt by continuing to cannibalize their own sales by opening a flurry of new stores in the quarter.  Interestingly, Walmart’s CFO has at long last finally stated that the company should be judged by total sales and profits rather than same store comparisons.  Toys ‘R’ Us muddled along with a year that can best be described as “less bad.”  As for KB – gee, do we really still count KB?

In WALMART UNIONIZATION news it should come as no surprise that Walmart closed the Quebec store which had voted to unionize.  Walmart Canada spokesthingie Andrew Pelletier stated “we have been unable to reach an agreement with the union that in our view would allow the store to operate efficiently and profitably.”  No mention was made of how much Mr. Pelletier’s salary has cost the company or of how many productive employees might have been retained had Mr. Pelletier’s labors been judged on efficiency and profitability.  With regard to a second Quebec store whose employees are considering UNIONIZATION; the Quebec Government Labor Relations Board told Walmart Canada to stop intimidating employees who wished to unionize.  The Quebec Board apparently carries little weight in the great state of Colorado where Walmart successfully intimidated employees who had called for election into then voting down their opportunity to unionize. 

At Toys ‘R’ Us, The Dude and the board continue in their bungling ways.  It’s almost too incredible to believe that they thought they could sell off the sagging domestic toy division and then sneak off with the good stuff.  Apparently, they never considered that a sophisticated buyer might want to buy and hold Babies ‘R’ Us while disposing of the toy group and real estate to finance the deal.  This type of thing happens when you hire a very pretty tropical fish who believes, and then convinces you, that he can swim with the sharks.  Then again, the TRU share price has just about doubled so maybe he’s sharkier than he appears.

We applaud recent comments made by TRU toy group president John Barbour in which he calls for both greater innovation and less commodization in the toy business.  One can’t help but hope that he’s able to shake himself loose of The Dude and then walk the walk as well as get his computer jockeys (buyers) to do the same.  If he can pull it off, TRU and the toy industry as a whole just might stand a chance.

All the best,

Tom Keoughan

By | March 15th, 2005|ToyJobs Blog|Comments Off on A Tale of Two Toy Fairs

Toy Industry Hiring Accelerates Despite “Jobless Recovery”

Another toy fair, come and gone.  While at the toy building the mood was one of very cautious optimism over at the Javits Center things were much more upbeat.  The consensus among specialty toy manufacturers seemed to be that the smaller specialty stores and toy boutiques that were able to survive the onslaught of closeout sales from FAO, KB, etc. would be able to look forward to increased foot traffic and would also need to restock shelves after some decidedly lean and cautious years.  In contrast, the mass market manufacturers seemed to feel that this year would be “les bad” than the last two or three and that was about as bright and cheery as the majority of them seemed to get.

Toy industry hiring has kicked into high gear, we’ve had a very strong January and February and a slew of new post trade show searches being started.  This contrasts with all the talk of  “the jobless recovery” in the press and by televised talking heads.  The best explanation, as usual, comes from Alan Greenspan.  There seems to be two things going on.  Cyclical hiring is accelerating.  On a micro level we see this in our business and on a macro level it can be seen in the growth of the number of want ads.  However, this is being offset by structural changes in our economy.  The flow of high paying factory jobs which started moving overseas in the mid eighties has increased due to both NAFTA and better and cheaper communications technology.  This outflow of jobs now includes software engineers, computer operations and call centers.

While Wall Street types and economists (smug up until the day they have to start operating a spatula) will tell you that this means decreased prices for American consumers, this is only half right.  Much of the cost savings goes to increased profit margins and drops to the bottom line.  Also, things had better cost less so that underemployed and unemployed consumers can afford to buy them at all.  This is not politics but basic common sense economics.

The toy industry has experienced some of these same trends.  Except for large blow molding plants and some game and puzzle facilities, toy factories have long since gone overseas.  Since the early nineties, probably two thirds of the engineering jobs have moved to Asia.  There has been some movement of product design jobs moving offshore but not at an alarming rate.  Also, some graphics jobs have moved, but mainly in the area of production.  Job loss in the design area has been more affected by productivity gains due to computerized design technology.  We don’t have to draw everything by hand anymore.

While less retailers, to a degree, means less sales jobs; this has been partially offset by the fact that the remaining retailers demand more and more personal attention.  We no longer have “the Target sales guy” but the “Target team.”  Marketing and Brand Management jobs have actually increased, as somebody has to keep all these balls in the air and moving in the right direction.  Sales and Marketing jobs look pretty solid over the middle to long term.

So, if you’ve got a kid in college, point him towards marketing or if he’s got a winning personality, make sure that he’s more than a little familiar with the geography of Arkansas.

All the best,

Tom Keoughan

By | March 30th, 2004|ToyJobs Blog|Comments Off on Toy Industry Hiring Accelerates Despite “Jobless Recovery”