Toy Jobs

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 | November 9th, 2008|ToyJobs Blog|Comments Off on Bleak Times: Will Walmart Steal the Silver Lining in 2009

Toyjobs Files Suit Against A-Ha Toys

Toy industry recruiter Toyjobs has filed suit in the Superior Court of New Jersey against A-Ha Toys, Inc. and its president Ivars Sondors.  The complaint lists breach of contract, unjust enrichment, fraud and various other allegations.

Toyjobs president Tom Keoughan stated “Every four or five years we have a situation where a company contracts with us to find employees for them and they tell us that they aren’t interested in any of our candidates. That is, of course, their prerogative.  The problem arises if they then go behind our backs and hire our candidates without telling us or compensating us for our services”.

Keoughan further states “I don’t know what people who do this are thinking.  We’re out in the toy marketplace every day and we are going to find out about it.  We are certainly going to demand payment and go about collecting it to the best of our ability.  Filing suit is a time consuming and potentially costly undertaking that Toyjobs would not pursue unless we were absolutely confident of our position.  In twenty-seven years of doing business, we have never lost a case of this type.”

By | October 7th, 2008|ToyJobs Blog|Comments Off on Toyjobs Files Suit Against A-Ha Toys

Caution Remains the Word of the Day

Although it appears that we are not technically in recession and first quarter GDP numbers were actually revised upward, caution remains the word of the day.  Overall retail sales rose in April and again in May but the main beneficiaries were deep discounters like Wal-Mart and Costco while higher priced stores had a difficult time.  It seems that the Bush administration’s stimulus plan has had a positive short term effect but those $600 dollar checks will be long gone by September and the beginning of the holiday sales season.

So the economy is not quite as bad as the media has been proclaiming (bad news sells) but the toy industry would be facing some very difficult challenges even if this were the best of times.  Every year I hear “the retailers are ordering late, even later than last year” until I realized that in their minds the retailers are not ordering late at all.  It’s simply part of their overall strategy of pushing as much risk as possible on to their suppliers.  This is especially true when it comes to fashion businesses like the toy industry.

This “late ordering” has become even more of an acute problem because of delays in the manufacturing and distribution cycle.  In China there is a labor shortage, electricity shortage, fuel shortage, and chip shortage.  Factories are shutting down left and right.  There are delays obtaining materials and components and further delays due to the stricter quality control regime.  If you look at our main article US Port Law ‘will slow growth’, you will see that the US government is talking about creating even more delays by having every container headed to the US inspected before it gets here.  Talk about your logistical nightmares.

All this is made even worse by continuing cost increases for fuel, resin, labor and the rise in the yuan which is now up over 16% in three years.  Dow Chemical, one of the largest chemical producers in the world, has raised prices 20% across the board.  This will particularly affect polyethylene and plastic stabilizers (used in toys), as well as polystyrene and polypropylene.  Dow is such a huge player that this move gives every other supplier license to raise prices too.

The combination of cost increases and late ordering has the synergistic effect of slowing things down even more.  If I show you a product at a certain price today and you wait three months to pull the trigger then at that time I can no longer sell you that product at the previously quoted price.  The process then rolls over and begins again and the non-decision goes on and on and on.  The one thing that we’re pretty sure of is that there is going to be a Christmas and they are probably not going to change the date.  Perhaps some sort of scheme could be worked out so that products could be priced on a sliding scale based on oil prices, resin prices, the value of the yuan or some combination of the three.  I’m not smart enough to figure out how the formula would work.  Even thinking about it makes my brain hurt.

Through all this ToyJobs is still managing to have its best year ever.  I completely expect that hot streak to end in July.  I thought it would end in June but we some how managed to pull it off for another month.  There are definitely less jobs available out there but we’ve been filling most of the searches we get pretty quickly.  We have been fortunate in that several of our clients are doing pretty well and have been stocking up on talent at a time that they don’t have to compete for it.  Candidates aren’t getting job offers from multiple companies the way they do during better times. We have even had two companies that liked the people that we sourced for them so much that they each hired two candidates for a single search.  A third company gave us a single search and ended up hiring three people. 

Many companies that I speak with tell me that they have holes in their organization that they need to fill but they have to be cautious (there’s that word again) and wait until their final retail orders come in.  So demand is out there but a lot of companies are playing it careful, as they should.  This seems to point to a slow summer for hiring followed by rebound in late August or September.  I should add, however, that if your company is doing well and you know that it’s doing well, this is a pretty good time to upgrade your staff.  There isn’t a lot of competition out there.

