I don’t envy toy industry executives right now. Even in the best of times they are in the seasonal fashion business which is always tricky. This year there are so many cross currents that it must be difficult to know what to do. The only bright light I see is that two years of sky high freight rates and delivery delays have reverted back closer to normal. That said, the situation in China where most of the toy factories are located is very fluid. Amidst widespread protests, labor shortages, and a never-ending game of Covid lockdown Whac-a-mole, I can’t imagine that many company’s plans are actually following their desired timelines.
Add to that cost input inflation. Paints, plastics, labor, fuel, and electricity have all risen dramatically in price over the last two years. Consumer prices have been soaring with people paying more for less. Except, it seems, toys and clothing. If I would have written in a college exam blue book for one of my Economics courses that we would have massive inflation AND an inventory glut at the same time, I definitely would not have gotten a passing grade. But here we are. Bentonville is at Defcon 1 with red lights flashing and sirens blaring.
My continuing forecast, based on an extremely cloud crystal ball, is that one half of population will Party Like It’s 1999 and keep spending on both goods and services in this first “post-pandemic” (Covid is still here but we’ve stopped behaving like it’s a pandemic) holiday season. Come January, the bills will come due – and with sky high interest rates attached.
For the other half of the population, hard times have already arrived.
Toy dollar sales volume will be lower but not really that bad as they face very difficult comparisons to the previous two years of explosive pandemic-driven growth. Margins, however, will be a different story. Toys are more expensive to make and an inventory glut has led to retail discounting beginning even before Halloween. Everybody will be trying to eke their profits out of their supplies margins – from retailer-to-toy company-to-factory-to-components and raw materials.
Inflation gluts will likely lead to lots of leftover merchandise after the holidays which will mean very little early year resupply in 2023 and a difficult first half for the toy business. This will come at about the same time that the consumer will be closing his then empty wallet.
Up until now, toy companies are continuing to hire. Toyjobs continues to have one of its best years ever after a short trade show induced dip, but I see dark clouds on the near horizon and they look like they’re heading this way.
I’m sorry that this piece is so scattered but with so many conflicting cross currents, my mind hasn’t coalesced (congealed?) around a coherent narrative.
Tom entered the recruiting business immediately after finishing at Drew University where he double majored in Economics and Sociology. He is the Founder and President of Toyjobs which have been the dominant toy recruiters since 1981. Contact Tom for your ToyJob search.