Toyjobs

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

Toyjobs Posts Third Best Year

Toyjobs posted its third best year out of twenty-six for 2007. It was a crazy and confusing period. With 2006 being our second best year coupled with 2006 toy sales being up 4 to 5 percent (rather than the usual down 4 or 5%) I figured we would start strong in 2007, but that’s not the way it happened. There were not a lot of toy company jobs available in the early going and in fact our sales were only at about fifty percent of normal through the end of June.

August brought not only the beginning of toy safety recalls but toy company hiring exploded. I would have thought with toy recalls, the housing market meltdown, the sub prime crisis and weak retail sales, that hiring would be subdued, but the frenzy continued until the very last day of the year. After twenty six years as a toy recruiter, I am usually able to divine some sort of rhyme or reason between toy industry conditions, the economy and hiring trends but I can’t even begin to fake an explanation for what went down in 2007. When hiring conditions were ripe, no one was hiring and when things looked their bleakest, companies were filling toy jobs hand over fist. It’s not that companies began hiring a raft of product safety people either. Toy companies were too busy fixing the crisis at hand. It was only after Thanksgiving that we started receiving a lot of calls from toy companies about hiring product safety professionals for the next manufacturing cycle.

Toyjobs is approaching 2008 with caution. With the exception of Walmart (up 8.4%) and Costco (up 10%), total December sales were pretty poor across the board. Costs continue to skyrocket. We still have high oil, resin and transportation prices. Add to this, rising wages and fuel riots in China, not to mention the rising yuan. Chinese factories are demanding 10-30 percent increases to manufacture goods. Although I have often heard “everyone’s costs are rising, so retailers will be compelled to let us raise prices”, I haven’t believed a word of it. Retailers have forced prices down for the past ten years even as costs continued to rise. Prices need to correct but retailers aren’t letting it fully happen. The toy industry executives I have been speaking with tell me that they are getting increases of 5-8 percent. With Chinese factories either standing firm or going out of business in ever increasing numbers, that means the extra cost increases will likely come out of US toy company margins. To their credit, I have spoken with several toy industry executives who have been walking away from potential business because of onerous pricing or terms (something we have long practiced at Toyjobs). Unfortunately, there will always be some genius who will sell product at a loss and try to make it up in volume. He may not last long but there seems to always be another bozo to take his place.

For 2008 there will be winners and losers and about half the companies I’ve talked with are gung ho while the other half are pulling in their horns. If I look at late December and January search starts, Toyjobs is up over our historical averages, so we are starting 2008 strong even as the press and the pundits are trying to talk the country into a recession.

I used to be able to explain everything but for now I’m just going to work hard and not plan any overexuberant spending either professionally or personally. Look for me to start shooting my mouth off when I’ve figured it all out again.
See you in February,

All the best,

Tom

By | January 28th, 2008|ToyJobs Blog|Comments Off on Toyjobs Posts Third Best Year

‘Tis the Season for Statistical Confusion

It’s time again for the annual swirl of confusing numbers emanating from retailers and Wall Street’s retail analysts.  Retail traffic was up on “Black Friday” and the post holiday weekend, but the average consumer spent less, an average of $347 down from $360 a year ago.  Surveys showed that the average person had completed 36% of their holiday shopping which is equivalent to last year.  All this seems to indicate that this year we had a better gauge due to a larger statistical sample which seemed to show that consumers will be spending less this Christmas.

But all the hype and hoopla which surrounds the day after Thanksgiving exaggerates the extent to which it predicts total holiday sales.  There are plenty of people, like me, who wouldn’t be caught dead anywhere near any retail establishment (with the possible exception of the wine shop) at any time during the entire weekend.  “Black Friday” and the following weekend are the shotgun start to the high shopping season – not a predictive bellwether. 

Here’s where things get really confusing.  If you look at the following chart, it’s easy to see that total November sales were very strong.  Unfortunately, comparisons are difficult.  There was an extra “shopping week” at the end of November which skewed total sales numbers higher and that extra “shopping week” will be lost when we examine December sales.  Also both store traffic and sales volume dropped off after Thanksgiving weekend.  We should also consider that due to the long “indian summer”, throughout much of the nation, that a significant portion of the spending went toward warmer clothing.

