toy industry jobs

Toy Industry Walks Through the Fog of Uncertainty

Most toy industry executives are telling me that while they certainly would have preferred to still have Toys “R” Us as a viable entity, that they have mostly replaced the shelf space and think that the year will turn out alright. That said, they want to make sure that they are on firm footing before they start investing in additional staff. They would like to put behind them the uncertainty of whether new product placement equals new sell through.

The good news is that consumers still want toys. We just have to figure out how to best get those toys in front of them and make them take notice. From cell phones to video games to WhatsApp to Fortnite to over scheduling by parents: kids have a lot more things competing for and dividing their attention than the days when we would just go out and play. To complicate things further, the array of choices is changing at an increasingly rapid pace. The challenge for Marketers is how to get their wares noticed on a increasingly pixelated and changing pallete of potential diversions.

At the same time, the retail landscape is undergoing revolutionary change. E-commerce is booming but physical stores still do the bulk of consumer sales. Buy online and then get in the car and drive to the store to pick it up is also increasingly popular although for the life of me I can’t imagine why. Manufacturers have to figure out how to best operate in this changing environment. Complicating that further is that you can’t just change from A to B. The retail formula is changing constantly and more rapidly all the time. The only certainty is the ever-increasing velocity of change.

Thus far, the holiday shopping season appears to be off to a strong start. Foot traffic over the Thanksgiving weekend was down somewhat but retailers began offering deals earlier which pulled some sales forward. The Black Friday weekend is still a good indicator but consumers are broadening their shopping window so there is much less of a pronounced spike.

black friday

In the meantime, online sales have been exploding with approximate growth of 25% over the long Thanksgiving weekend plus Cyber Monday. We should expect a strong holiday sales season. The economy is humming, and the consumer is flush with lower unemployment, lower taxes, lower gas prices and as of the last few months higher wages. Event more importantly, the consumer is willing to spend. Top line numbers for retailers should be strong but profit margins for retailers of all stripes may be challenged by higher labor costs for brick and mortar locations and higher freight costs for items purchased online. Retailers may be willing to pass some of these cost increases on to consumers, but it is likely that for the larger portion they will be looking toward vendors.

While the overall holiday sales environment looks quite positive despite potential back end shearing by retailers, there is another big concern for toy manufacturers. That is a potential Trade War with China. As of now, it appears that Xi Jinping and the Trump Administration have made small concessions that permitted each other face saving gestures and agreed to a temporary cease fire.

trump xi pic

That allows toy manufacturers to breathe a little easier for now but kicking the can down the road doesn’t alleviate uncertainty. In ninety days, when a full agreement still hasn’t been reached, tariffs on the $200 Billion of goods now set at 10% will be increased to 25%. The good news is that toys, as it stands now, still will not be affected. Unknown is what happens next. How long will the next negotiating window be? What will the consequences be if a deal is still not reached? Most likely, the next step of tariff escalation will include the toy business. Will the toy industry be able to ship goods for the holiday season of 2019 by, let’s say, June 1st? Especially, when you realize that vendors and retailers may be at cross purposes. Manufacturers will be trying to ship products as early as possible to try to beat the clock while at the same time retailers tend to try to postpone commitments to buy as long as possible.

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If there is any kind of silver lining in this fog uncertainty, it is that the toy industry is more agile and better equipped to navigate uncertainty than most other manufacturers. After all, even in a year that is all blue skies and smooth sailing (and I can’t remember that ever happening) we are in a seasonal fashion business. Turbulence is our middle name. We are used to it.

My view is one of cautious optimism – but that’s pretty much my default setting. Things tend to work out… eventually. The worry is how long will it take.

Crossing the River by Feeling the Stones.

Tom Keoughan

 

By | December 4th, 2018|About Toy Jobs|0 Comments

Dallas Fall Toy Preview AND The Zombie Awakens

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Day one, morning at the Dallas Fall Toy Preview was mostly grumbling as exhibitors complained widely that: “This place is empty.”, and “There’s nobody here.” Indeed, the main floors on 12 and 13 looked like a ghost town. I found it much busier down at the 4th floor Diverse and McManemin showrooms. That’s likely because with twenty to thirty companies crowded into each space there was a much higher population density.

Activity had picked up by evening and interestingly there seemed to be more people at the Tuesday night cocktail party than there were in the building all day. This led me to quip: “if they want to increase attendance, maybe they should serve beer.”

By Wednesday afternoon, the sentiment had changed. Most exhibitors I spoke with were saying “We had really good meetings”. Several companies stated that while they could skip the show and just travel to all the different retailers, they like that fact that with the Dallas showroom space they could put their entire line of product offerings on display.

It was good to see several TIA Board members actively starting discussions and eliciting feedback about the future of the show. As usual, there was talk of moving the show to Los Angeles. There are two insurmountable problems with that. First, the large LA based companies don’t really want their nimbler competitors around trying to “distract” retailers with their often more creative wares. If the show was moved to Los Angeles in an attempt to consolidate what has turned into four October trade shows, then the big LA based companies would simply change their dates thus defeating the whole purpose.

Second, a lot of companies have opened showrooms in El Segundo but they can be anywhere from a couple of blocks to a couple of miles apart which necessitates leaving the building and often getting into a car and dealing with LA traffic. I seemed to be the only who thought that could be solved by running a continuous string of shuttle buses. Then the real answer came out. “Buyers don’t like it. They don’t want to travel from block to block and building to building.” That’s it. Retailers are the ones we want to attract and convenience. If we want to change the Dallas format in in such a way as to attract more buyers, we can’t do it in a way that they have already told us they don’t like. For the time being, at least, LA is out.

