So there’s really not much new to report since last time. Sales volumes continue to be strong, margins continue to be tight. Supply chain woes continue with sky high material costs, chip shortages, the apparent alien abduction of all of the world’s truck drivers and an endless game of Chinese lockdown Whac-a-mole.
The Toy Industry is looking to hire a lot more people and for the most part is succeeding in doing so. The one real trouble spot I see is Brand Managers and Marketing Communications Managers.
There are really two reasons that I can identify that are exacerbating the problem. First, these people are currently in high demand. Lots of companies are looking for them. That has led to a marketplace where candidates are getting offers from two or three different companies. At the same time, companies have chosen this group to hold the line on salaries. At the start of a Brand Manager search I find myself telling clients that their salaries are too low but companies aren’t budging even though they are willing to raise salaries for other types of jobs. “That’s what we have in our budget.” “Okay, but your budget doesn’t match the marketplace.”
The second major factor is demographics. The people who populate these jobs most often are in their mid-twenties to late thirties. It seems the cultural norm for this group is to be unresponsive. Phone? Email? Text? Smoke Signal? It doesn’t seem to matter. Never before in human history have there been so many ways to communicate and never before are so many people so desperate not to do so. With many people rejecting to even have a yes or no choice about a potentially advantageous career move we end up having smaller pools of candidates. It seems to affect Marketing people the worst. Salespeople don’t do this. Designers of the same age group don’t do this. The very people who are supposed to have the most business savvy seem to be the least savvy about their own personal business and careers. Ah well, end of screed.
Moving forward I think that 2022 will be a pretty good year. Perhaps not as good as 2020 and 2021 but solid and happier as the pandemic hopefully continues to dissipate. Inflation is a major challenge but consumers are continuing to spend. More money is being directed toward necessities, but people are trying to maintain their lifestyles – for now at least. This is causing them to spend down their record high savings and increase their credit card balances. Neither of those things bode well for the future. Add to that an increasing interest rate environment and a Fed which does not have a very good record at engineering soft landings and I see clouds (or is it smoke) on the horizon for 2023. Now is the season to be hoarding your acorns. Winter is coming.
Despite the pandemic and the continuing supply chain crisis, the U.S. toy industry had another banner year with 13% sales growth in 2021. Predictably, this has led to a talent shortage in 2022. As we begin to move out of the pandemic, labor shortages have plagued industries across the board but seem even more acute in the toy business as companies seek to invest the proceeds of several consecutive years of strong growth into new product offerings. There has been a surge in Marketing and Product Development roles which to me indicates that companies are looking to do new things and start new initiatives.
This has come in an atmosphere where it is more difficult to find the same number of interested candidates per position than we used to. While we all have heard of “The Great Resignation” much of that has passed. Lots of people have changed jobs during the last nine months and understandably are not interested in doing so again soon. Additionally, companies are holding on to their staffs by giving lots of promotions and raises. Doing that it both easier AND cheaper than having to refill positions or worse yet, do without.
There is some hope on the horizon as the labor participation rate is beginning to creep up from pandemic lows. Some people who stayed home to care for children during school and daycare disruptions are now free to look for a job. With the pandemic beginning to dissipate, there are also a lot fewer people either home sick or caring for sick relatives. Add to that without “free money” household savings are declining especially as inflation is causing prices to rise for rent, gasoline, groceries, and everything else. My thinking is that these factors should increase the workforce but as summer approaches (Wait, what? Yeah, already), it may take until next September for these forced to be felt fully.
Here at Toyjobs, we know how to find the best people even if, for now, it is difficult to find as many strong candidates for each search. We just wrapped up our best first quarter ever! Certainly, the talent wars were a contributing factor, but I also attribute it to the changing annual migration patterns of toy industry executives. The first quarter has always been our worst with the entire toy business hopping on planes every January 2nd and cycling through Hong Kong, Nuremburg, London to New York with maybe a side trip to Atlanta. My view has always been that there were way more trade shows than necessary and often imagined an entire industry frantically laundering suitcases full of dirty shirts.
I’ve always liked the Dallas Toy Fair since there always seems to be a lot of toy execs standing around without a whole heckuva lot to do. That well suits continuous laps of glad handing and back slapping. That said, I am well aware that the Toy Association doesn’t tailor these things for my purposes. So just one more go ‘round in Dallas – savor it.