Bargain-Hunting Season    
Retail sales for November 2007    
 

Total November sales

 
Discounters

In millions

Chg. From year ago

Comparable stores chg. from year ago

Wal-Mart*

$31,718.0

+8.4%

+1.5%

Target

5,972.0

+16.7

+10.8

Costco**

5,720.0

+13.0

+6.0

Department Stores      
Macy’s

2,713.0

+13.9%

+13.4%

Kohls

2,023.2

+20.0

+10.2

J.C. Penney***

1,709.0

+5.8

+2.6

Nordstrom

804.9

+7.4

+8.7

Dillard’s

559.3

+2.0

+1.0

Neiman Marcus

360.0

+8.7

+5.8

Saks

347.6

+26.3

+25.7

Apparel      
TJX

1,800.0

+10.0%

+7.0

Gap

1,540.0

+11.0

0

Limited

858.7

-8.4

-7.0

Ann Taylor

209.2

+12.2

+3.9

Teen Apparel      
Abercrombie & Fitch

352.3

+25.0%

+2.0

American Eagle Outfitters

285.8

+16.0

0

Sources: the companies; WSJ Data Group    

  *Comparable sales for U.S. stores only, excluding fuel sales

 **Comparable sales for U.S. stores only

***Department stores only

What people are buying is of particular concern to toy manufacturers.  There were an awful lot of “Guitar Hero” games and Nintendo Wii’s (do we count those as toys?) moving out the doors.  Generally consumers seemed to be focused on AWAP (Anything with a Plug).  There doesn’t seem to be any “gotta have it” product driving people into the toy aisles this year and that controversial last minute Ecology Center study trumpeting that over one third of toys contained dangerous chemicals certainly didn’t help.

So where does all this leave us.  It seems that thus far, total holidays sales appear to be strong BUT a larger percentage than normal of total holiday sales has been counted.  Sales seem to be slowing BUT we still have the two crazy final weeks of holiday shopping to go.  I think its best to cross your fingers, close your eyes and hold on tight.  There’s not much we can do about it now and soon enough we’ll find out where we’re heading.

Happy Holidays!

Tom Keoughan

By | December 10th, 2007|ToyJobs Blog|Comments Off on ‘Tis the Season for Statistical Confusion

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

Mattel v. China and the Blame Game

Mattel hasn’t made it any easier for themselves or anyone else in the toy industry.  When CEO Robert Eckert landed on the front page saying “the company discloses problems on its own time table because it believes both the law and the CPSC’s enforcement practices are unreasonable”; it was the height of the folly.  I’m not saying that I disagree with what he said.  After all, Congress has gutted the CPSC’s budget over the years and left it with a single lonely toy tester.  Even some of the Commission’s own buildings are embarrassingly not up to code.  That said, Mr. Eckert’s timing could not have been worse.  What was he thinking?  Clearly this was the time to take a constructive approach with the CPSC and an apologetic one with the public.  One suspects that after that quote Eckert got a lot of heat in the boardroom and that one of the directors probably gave him a whack with a rolled up newspaper before he was trotted off to Washington for his contrite appearance before Congress.

Mattel, however, was still playing the blame game and pointing the finger at Chinese manufacturers.  China is a pretty easy target since it has major quality control problems at an incredibly large number of factories manufacturing all sorts of consumer goods.  While Mattel was playing its China card it was soft pedaling the fact that the vast majority of its own recalls were the result of product safety issues (design problems) rather than manufacturing quality problems in China.  Nobody has bothered to really educate the public on the difference between a product safety issue and a quality control problem.  Certain Northeastern senators who are running for President seem congenitally unable to grasp the difference. 

Mattel had magnet issues.  The magnet problem in toys came to the surface in 2005 with a number of injuries and deaths resulting from children swallowing magnets from Rose Art’s Magnetix.  In October of 2006, several children were injured after swallowing magnets from Mattel’s Polly Pocket line of products.  Mattel issued a recall on the Polly Pocket products but they had a much bigger magnet problem stretching from Batman to Barbie and beyond.  At the time, Mattel did not recall these products and decided to, in gambler’s parlance, “let it ride”.  To be fair, there were no injuries from these products but the magnet issue was out there and it would have been much more responsible for Mattel to take the financial hit and issue a recall then rather than crossing its fingers and hoping that no children got hurt.  Only about a year later when Mattel was under the harsh glare of the spotlight did that recall finally come. 