Company owners told me they like Dallas because it is convenient, it’s centrally located, and both travel and hotels are relatively inexpensive. They also like the ability to put their entire product line on display. Their complaints were: “More Buyers”, and that renting booth space was very expensive.

From where I stand, I like the show as it currently is. I can fly in and stay in an inexpensive hotel and spend two days meeting with fifty toy company owners and Presidents because they have a lot of free time on their hands. That’s great for me but I’m acutely aware that y’all aren’t having the show for my benefit. If the show doesn’t make financial sense for toy manufacturers, then it will cease to exist. So, here’s my two cents on possible ways to improve the show for my clients:

  1. More Buyers. It was great to have Wal-Mart, Wal-mart.com, Target and Target.com in attendance but booth space is expensive so if more mid-tier retailers are represented that helps to justify the costs. It would be particularly helpful if Sales Execs could use the show to avoid an additional schlep to Menomee Falls, Wisconsin or Grand Rapids, Michigan. What can we do to attract broader retailer participation?
  2. Condense the Show in Space and Time.  Most manufacturers had two or three appointments on Thursday morning but also had plenty of downtime on Tuesday and Wednesday. The show could easily be compressed into two days. I confess that I have no knowledge of how this would affect the T.I.A.’s financial considerations but my understanding is that this show isn’t a big money maker for them anyway. Also, the show could easily be fit on just the 12th and 13th floors. That would create a busier and buzzier environment. How could the showrooms on the 4th floor and what’s left of the 8th floor be motivated and compensated to move upstairs?
  3. Serve Beer. But maybe don’t start until lunch. 😊

The big buzz in Dallas was various announcements about the potential rebirth of Toys “R” Us. Phase one will be a shop within a shop launch of Toys “R” Us private label brands at “a prominent Midwest based retailer.” Meijers? Kohls? That sounds like a Hail Mary pass to me. I can’t imagine that the public is exactly riveted by brands like Fastlane or Animal Alley.

zombie

Much more interesting is the prospect of opening 200-300 stores in 2019 under the Toys “R” Us banner. At this point, plan specifics are preliminary and unsurprisingly very sketchy. That said, we should remember that Toys “R” Us was a viable business if it hadn’t been loaded with all that debt. Now that debt is gone, they are mostly off the hook to vendors for 2017 shipments, they have wriggled out of their leases and there is an awful lots of inexpensive retail space to let.

A lot of people had the immediate reaction, “Why would companies want to deal with them again?” Really? I can’t imagine a single toy manufacturer that wouldn’t happily line up for a retailer with 200-300 doors – provided that the terms were right. That said, the new owners of Toys “R” Us should come to realize that there is a lot of bad blood between vendors and a certain Sr. Merchandising Executive who actively chased in shipments that he had to have known weren’t going to be paid for. TRU’s owners may have needed him to hold things together thus far, but if they want to re-establish trust with their vendors, he will have to be jettisoned. All trust there is gone and is unlikely to be repaired. It may be time for the man in the Geoffrey mask to go.

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As I write this, Sears/Kmart is back on the ropes and wobbling badly like an aging prize fighter. They have announced they will close roughly 150 stores with an additional 250 stores put under review while about 300 stores that are considered more viable will remain open. Many toy companies continue to sell to Kmart while keeping receivables on a very tight leash, but I can’t help but think that I’ve seen this movie before… and I’ve seen it just recently.

Fortunately, other retailers are picking up the slack, Wal-Mart is increasing its toy department by 30% and Target is doubling its toy selection. Kohl’s and Penney, Five Below and Best Buy are all increasing toy sections for the holiday sales season and other retailers are following suit, Party City will open up to 50 pop-up stores for the holiday sales season and if successful, I would have to think that Spencer Gifts will follow suit with its Spirit Halloween division next year.

               U.S. unemployment rate, seasonally adjusted. Source: Labor Department

unemployment rateThis along with the lowest employment rate in fifty years, the highest consumer sentiment in 18 years and rip-roaring consumer spending should help toy manufacturers in 2018. The National Retail Federation expects that holiday sales-excluding autos, gas, and restaurants – should be up to 4.3 to 4.8 percent over 2017.

Most toy company executives are telling me: “though we would have done better without the demise of Toys “R” Us we think we will do okay.” They also say that they want to make sure that they are going to be okay before they start investing in additional staff. Toy industry hiring which was dead in the first half of 2018 picked up nicely in June but has not been as robust as it should be. I suspect that it will continue at the “better but not normal” rate until we make it through the holiday sales season and the January/February trade shows.

Steady as She Goes,

Tom Keoughan

By | October 17th, 2018|About Toy Jobs|0 Comments

Toy Hiring Gaining Traction

The sudden demise of Toys “R” Us has been very disruptive to the toy hiring market. It’s crazy out there. Many companies have laid people off but lots of companies are hiring as well. Oddly enough, many companies are doing both as they reorganize their rosters for the changes and challenges ahead.

Santa-Clarita-Toys-R-Us-Closure-

By the beginning of 2018, most toy manufacturers expected that Toys “R” Us was going to be a bit shaky moving forward and had instituted plans to limit any potential damage by shipping less, later and tightening payment terms. They were hedging their bets but remained confident that business would continue amongst constant reassurances by Toys “R” Us Execs to: “Remain calm. All is well.” Then shortly after the completion of the January and February Toy Shows, Toys “R” Us declared bankruptcy. While everyone knew that things were wobbly, nobody expected Toys “R” Us to fall so far and so fast. After all Kmart has been wobbly but still standing for over a decade.