The New York Toy Fair’s move to the autumn makes a whole lot of sense. It really fits well with the industry’s buying and product development cycles, not to mention – the weather. That said, you will still find me swallowing fistfuls of Aleve while chain-complaining about “The World’s Hardest Floors.” At least I’ve had a couple of years since the last one to recover.
It’s been two years since the last toy industry trade show, and we were all looking forward to finally getting together in New York. Unfortunately, the Toy Association decided to cancel. I, for one, (not that anyone cares) think they have made the right decision. The Omicron variant will be peaking in the U.S. over the next few weeks and holding an international trade show in the midst of that is a recipe for bad outcomes. Pre-emptive push back to objections: the word “peak” doesn’t mean “over” and the phrase “just past the peak” doesn’t mean “over” either.
Several major and mid-tier toy manufacturer’s had already pulled out of the show. More importantly major retailers like Wal-Mart, Target and Amazon had pulled out as well. A game of chicken was beginning to develop between toy manufacturers and the Toy Association of “who keeps the money-who will cancel first.” Pulling the plug kept the Toy Association aligned with its membership, which is as it should be. Ultimately, if the buyers weren’t going, there was little reason for manufacturers to go. Whatever was left would have been both expensive AND unfruitful.
The one thing I heard over and over again was that the February timing really isn’t right for doing business. Most people seem to think that a larger and more cohesive October show would be better. Rather than a mad scramble from LA to Dallas to Hong Kong, let’s focus everybody’s energies on one location. Hong Kong has largely imploded so that’s one less whistle stop we have to worry about. There has always been the danger that, if a big October Toy Show was scheduled for LA that the large Southern California toy manufactures would simply change their dates. They don’t want buyers to be “distracted” by their smaller, nimbler competitors. Perhaps a two week show could be set up to accommodate everyone. Two weeks in one location is certainly better than three or four weeks in three locations. Retailers could be called on to pressure their suppliers into condensing their calendar as tightly as possible. Everybody is willing to kowtow to the wishes of the buyers. Right?
We have always heard the excuse that there is no possible venue in all of Southern California in which to hold a trade show. That has always been more than a little bit hard to believe. But- good news- the weather in October is good, pretty much everywhere. So, if it’s two weeks- two locations that should be very doable. I suggest somewhere in the middle of the country in order to make it equally accessible for everybody- Dallas? Chicago? Kansas City? There should be plenty of places.
On the employment front the craziness continues. It has even earned a name- The Great Resignation. What is this Resignation and why is it happening? There are always a certain percentage of people willing to change jobs and that remains constant. After two years of Covid a lot of the stable workforce is looking inward. These are people who weren’t really that unhappy but weren’t exactly overjoyed with their jobs or their workplaces. A job was a job and work was work and they just got on with it. They weren’t overjoyed with their jobs, but they didn’t expect to be, and they weren’t unhappy enough to leave. Two years of Covid has led them to wonder “is this really what I want to do with the rest of my life?” Many of them are deciding to change jobs and some of them are deciding to change their careers radically. And let us remember that with a lot of people working from home, it has become easy to change jobs without even leaving the house. As people change jobs there is a multiplier effect as their jobs need to be filled by people whose jobs need to be refilled in turn…. and on and on and on. Add the normal amount of job changes to the (for the lack of a better term) newly enlightened to the multiplier effect and suddenly there are a whole lot of job openings out there.
What’s a company to do? Shorten your hiring process. I’m not saying don’t be as diligent but rather tighten up the calendar. Stop hemming and hawing. Stop foot dragging. Make hiring a priority that doesn’t keep falling to the bottom of the hot list. Yes, I understand that you may have more urgent problems today but the person you hire will solve twenty problems tomorrow. Be aware that all of your competitors are also looking to hire and that the best candidates have more than one job offer. Beat competitors to the punch. Git-R-Done.