China has not been happy about all the fingers pointing their way over its huge quality control problem.  Just as Mattel tried to scapegoat China and de-emphasize its own culpability, now China in demanding (let’s face it they demanded that apology) and receiving a very public apology from Mattel is trying to use Mattel as a scapegoat to deflect attention from the country’s massive quality control problem.  In just the last thirty days China has yanked the export licenses of 300 toymakers and shut down about 2,000 unlicensed toy factories.  Obviously they have a major problem.  Mattel has countered with yet another waffle and is now claiming that their apology has been “mischaracterized”.

The fingers have been pointing everywhere.  Everywhere that is except to the place that is the likely cause of at least the Chinese quality problem in the first place.  As for Mattel’s magnet recall, I’m afraid they own that one themselves.  Miraculously no fingers except for a few hushed industry insiders have been pointing to Bentonville, Arkansas.  The media hasn’t seemed to want to touch it.  The politicians (especially former board member Hilary Clinton who has her own China problem in the guise of Norman Hsu) certainly hasn’t wanted to touch it either.  U.S. toymakers remain mum about it because they’re fearful of retaliation when it comes time to sell next year’s product line.  Walmart and its fellow mass market retailers are the white elephant in the room that no one wants to discuss.  Finally, union backed WakeUpWalmart has started running ads on the topic.  Unfortunately, WakeUpWalmart is so hopelessly biased that they can’t be taken completely seriously  even when they’re right.

By keeping its price points artificially low in an era of rising costs, Walmart puts margin pressure on U.S. toy marketers who in turn send that margin pressure down the line to Chinese manufacturers and suppliers.   It’s as if at each step in the chain everybody has his hand in the next guy’s pocket trying to steal his profit margin out of theirs until the last guy in the supply chain is left with razor thin margins along with rising costs.  This incredible pressure on the manufacturers is what leads to cutting corners and scrimping on both the quality and amount of materials used.  Add to this the fact that most Chinese factories of any type are staffed by basically impoverished people who might be more than a little inclined to take a quick backhander and it’s easy to envisage a system that is either just barely in or just barely out of control.   

This is where the TIA could step up and do something useful.  As a responsible toy industry spokesman (yes, quite a new role for the TIA) it could bring very public pressure to bear on retailers to lift price points which will not only increase the retailer’s own profit margins but let everyone in the supply chain breath a little easier.  If they were to do this as an industry-wide spokesman then retailers would not be able to retaliate against individual suppliers.  They could commission studies to determine if consumers are willing to pay a dollar or two more for a toy if it meant a higher level of quality and safety for a product that they are going to give to their children.  Personally, I believe that a mother purchasing a toy for $7.99 is more than willing to pay $8.99 for it anyway.  I think we all know this to be true.  If the TIA were to commission such a study and make it very public it would gut the mass market retailers’ monotonous cry of “we need our prices that low because the consumer demands it.”   

Obviously, the toy industry needs to change its quality control procedures as well and that seems to be happening.  In a sense, that’s really only treating the symptoms.  By going after the roots of the problem as well, a better long term solution for everyone can become reality. 

See y’all in Dallas. 

Tom Keoughan

By | September 25th, 2007|ToyJobs Blog|Comments Off on Mattel v. China and the Blame Game

The Toy Industry Needs Boots On The Ground

China is not the only culprit in the recent recalls of everything from toys to toothpaste and a wide variety of other consumer products.  Shoddy manufacturing and quality control practices are endemic to the system that provides American consumers with low priced goods.  America’s mass market retailers, led by Wal-Mart, drive this by using toys as a loss leader to attract foot traffic into their stores during the holiday shopping season.  In order for their loss leader strategy to work they need to charge extremely low prices.  This is a problem in an environment of rising prices for oil, resin and transportation.  Retailers relentlessly squeeze the profit margins of American companies who in turn beat up on Chinese manufacturers and their suppliers for even lower prices.  At every stage of the supply chain from retailers on down each company has his hand in the next guy’s pocket trying to extract his profit margin out of theirs.  This puts those on the bottom rung, Chinese manufacturers and their suppliers, under tremendous pressure.  China, Inc. has been shouting to anyone willing to listen (and it isn’t many) that the overwhelming majority of their products are safe.  The trouble is that if 90 to 95% of their products are safe then the consumer doesn’t know which ones are and which ones are not and may choose to stay away from them all.