In a typical year, very little toy industry hiring gets done in January and February as Toy Execs are overbooked and over busy crazily traveling the globe to attend anywhere from three to five shows. Not only are they too busy to hire they also would prefer to wait and see how retailers react to their wares before opening their wallets to add to staff.

WSJ store closing graph

Usually, about two weeks after the final trade show in New York, manufacturers put the finishing touches on plans and projections and the phones begin to ring here at Toyjobs World Headquarters. With the sudden and unexpected demise of Toys “R” Us, manufacturers had to reconfigure their expectations. Publicly there was a lot of finger pointing, magical thinking and gnashing of teeth. After about two months, forecasts were changed and plans were redrawn and search starts picked up in early May leading to increased but not overwhelming hiring in June, July and August.

Toy hiring follows toy sales and I would imagine that toy sales and will be somewhat lower in 2018 as  manufacturers search and battle for shelf space to replace their Toys “R” Us acreage. I would think that challenge will continue but to a lesser extent into 2019 as Toys “R” Us begins to fade into the rear-view mirror. I envision that toy sales and therefore toy hiring will remain disrupted but steadily gaining strength over the next year and a half.

I realize that is very much at odds with recently published NPD data. Toy industry grows its sales by 7 percent in the First Half!! Yeah, but … Consumers were lured into the Toys “R” Us stores by the trumpeting of huge markdowns which didn’t really look all that “yuge” once you were in the store. I know mothers who went to Toys “R” Us every couple of weeks in search of big bargains that barely existed. After all, if you’re going to lie to your employees and lie to your vendors why not lie to the public as well. Probably because traffic, even disappointed traffic, equals increased sales. Unfortunately, those sales didn’t help the toy industry all that much. They were sales of previously shipped and unpaid for merchandise. I would envisage that most of the proceeds went into the pockets of the bankruptcy attorneys rather than toy companies. So I see that 7% Toy Industry Sales Growth as a very flawed number in this period. Sales of toys off retailers shelves was indeed a very different things than sales by toy manufacturers.

That said they toy industry is reacting to and recovering from the Toys “R” Us debacle amongst a very bright backdrop. It’s better to face challenges in an increasingly robust economic environment. After all, this isn’t 2009 and the world isn’t going to end tomorrow. Rising employment, wages and tax cuts have consumer spending on a tear and US GDP rose to 4.1% in the second quarter, Wal-Mart just hit it out of the park. CEO, Doug McMillon was quoted last week as saying “Customers tell us that they feel better about the current health of the U.S. economy as well as their personal finances. They’re more confident about their employment opportunities.”

The evolving retail landscape toward online shopping continues but many brick and mortar retailers like Wal-mart, Home Depot, Nordstrom, and Coach have recently been reporting strong numbers while others (JCPenney, Bon-Ton, Claire’s) are either closing stores or going bankrupt. Weaker competitors are being weeded out and clearing some of the over capacity that has plagued retail. As a result, the remaining chains are growing even stronger.

The good news is that consumers still want to buy toys. Toy manufacturers will just have to be ever more nimble in getting their products in from of them.

Say what you will about Trump’s antics but the economy is humming. I’m still wary about Trumpian trade issues. I suspect, but can’t know for certain, that things will get worked out with Mexico, Canada, and Europe. That said, playing a game of chicken with China is a very different deal. Eventually, after much dickering, we will probably end up with face saving half measures (or more likely quarter measures) … eventually.

Free product idea for a Skill and Action Game:

The Game of Chicken: Trump, Trade and Tariff Edition

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“Crossing the River by Feeling the Stones”

Tom Keoughan

 

By | August 22nd, 2018|About Toy Jobs|0 Comments

Turbulence in Toyland – Same As It Ever Was

 

TRU 4-18-18

I think that it’s reasonable to say that there are two main causes for the recent demise of Toys ‘R’ Us. The first was the excessive debt burden put upon the company by owners KKR, Bain Capital and Vornado Realty. TRU’s heavy debt service came at a time of massive change in the world of retail and made it difficult for the company to invest in the changes needed to survive during this period of disruption. That said even if they didn’t have the debt burden, it is far from certain that TRU would have had the correct strategy or the ability to execute it. With their brand equity they should have been a leader in toy E-commerce but have botched that so many times that recently they haven’t even been one of the top five online sellers of toys. Additionally, their stores were a mess and there really wasn’t any compelling reason to visit them. If only TRU could have figured out how to attract as many people to its stores as attorneys to its legal hearings, things might have turned out differently. I think it’s reasonably to say that the business has been serially mismanaged since the recently deceased founder Charles Lazarus and his original team retired.

Corporate bankruptcies are always messy and the Toys ‘R’ Us case is no different. I am no big fan of US corporate bankruptcy laws having been burned by them a couple of times in my career. They seem a bit topsy turvy to me. Debt holders and financial institutions who are supposed to be professional evaluators of creditworthiness are first in line ahead of suppliers who are doing business with the company in good faith. Games almost always get played. I’m not privy to the details but it is pretty easy to imagine both product and service suppliers to Toys ‘R’ Us being lead on and lied to.

So, where does that leave us today? The patient is dead but there is still time for another attempt or two at resuscitation. To the Paddles! Toys ‘R’ Us is currently undergoing liquidation (even though the bargain prices don’t seem so low) but there are apparently still a few serious and non-serious attempts to revive the collapsing retailer.
There have been whispers of Toys ‘R’ Us trying to spin out or sell its house brands either with or without its internal product development team. However, those brands are not particularly strong, and I would imagine that the chances of this being successful are slim to nil even if they try it. The world will have to learn to survive without a brand called “Animal Alley”.