All the best,

Tom

By | June 17th, 2008|ToyJobs Blog|Comments Off on Caution Remains the Word of the Day

Toyjobs Takes Off to Its Best Start Ever

Toyjobs has gotten off to the fastest start in its twenty-seven year history.  Unfortunately, I don’t think that is likely to continue.  This is counter to the economic climate and I would certainly agree that there are fewer jobs out there and less toy company hiring.  This seems to be what’s going on.

When times are good, most toy companies are pounding the table for “five more Brand Managers!”  With everyone looking to hire the same people inevitably many of these jobs remain unfilled or at least take longer to fill.  In more cautious times, the companies that are looking to hire are generally looking for just one or two high impact players, say a Marketing Vice President or a Vice President of Wal-Mart Sales.  In March we had our best single month ever, placing six people including two Vice Presidents and two Directors.

Another factor is that we spend less time and energy on searches that later get put on hold.  Companies that aren’t hiring know that they aren’t hiring and are much less likely to spin their, our and the candidate’s wheels and then not pull the trigger.  The companies that are looking to hire a high impact player are generally pretty committed to doing so.

Over the last six months we have been able to fill an even higher percentage of jobs than are normally high fill ratio and we have been able to fill them pretty quickly.  Now that this year’s initial burst of hiring is winding down, I would look for things to slow until late August when toy companies have a clearer picture of how their year is going to go.

We have begun to see a trickling style of layoffs unlike the wholesale dislocations we saw in 2001 and 2002.  I think this is because we are not coming off a bubble economy like the late nineties and 2000 so that companies don’t have as much fat to trim from their payrolls.  The toy industry’s ever thinning margins means there’s not much fat to trim at all.

All the best,

Tom

By | April 15th, 2008|ToyJobs Blog|Comments Off on Toyjobs Takes Off to Its Best Start Ever

Toy Fair Outlook – Cautious

The February Toy Fair seemed to go pretty well. The Javits Center maintained its world record of having the hardest floors on the planet. I did notice that several mass market companies were not “showing” although some had representatives lurking in the aisles. Mass market companies that grumbled beforehand that this would be their last one all seemed satisfied and said that they would be back. Specialty toy companies were having a field day and seemed to be a much more jovial group. I think a company’s sense of success at the show was very much driven by their expectations coming into it. It’s an excellent show for specialty manufacturers but also a very good place for mass market companies to focus on second and third tier retailers. Over the last couple of years, most of the toy company executives I have spoken to at Toy Fair have been cautiously optimistic but this year I would characterize their mood as just – cautious.

Of course, there is good reason to be cautious with big recession thunderclouds on the horizon. I don’t get the sense that recession has hit yet. Despite anecdotal evidence of empty store aisles, retail sales were strong in February. Wal-Mart’s total sales were up 8.9%, Target up 5.9% and Costco up 11%. That said, everyone from businesses to consumers seems to be standing around very quietly wondering why they’re still on their feet. It’s like waiting for a tornado. The press may not be talking us into a recession but they are certainly hastening its arrival. It’s also a little unnerving that the balance sheet of a single company could throw us all into crisis. If MBIA receives a ratings downgrade all hell is going to break loose. I suspect there would have to be some sort of government intervention.

Add to economic backdrops the particular challenges that the toy industry is facing now – rising costs, the rising Yuan and stingy retailers only allowing prices to rise 5-8% – and you have the making of thinner margins and a very difficult year.

Because of the string of January and February Trade shows it is always difficult to get a read on toy company hiring at this time of year as companies are typically too busy to “pull the trigger.” I can say that search starts have been strong during the period and I have every indication that many of these will close during the coming month. I should be able to pass on a more definite outlook on the subject in my next communiqué. I just hope that it’s not coming from a bunker.

All the best,

Tom Keoughan

By | March 21st, 2008|ToyJobs Blog|Comments Off on Toy Fair Outlook – Cautious

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 | October 30th, 2007|ToyJobs Blog|Comments Off on Fall Toy Preview Successful . . . Industry Continues to Stumble

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

Torrid Toy Hiring Despite Challenges

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

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

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

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

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

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

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

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

All the best,

Tom Keoughan

By | May 2nd, 2006|ToyJobs Blog|Comments Off on Torrid Toy Hiring Despite Challenges

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

Toyjobs Posts Second Best Year Ever

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

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

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

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

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

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

All the best,

Tom Keoughan

By | February 2nd, 2005|ToyJobs Blog|Comments Off on Toyjobs Posts Second Best Year Ever