It’s easy to foresee many more recalls as toy companies rush to inspect their products.  The Chinese government recently announced that 15% of food products had failed quality checks in the first six months of the year.  It also seems that the U.K. is experiencing problems with widespread forgery of product safety certificates by Chinese factories.  Anybody who just assumes that their stuff is okay is whistling past the graveyard.  What this means for the coming holiday season remains unknown.  Many consumers will behave just as before but many will become more vigilant.  Toy companies who manufacture their products in other locales will slap “Made Elsewhere” stickers on their packaging and they will certainly be helped.  That said, I don’t see “Made in Vietnam” as having much of a qualitative difference.  High quality specialty toy companies could receive a substantial boost.  It wouldn’t be surprising to see Playmobil have a banner year.  Nimble companies could do well in the short run by filling shelf space left barren by ongoing recalls.  If toy companies act fast by publicly announcing recalls as well as emergency procedures for this year and overhauled quality programs for the future, then Christmas can be saved.  If recalls continue into October, sales of mass market toys might be greatly impacted. 

The best long term solution would be to treat the cause, not the symptoms.  This would mean convincing Wal-Mart and its brethren to loosen their overly strict adherence to particular price points.  Personally, I believe that a mother going into a store to buy a toy will purchase it regardless of whether the sticker price is $9.99 or $11.99.  This would allow the retailers themselves to make better profit margins as well as letting everyone in the supply chain from US marketing companies to Asian manufacturers breathe a little easier.  I’m not going to hold my breath waiting for that to happen.

American companies could try to induce Asian manufacturers to indemnify them against quality based recalls.  Good luck with that.  We could do nothing and wait for a real regulatory culture to develop in China but that could take decades.  Yes, China has just announced the formation of a new cabinet level panel which will study ways to address the country’s quality problems, but on the very same day they banned state media from covering a deadly bridge collapse.  At least when American bridges collapse we make it public and politicians blow hot air, if little else.

The best solution is to have boots on the ground – American boots.  It’s the Wild West (or Wild East) over there and in a land of the impoverished workers, conflicting loyalties and thick envelopes; the answer is not hiring locals and expecting them to remain loyal just because they are on your payroll.  We also need these people to be over there on a full time basis.  It obviously has not been enough to send someone to Asia four or five times a year as is now customary and expect that everything will run the same way when your back is turned.  Yes, sending in expats can be expensive but it is arguably less expensive than the financial, logistical and public relations nightmare of either recalls or lawsuits involving injured children.  This is the price that needs to be paid when manufacturing is done in a country where quality problems are a normal occurrence.

There are plenty of Quality Control people around (think the automobile industry) and while they might not qualify to be your Vice President of Product Safety, they can certainly be retrained to administer the quality control procedures necessary for a toy manufacturing line.  I’m willing to bet that they would rather be living in China on expat pay then sitting unemployed in Detroit waiting for their houses to be foreclosed on.

Tom Keoughan

By | August 10th, 2007|ToyJobs Blog|Comments Off on The Toy Industry Needs Boots On The Ground

The Return of the Texas Two-Step

First of all I would like to thank everyone for the overwhelmingly positive response to my last Toyjobs Executive Monthly article. The only negative comments came during a highly charged Friday afternoon phone call from the TIA Board Chairman. For my part, I also view that response as positive.

Besides all the positive feedback, many of you offered strong suggestions about industry tradeshows and the current showroom impasse. If you are desirous of positive change within the industry, I suggest applying pressure through public letters to various toy industry forums. The industry has seen where watching and waiting and sidebar conversations gets us. I would also strongly recommend getting involved and standing for election to the TIA Board. Unfortunately, it seems that to run for the TIA Board you have to be nominated by a current TIA Board member. Hmm…not exactly a mechanism for positive change. Still, you can volunteer to pitch in and help out and not take any position on any question until after you’re elected. After all, that’s the way our national politicians do it.

As for me, I hope the October show in Dallas is a raging success. I hope that everyone is selling more toys and hiring more toy people; but we should keep in mind that a Dallas Toy Show has failed before. There are also a lot of manufacturers saying that they won’t show in Dallas, but I suspect that they’ll eventually come around. The toy industry is just about the metooingest business there is. Nobody will commit to anything until they see who else has committed to it first. I suspect that once a critical mass of toy manufacturers and buyers commit to the Dallas show, that most everyone else will begin to fall into line no matter how angry they are. Of course, people have every right to be angry. The TIA Board Executive Committee overruled the TIA Board and went against the wishes of much of its membership. They effectively torpedoed the ability of toy manufactures to work out of showrooms in a toy building or small group of buildings even though that is the way most manufacturers prefer to work. Their publicly stated reasons for doing so were specious. One gets a little tired of hearing that buyers were complaining about having to travel to showrooms scattered all over the place. Buyers can easily control that by telling manufacturers “I am going to A and I am going to B. If you want to meet, you will be in one of those places.” The one positive is that we can be pretty sure that the TIA will do everything in its power to make the Dallas show a huge success if only to avoid the finger pointing, howling from the rafters and boatloads of “I told you so’s.”