In better news, Toys ‘R’ Us attorneys have said in court that they have received multiple offers for a majority stake in its Asian subsidiary. Toys ‘R’ Us Canada has also been a viable business and there is talk of multiple offers in the works for the division.

Then we have the strange case of Isaac Larian. In what can only be described as a publicity stunt, Mr. Larian started a GoFundMe campaign purported to be an effort to buy Toys ‘R’ Us. The skinny is that if people donate enough money to buy Toys ‘R’ Us then Mr. Larian is willing to accept ownership of the company. In return, donors will receive not equity but rather bumper stickers and T-shirts which Mr. Larian imagines will be highly prized. I have to ask why such a scheme should be limited to the toy business. There are other troubled companies out there that Mr. Larian might like to own. Perhaps people will also donate money to buy General Electric for him. And why should we limit this to companies in trouble? I may consider asking donors to purchase Apple Inc. for me. It’s not surprising that this absurd effort only attracted $59,000.00 out of the billion dollars Mr. Larian has requested.

Isaac-Larian

Mr. Larian also purports to have made another more serious bid to purchase some Toys ‘R’ Us assets. While his GoFundMe shenanigans do make this plan less credible that does not mean that it is not credible at all. Mr. Larian has said that he has offered $675 million for the U.S. stores of Toys ‘R’ Us and another $215 million to purchase the Canadian operations. As the very least, the offer for the Canadian division appears to have some legs. Should either of these efforts come to pass, toy manufacturers will have to carefully consider whether to do business with a retailer owned by a major competitor. Mr. Larian has said that he will not be involved in day to day operations but people who know or have worked with Mr. Larian have never described him as being hands-off. One has to wonder if other toy manufacturers will be eager to “open their kimonos” on pricing, costs and early peeks at their product lines to a competitor in a secretive and often ruthless business. Time will tell.

Better news is coming out of the K.B. Toys camp. Strategic Marks which owns the brand has been in talks with Spirit Halloween, Party City and others to open up 1,000 pop-up stores to sell toys during the holiday sales season. This should help manufacturers in their search for more shelf space to replace that which they have lost at Toys ‘R’ Us even while fighting against their own unpaid for merchandise which is being sold at a discount during TRU’s liquidation.

Other potential turbulence in Toyland comes from the possibility of a trade war breaking out right at the beginning of the holiday shopping season. Thus far most of the tariff talk appears to be rhetoric rather than policy. Both the Trump Administration and China appear to be engaged in posturing ahead of what will likely be protracted negotiations rather than an all-out trade war. The two sides now have a period of about seven months during which they will seek to negotiate a new normal. Hopefully that will turn out to be the case because a game of chicken can end badly, especially when conducted in public by men with enormous egos. Sooner or later somebody is going to call your bluff.

What does this mean for toy industry hiring? So far, things are much better this year than last. Last year at this time, toy industry executives were telling me that they needed to add staff but were going to “hold off for now” due to uncertainty at Toys ‘R’ Us. Chapter 11 brought “certainty” but it wasn’t exactly helpful and left many companies wide-eyed and immobile like deer in the headlights. In 2018, toy manufacturers were expecting trouble at TRU and planned for it. Very few were expecting that trouble to hit as deep or as fast as it did, especially since Toys ‘R’ Us executives were leading them to believe otherwise. What I see in the toy employment now is total turmoil. Some companies are laying off. Some are hiring. Many are doing a little of each as they seek to realign their staff with their go forward strategies. Few companies are standing pat and most are making changes to meet the challenges of the shifting retail landscape. That means there will be winners and losers. There are few jobs right now for Sales Executives in the northeast, even as opportunities for people with sales experience calling on mid-tier and value channel retailers as well as E-commerce expand rapidly. Some will see new opportunities opening up while others will have to retool and learn new skill sets.

After a brief period of confusion, the toy industry is going to be alright. Consumers still want toys and five years from now manufacturers will have found new ways of getting their product to them. From the early eighties with the rapid succession of toy company shutdowns of – Mego, Lesney, Coleco and CBS Toys – the toy industry has been ever changing and always in turmoil. Same as it ever was.

“Crossing the River by Feeling the Stones”,
Tom Keoughan

By | April 17th, 2018|ToyJobs Blog|0 Comments

Toy Fair Revue and Prognostications

New York Toy Fair kicked off on Friday night with the 2018 Toy Of The Year Awards. Held at Ziegfeld Theatre, this was a fantastic event as always. The Toy Association staff led by Steve Pasierb has really got this down. I’d like to give a shout out to Marian Bossard, Kimberly Carcone, Robyn Gibbs, John Klein and the entire Toy Association staff for doing such a great job not only with the TOTY Awards but with New York Toy Fair as a whole.

Zuru WinnerTwo trends seemed to emerge among the award winners that night. First, collectibles continue to be a very hot category with WowWee’s Fingerlings and MGA’s L.O.L. Surprise! sharing top honors as “Toy of the Year.” In addition, Funko’s Mystery Minis won the “People’s Choice Award” which is chosen by tallying the votes of consumers.

The other big trend was that about half of the twenty awards were won by small and medium-sized companies. These companies have to run faster and jump higher with less resources (both human and financial) backing them up. They also have to be more inventive than the typical brand behemoth. I think this bodes well for the health of the industry which for a while in the early aughts seemed to be more about slapping licenses on sippy cups. Congratulations to the entire teams of all award winners for keeping kids smiling.

Sunday night was Ladies’ Night with the always wonderful WIT Wonder Women Awards Gala. As usual, it was held at The Lighthouse at Chelsea Piers. Please don’t move it. It’s a great venue. Event Co-Chairs Genna Rosenberg, Janice Ross, Jennifer Caveza and their entire Host Committee made it look easy despite what must have been an awful lot of work above and beyond their day jobs. Congratulations to all the Award Winners and to all the wonderful women of the toy industry.

WIT2018

New York Toy Fair as a whole seemed well attended and very upbeat. It also seemed that international attendance was quite high. The toy executives I spoke with exuded confidence and were bustling about their business. Now if we could just do something about those Javits Center floors.

TNT2018

Notable Toy Fair news included the election of Bob Wann of PlayMonster to Chairman of The Toy Association. Bob has toiled for both big industry players like Fisher-Price and Hasbro as well as smaller companies like Sababa Toys and now PlayMonster. He may be just the guy to balance the very different interests of those two groups. Maybe….. maybe he can even solve the annual October multiple location Toy Show mishegoss.

BobWannIn other news, Hasbro was named the global master toy licensee for Power Rangers. That might not impact the toy industry as much as Bandai losing what had been a long-time licensee. Lastly, Basic Fun announced that they had bought K’nex. K’nex has always been one of the most inventive and versatile construction toys in the pure product sense but never seemed to have been brought to market in the right way. Jay Foreman and his team should be able to change that.

Moving forward, with the exception of two monkey wrenches, both business and hiring trends look good. The toy industry only grew by 1% in 2017 but that was after three consecutive years of better than average 4-5% growth. The industry can afford to take a breather and still be able to move that trend line up and to the right. Buoying the economy is a strong labor market with unemployment holding at a 17-year low. Top-line wages are beginning to creep up AND, due to the new tax plan, take home pay is on the rise. Additionally, there is a growing wealth effect where consumers “feel” wealthier due to rapidly rising home prices and the stock market being near an all time high, despite February’s fluctuations. All this has led to skyrocketing consumer confidence, which indicates that consumers will open their wallets wider.

FeelingGoodChart

On the other hand, we have our two monkey wrenches. The first is Toys ‘R’ Us. During the New York Toy Fair, I asked everybody I spoke with about Toys ‘R’ Us. The venerable retailer had already announced that it would close 180 stores. That’s a lot of shelf space that won’t need to be filled. Most companies said that they had put Toys ‘R’ Us on a tighter payment schedule and had already forecast lower shipment levels to the retailer. Many said that they were done and weren’t going to sell to Toys ‘R’ Us anymore. I’m not sure that I believed all of them. Others cited that they would be moving to diversify their customer base. I’ve seen evidence of that. In the last year, Toyjobs has completed a lot of searches for Sales Execs specializing in mid-tier chains, E-commerce and the value channel.

ToysRUsClosing

Then on February 21st, the day after Toy Fair closed, The Wall Street Journal reported that Toys ‘R’ Us would be closing an additional 200 stores beyond the original 180. There were also rumors of laying off a quarter of the corporate staff. I’m sure that this news has sent toy executives scurrying back to their spreadsheets. Almost nobody had this baked in. Numbers will have to be crunched and decisions will have to be made. I’m guessing that many more companies will decide not to do business with Toys ‘R’ Us. Others will tighten the payment leash even further – cash on the barrelhead – a la Kmart. Competition for shelf space at other retailers will intensify. Bricks and mortar isn’t going away, just finding it more difficult to grow. Many heritage retailers had very strong 2017s. While E-commerce sales are skyrocketing, they are still less than 10% of total US retail sales. I also expect that toy manufacturers will start to really professionalize their E-commerce efforts.

The bottom line is that consumers still want toys but the way to get those toys in front of consumers is changing. It’s way above my paygrade but ultimately toy companies should think about banding together and creating their own mega E-commerce hub which will both attract consumers and keep manufacturers from getting sheared on their way to market. Think like a big media company. Content AND Distribution is far more powerful than Content or Distribution. The toy industry may be too small and fragmented for each company to do this on their own but banding together could turn out to be a “Grand Bargain.” Of course, the devil will be in the details. “Who pays for this? Who owns that?” but motivated people have a way of working things out.

ECommerceChart

As for the second monkey wrench, it goes by the name of Trump. On Thursday, March 2nd, Mr. Trump announced that he was going to institute a 25% tariff on steel and one of 10% on aluminum adding to his previously announced tariffs on solar panels and washing machines. The danger is that, if enacted, these will escalate into a full-blown trade war. Now that the economy is up and humming, this would be a very odd and counter-productive thing to do. Mr. Trump’s pronouncements aside (“trade wars are good, and easy to win”); a trade war is in nobody’s interest. It’s especially not in your interest to throw the economy into turmoil when it has been gaining strength while you have been President and you have mid-term elections quickly approaching.

TrumpThe only thing consistent about Mr. Trump is that his proclamations are much more extreme than his actual actions. I suspect that last week’s news burst was his way of opening negotiations since Chinese Trade Minister Liu He was just arriving in Washington. It is interesting to note that China doesn’t really export much steel, solar panels or washing machines into the United States. Steel exports have dropped rapidly over the last few years due to China’s own internal construction boom. They do ship a fair amount of aluminum here. That lends credence to the idea that these are really shots across the bow…. negotiating tactics. Would Donald Trump enjoy an international spectacle with him at the center? Surely he relishes the idea of global players rushing to him in order to curry favor. That said, the presence of Peter Navarro and Wilbur Ross in the Administration is troubling. So are we entering a trade war? Will he or won’t he? …..only his hairdresser knows for sure.