See y’all in Texas,

Tom Keoughan

By | May 15th, 2007|ToyJobs Blog|Comments Off on The Return of the Texas Two-Step

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

A “Confusement” of Numbers

A plethora of inaccurate or ill conceived numbers are contributing to what our dear President might refer to as “confusement” about the recent holiday selling season. Holiday sales have been categorized as soft with average same store sales increases at about 2.5 percent. Retailers and Wall Street analysts had apparently emailed Santa a wish list indicating that they wanted 6-7 percent. Anything less would be deemed disappointing. Where do they get these numbers? Has the population increased 6-7 percent in the last year? Have earnings of the average family shot up 6-7 percent? Have their savings? With most of the real estate refinancing already done and consumers unable to use their homes as ATM machines, just where was that 6-7 percent supposed to come from?

Of course, while the above analysis seems to make sense and may be somewhat entertaining, it is completely unsound. Our overconsuming society is over-retailed. Not only do retailers compete against each other, but they cannibalize their own same store sales by plunking down yet another supercenter only five miles away from the last one. The real story of Holiday sales is quite different when you look at more appropriate numbers. Walmart’s (oh, such a terrible year) total December sales were up 8.8 percent year on year. Target was up 9.9 percent, Costco plus 14 percent, Kohls 11.2 percent, Dollar General up 12.1 percent and so on. Numbers like that don’t sound disappointing at all. It’s all about looking at the most appropriate numbers. Unfortunately, the most appropriate numbers are not always easy to come by. My personal favorite is the game of “we sold a lot of gift cards and we can’t count them until they’re redeemed.” I understand that from an accounting standpoint you can’t count them until they’re redeemed, but how many dollars in gift cards did you sell? You don’t know? Gee, I’ll bet your POS system can tell you exactly how many dollars in gift cards you sold. What you don’t know is how many will be redeemed. Apparently 20-30 percent of gift cards are never turned in. Free money – now that’s a business I like. I’ll sell you 70 cents for a dollar all day long. And hey, when does that 20-30 percent get counted? 

So the overall holiday sales figures weren’t so bad after all. However, retail margins were likely to be razor thin. Walmart was discounting toys before even Halloween. I saw big flat screen TV’s being sold for $1,000 – $1,500 dollars off – and they were selling a lot of them. Hell, I even bought one myself. Lord knows the retailers aren’t about to eat those discounts on their own. They’ll be looking for markdown money. That should be infuriating because retailers weren’t closing out unsold merchandise. They were discounting starting in October as part of a marketing strategy to drive store foot traffic. 

While at first blush the toy industry appeared to have a good year, we have to tease out the video game numbers. With several new game platforms and Nintendo’s hot product, video game sales rose 18% to $13.5 billion. Now the numbers get a bit foggier. What seems clear, or at least unclear, is that the toy business did much better than the previous two years’ 4-5 percent annual decline.

Why is it so difficult to just get the straight numbers in a timely fashion? Wall Street analysts and research firms devise all these numbers, indicators, formulas, etc. Many of them, although they seem to make sense, are ill conceived or misleading. The numbers are then slowly dribbled out over time. These numbers are used by investors from hedge funds and pension managers to Ma and Pa Kettle to make buy and sell decisions. More different numbers dribbled out over a greater length of time leads to more buy and sell decisions. Wall Street clearing houses make money on every incremental trade. Now there’s a business I’d like to be in too. Alas, too many numbers. 

That leaves me stuck in the recruiting business.  Even though it’s a lot more work than selling 70 cents for a dollar (sigh), Toyjobs had its second best year out of twenty-five in 2006.  Just don’t ask me to tell you our numbers.  

See ya’ at the Toy Show, 

Tom Keoughan

By | January 30th, 2007|ToyJobs Blog|Comments Off on A “Confusement” of Numbers