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SteelChart

Wrapping up, the overall terrain for business and hiring looks to be quite strong but we have two monkey wrenches coming at us fast. For Toys ‘R’ Us, toy companies can potentially ameliorate the crisis through planning, forecasting, tightening, diversifying and/or just deciding not to play. It will be a tricky navigation but presumably we should be able to come out the other side. As for Trump, there’s little to do but watch and wait to see if this is just negotiating bluster or if he has really decided to shoot himself in both feet. Hmm, I guess I’m cautiously ecstatic. Is that possible?

 

May you live in interesting times,

Tom Keoughan

By | March 5th, 2018|About Toy Jobs|1 Comment

2018 Optimism Once We Get Past TRU Mess

TRU
Every day we are pounded by headlines about retailers closing stores. Toys ‘R’ Us leads the charge and will be closing about 180 or 20% of its locations in the US. Walgreen, Brookstone and Hallmark have also announced closures.

Sears Kmart will be closing about 165 locations. Of course, if you are still selling to Kmart you already know that you’re sitting at the blackjack table deciding whether to draw another card when your hand stands at 15. Can I get 15 day payment terms? Can I get 10?

Wal-Mart will also be closing 63 of its Sam’s Club locations, although about a dozen of those will be converted into e-commerce distribution centers. Building out their e-commerce fulfillment network should help them deliver online orders to customers faster.

All of these store closings will mean less shelf space to fill but greater predictability for the year ahead.  No longer will toy manufacturers have to wonder: “Will they?”….They already have. Unfortunately, many manufacturers still have uncertainty on how much and when they will be paid by TRU for goods that they’ve already sold. That means that while the future looks brighter, many vendors still have uncertainty about their own current financial situation. It doesn’t help that Toys ‘R’ Us has secured a bankruptcy extension beyond April 6th. It is also unhelpful that throughout this whole bankruptcy process, TRU has been far from forthcoming and has not acted as a very upstanding citizen toward the toy industry community. “Not only are our payables way late but we will continue to nickel and dime you in the warehouse and any place else we can think of.”

There are, however, silver linings on the horizon. Holiday sales for 2017 posted strong gains. The National Retail Federation stated that overall sales when up 5.5% while according to data from MasterCard Spending Pulse they were up 4.9%. Target, Kohl’s and even J.C. Penney all hit it out of the park. Amazon continues to rocket forward. A study by One Click Retail said that the online juggernaut claimed 44% of all US e-commerce sales for 2017. Additionally, Amazon accounted for 4% of total retail sales for the year – approximately $200 billion.

Unfortunately, toy sales gains were much more muted. According to NPD they grew only 1% in the US and 1% globally in the 12 countries they track. Mexico and Russia were hot sales growth markets. Toys ‘R’ Us has to be one of the major causes of this. We have heard that TRU’s US sales dropped by 15% in 2017. And if those are the numbers we are hearing, the real numbers could be substantially worse.

Although we were coming off of our third best year ever, 2017 was a lousy year for Toyjobs. For the first nine months of the year our clients told us:  “We need additional people but we are going to wait and see what happens with Toys ‘R’ Us.” Once the bankruptcy was announced, toy manufacturers, for the most part, pulled in their horns. TRU is everybody’s second or third biggest customer and manufacturers big and small all took a hit to their overall profit margins.

Moving forward we are cautiously optimistic on toy industry hiring for 2018. Although there will be less shelf space to fill, there should be greater predictability on 2018 sales. In addition, tax relief should mean wider profit margins for toy manufacturers. That said, I wouldn’t be surprised if retailers are unsatisfied with their own expanded profit margins and also want a piece of yours. Consumer spending was up 3.8% in the final quarter of 2017. That looks to continue due to strong employment, signs of wage gains, a galloping stock market and high consumer confidence. Spending should be boosted even further as consumers see their take home pay begin to rise. The media has 90% of the American people believing that their taxes will be going up. What a surprise it will be when 85% of them actually see their tax burdens drop and their paychecks increase. Add to that, the pent up demand when toy manufacturers who wanted to add people last year now feel comfortable enough to do so. All of this should come to pass if and when the toy industry can finally get past the Toys ‘R’ Us fiasco.

I look forward to seeing everyone in the New York February cold.

Tom Keoughan

By | January 30th, 2018|ToyJobs Blog|0 Comments

Toy Hiring Mimics the Poor March Jobs Report – But We’re Optimistic

By now I’m sure that most of you have heard about the sharp deceleration in March hiring after a long string of strong jobs reports. Non-farm payrolls slowed in March to a seasonally adjusted 126,000, the weakest hiring in 15 months. Hiring estimates for both January and February were also revised downward.

My gut feeling is that things are not as bad as that report indicates, despite the press running around crying that “the sky is falling.” After all, bad news sells. The US has had a number of soft first quarters in recent years. I haven’t been able to come up with an explanation for that phenomenon that I’m satisfied with yet. Lots of correlation but unconvincing causation. Here at Toyjobs, we don’t just make stuff up but it’s still important that we recognize the pattern.

There have been lots of layoffs recently in the oil and oil service businesses and certainly that is a factor. And, for the last two years, first quarter winter weather has been horrible. Last month, job growth in construction and leisure and hospitality, two of the most weather-sensitive industries, slowed by about 90,000 jobs. Days when the office is closed due to weather also takes a greater toll than it is generally given credit for. There are the snow days themselves and then there are the next few days of playing catch up. Yes, I know everyone claims that they can get all the work done or are even more productive from home but we all know that’s not entirely true, don’t we? This means multiple days taken away from interviewing and decision making all of which pushes actual hiring down the road.

In the toy industry it is not unusual for hiring to be slow in January and February as everybody hits the road for the global trade show circuit. There is no time to interview and make decisions. A lot of companies also decide on whether to create jobs based on trade show and early year sales results. Hiring can slow even as search starts increase.

That’s what we’re seeing this year. Here at Toyjobs, after an extremely strong fourth quarter, first quarter placements have been slow as search starts have been soaring. If both unemployment figures and search starts had gone into reversal, I would be concerned that the US economy was faltering. That has not been the case. Search starts have been quite robust and those searches are now beginning to come to completion. Many will be completed in April and May – a few weeks later than usual. This leaves me optimistic that poor first quarter jobs numbers represent a delay rather than a long term slowdown and that we are thankfully about to experience a rebound.

Optimistically,
Tom Keoughan

By | April 15th, 2015|ToyJobs Blog|Comments Off on Toy Hiring Mimics the Poor March Jobs Report – But We’re Optimistic

Toy Hiring Approaching Normal But a Little Too Early To Call

Toy Industry hiring continues to be strong and the job environment seems to be close to back to normal. I don’t want to “call it” until we see what search start volumes are coming out of the summer doldrums. The usual mid-August ramp up was delayed last year until early October. I’m a big believer that hiring in the toy industry is event-driven. One event trigger is when the product ships. When that happens, companies relax a little bit and feel better about themselves and then start hiring. Last year, retailers delayed having goods shipped until late September/early October. I’m guessing that will be a structural shift and goods will continue  to be brought in later as retailers continue in their never ending quest to shift as much risk as possible onto “their partners” in the seasonal fashion goods business.

It would also be nice to see an uptick in Marketing and Product Development jobs. Prior to the financial crisis, those positions were Toyjobs’ bread and butter. During the crisis whatever hiring there was focused on safety, sourcing, and sales. That only makes sense: there was a big product safety brouhaha in 2007 and safety issues were put under a magnifying glass. Regulations (some ridiculous) were constantly changing. Sourcing is simple code for “beat down the prices at the factories.” Sales, well we all want more sales and many business owners and senior managers subconsciously (I’m being kind) blamed poor sales on their Sales guys rather than the economic collapse. In any case, Marketing and Product Development jobs seem to be just starting to pick up. That is a sign that toy companies are moving from a defensive position and are looking to do new things. For me to declare the hiring environment “back to normal” it is important for that trend to fully develop.

Many people have been able to change jobs over the past year and that looks set to continue. Unfortunately, there are far too many people who have been unemployed for a long time. For people who have been out of work for three or four years, things are extremely tough. If you have been consulting, it is important to list what projects you worked on and what companies you did them for on your resume. Also highlight them in your interviews. For the long term unemployed who haven’t really been doing any consulting it may be time to reinvent yourself and perhaps even reset expectations. I know that is very difficult but it may be even harder to find your way back to your old career.

It’s not so much that companies are discriminating against the long term unemployed as much as there is strong competition for every job and that competition includes a lot of people who were doing that job just yesterday. For about five years, even employed people who wanted to change jobs had nowhere to go. Now that jobs are opening up, currently employed people with an up to the minute skill set and current connections are going to naturally be in the front of the line.

If you have legitimately been consulting, you can work your way back inside. If you haven’t, it may be time to reinvent yourself and move onto the next phase of your career. I know that’s very difficult to hear, but not as hard as continuing to pound on doors that aren’t opening.

For the rest of us, we should feel especially grateful for having come through this thing mostly intact and should reach out to help others who need it when we can.

The best to all,
Tom Keoughan

By | May 6th, 2014|ToyJobs Blog|Comments Off on Toy Hiring Approaching Normal But a Little Too Early To Call

Toyjobs Logs Best Month Ever

In December 2013, Toyjobs recorded the best month ever in its thirty-two year history. Not only was hiring strong in general, but many toy companies were hiring people at senior levels. This is a strong indication that the industry as a whole has left behind its primarily defensive posture of the economic downturn (teenage ninja heads in shells) and is now aggressively looking for opportunities (mutant turtle heads popping out of shells).

Typically, toy recruiting slows in January and February as the industry is focused on running from one trade show to the next. However, this year activity has not let up and search starts have continued to be strong. It can be difficult to actually close searches during this time period with so many people on the road but I think that the high level of search starts bodes well for toy industry hiring in February, March, April, and beyond.

Holiday toy sales were down slightly and no brick and mortar retailer stood out as having a great year. Several retailers came into January with particularly grim results. Toys ‘R’ Us and Kmart staggered out the holiday season punch drunk and wobbly. Costco’s toy department bombed. Even Dollar stores and the value channel were hurting. Our award for the worst behavior for a retailer this season goes to Target. Not only did Target have a massive breach of consumer data, but they are now compounding it by trying to strong arm suppliers into paying for their credit card problems.

Many retailers overpromised consumers on their ability to deliver late purchased goods. Some were advertising that orders placed as later as December 22nd would arrive before Christmas. This will only serve to increase already growing consumer cynicism over retail practices.

Retailers also cut into their own margins with “discounts” which were early, constant and deep. Even though many of these “discounts” were built into the purchase price, a lot of potential earnings for both retailers and their suppliers were still left on the table.

On the positive side, online retailers like Amazon, Zulilly and others absolutely knocked it out of the park. Offering both price and convenience is an unbeatable combination and physical retailers have a difficult task ahead in figuring out and presenting their value proposition to the consumer. Personally, I can’t think ofgeared up a single reason why I would want to be caught dead in a large retail store or mall during the holiday shopping season.

Total retail sales also improved. I can’t help but think that without any red hot toy smashes in 2013 that there were a lot of Xboxes, iPads and Microsoft Surfaces under the tree. Total retail sales are an indicator of the economy as a whole. As it improves, toy sales should come along for the ride…as long as we have engaging product.

Most economic data continues to improve, including the unemployment rate with the headline number (U-3) dropping in December to 6.7%. That said, the headline unemployment number is greatly understated on two fronts. First, a more accurate gauge of financial pain is U-6. U-6 represents unemployed people, plus people who are employed as a consultant or on a part-time basis but would prefer full-time work. It also adds people who have quit looking for work but would take a job if they could find one. U-6 currently stands at 13.1%. Another area of understatement is that U-3 does not consider people who have left the workforce or have stopped looking for work. You may think – “Well, how do they do that? How do they just decide to leave the workforce?” The answer is that most of America is populated by two income families and when one of the earners is either unemployed or underemployed, then the entire household is financially pinched. Rather than thinking about a 6.7% unemployment rate, a more accurate way of looking at the employment picture is that 20% of two income families are living worse off than they used to. As depressing as that may be, statistics are just a snapshot of a moment in time. The best way to view them is by looking at the trend history. Both U-3 and U-6 have been consistently improving. Unfortunately, the trend in people leaving the workforce is not. However, that should turn around as the first two continue to improve.

Looking forward, most economic data is improving. Employment data is improving, it’s overstated, but the trend is consistently growing better. Retailers had a difficult year but it wasn’t terrible –except for a few of them. Because retailers played it very cautiously in 2013 – ordering fewer goods and ordering them later – inventory levels are okay and there is not a lot of carryover. I expect retailers to play it the same way this year even if once again it means losing out on some sales due to empty shelves late in the holiday season. Most importantly for toy industry hiring is that manufacturers are hungry again and are actively looking for opportunities. This means they will need key people to recognize and seize those opportunities and more people to execute on them.

I look forward to seeing y’all at The New York Toy Fair!

All the best,
Tom Keoughan

By | January 28th, 2014|ToyJobs Blog|Comments Off on Toyjobs Logs Best Month Ever

Another Black Friday Disgrace – While Toy Hiring Soars!

Another year – another national disgrace as the human herds were once again rampaging through the nation’s retail outlets in what is little more than legalized wilding. While spreading out the bait over several days made the peak frenzy a little less intense, it also means that we now have four consecutive days of mayhem.

As usual, we had human (?) stampedes, knockdown merch, brawls, aggressively unnecessary pepper-sprayings, shotgun battles over parking spots, a guy stabbed while carrying home his new big screen TV, police officers being dragged by cars through parking lots, and a new low: kids having a stun gun fight in a Philadelphia mall.

Thank you Wal-Mart, Thank you Target, Thank you Best Buy, Thank you Kohl’s for inciting this dehumanizing behavior. If I or a member my family was foolish enough to venture out into these deal hunting scrums and became injured; you can be sure that I’d be having a phalanx of the most rabid attorneys around suing you for intentional reckless endangerment. I’m sure we could find a slew of other legal misdeeds as well (BLACK FRIDAY DEATH COUNT)http://s.wsj.net/public/resources/images/P1-BO270A_Econo_NS_20131206180603.jpg

More people were out participating in the melee than ever before, but on average, people spent less than last year ($407 vs. $423). Maybe retailers’ promotional activity pulled forward some holiday purchases earlier into November. Maybe, with smart phones at the ready, consumers are better able to make price comparisons and sniff out the best Black Friday deals. What does appear clear is that retailers have cut costs so much that it will negatively affect their margins and those of its suppliers (Wait? That’s us!).

In the meantime, toy industry hiring has soared. As reported here last time out, search starts rocketed in early October as children’s products started hitting the retailers’ shelves. Toy companies have been filling those jobs at a feverish clip which continues to this day. The pace will likely be maintained through year end. On January 2nd, the toy industry, as a whole, will board the planes for their annual pilgrimage to Hong Kong. This time out, a whole lot of business cards will be wearing fresh, wet ink.

The surge in hiring appears to be mirrored in the economy at large. Payrolls increased by a seasonally adjusted 203,000 in November. Earlier months have been revised upward and the job increases have now averaged 193,000 for the past three months.

http://www.washingtonpost.com/rf/image_296w/2010-2019/WashingtonPost/2013/12/06/National-Economy/Graphics/296GDP1206.jpgThat is nearly enough to impact the unemployment rate in a meaningful way. The jobs recovery has had false starts before, but this time it seems much more solid and sustainable.

Other economic data seem to support an improving outlook. Third quarter economic growth has been revised sharply higher to 3.6%. US consumer spending is up 2.1% from a year ago. Wages are up a modest 0.2% Consumer Confidence is on the rise and The Federal Reserve reported that credit card debt has risen to the highest amount in three years. All of those are hopeful signs that shoppers will be out buying more toys, Xboxes, and iPhones in the coming weeks.

I would like to see a few more months of improving economic data before declaring that the train has left the station, but it does appear that we are finally, finally gathering momentum. Remember folks, you heard it here first – all the way back in October…now if Washington can just stay out of the way.

It is my fervent holiday wish for the coming year that the economy continues to gather strength in a sustainable way and that there are more and more jobs for people who don’t have them and want them, especially the long term unemployed. God bless us, everyone!

All the best,
Tom Keoughan

By | December 11th, 2013|ToyJobs Blog|Comments Off on Another Black Friday Disgrace – While Toy Hiring Soars!