I’m seeing mistakes made on the candidate side too. The abundance of jobs has led to sloppy thinking. An example of one type of mistake I see is upon receiving a job offer, this currently unemployed candidate asked for $40,000 dollars more than they knew the company had in their budget. The company immediately pulled the job offer and wouldn’t even speak to the candidate when she offered to take less. If she asked for the top of the range or even 10% more than the budget, she would have gotten it, but she was perfect for this hard to fill job and decided to hold a gun to the employer’s head. Six months later she is still unemployed. A job offer is not a winning lottery ticket. Candidates currently have a stronger negotiating position but be reasonable. Nobody likes to be ripped off.
The other candidate mistake I see is one of recency bias and coming to believe that everyone is going to work from home forever. I know the TV and the radio tell you so but the business of the media is to gather the largest possible audience so they can sell more advertising and at a higher rate. They do this by pandering to chosen demographics. There are a lot more employees than employers out there. While many employees may want to work from home- employees aren’t going to be making that decision- employers are. So, before you decide to move to Charleston (where the only jobs are waiting tables), please realize, that employers will do what they have to do for as long as they have to do it. In about two years after Covid most people are going to be heading back to the office. Big changes may have taken place during the pandemic, but when it’s all over the changes that stick will be incremental. I do foresee more 4-day work weeks in the office and more one day from home. Look back to the financial crisis and use that as your guide.
As far as the toy industry goes, hiring was gangbusters for the second half of 2021 and that has continued thus far into 2022. Holiday sales were growing quickly in the fourth quarter with bricks and mortar even adding 8.1% compared to 2020. However, there was a sharp drop about a week before Christmas. This was largely due to the Omicron surge but also people got the message and shopped early due to the supply chain woes. By the last week of holiday shopping, the cupboards were pretty bare. It’s hard to make sales when you have nothing to sell.
It’s looking like the pandemic will peter out and become endemic beginning in May or June but there’s no telling what kind of wild card Covid may throw at us. I’m hearing widely divergent opinions about when the supply chain will straighten out. Estimates range from this summer to two years from now. I’m not smart enough to know the answer. My plan is to forge ahead with cautious optimism. I hope that everyone will stay safe.
There are so many changes taking place so fast these days that it almost feels like nothing is happening at all. Covid leads to economic shutdown leads to supply chain issues leads to inflation and all of it is made worse by bad policies based on either politics or ignorance by many governments all over the world. It feels like getting repeatedly smacked in the face during a particularly long and intense game of close quarters dodgeball.
My load was lightened last week by a sudden episode of comic relief. From out of the blue, it was announced that Toys ‘R’ Us was teaming up with The Great White Elephant of the N.J. Meadowlands.
Both entities have rolled through one or more bankruptcies and have highly uncertain futures. It’s like Toys ‘R’ Us recognized itself from five years ago and decided to partner with a place that was once called Xanadu.
Despite this wacky world, toy industry hiring continues to be robust. At Toyjobs we just keep running in fast motion and continue to produce results for our clients. We are getting a little tired…and a little cranky. I know that at this time of the year everybody in the toy industry is feeling the same way, but we can make it through another two weeks and hopefully get a little time off during the holidays.
Typically, in January and February, toy hiring slows to a trickle as toy executives travel the globe to display their wares at way more trade shows than are necessary. That may or may not happen this year. I’m not ready to make a prediction but I think it’s uncertain that this winter’s trade shows are going to happen.
Oops! It seems there is yet another White Elephant in the room.
Far be it from me to prattle on about supply chains to all of you on the front lines fighting the battle every day. From out here it looks like an old car which keeps getting driven after the thingamabob goes bad until the next thingbreaks, then it starts making a horrible racket, so you just turn the stereo up which fixes it for a while until the whole engine seizes up.
Keeping ports open sounds a lot like cranking a Best of BTO 8-Track.
It feels good but it’s not going to fix the problem.
We have a shortage of truckers and warehouse workers. Some terminal operators say that there is little point in extending hours when many of their regular pick up slots are going unused. “We are open 90 hours a week now with only 60% utilization. Without people to do the work the whole 24/7 ploy reminds me of a Motel 6 commercial: “We’ll Keep the Lights on For You.”
For a bit of crystal ball gazing at what might be around the bend, read John Dizard’s piece in The Financial Times: The Worst of the Supply Chain Crisis is Over. Dizard is concerned that once the ginormous inventory glut finally gets delivered, retailers won’t have to reorder anything for a very long time. “The thought’s and opinions of John Dizard do not necessarily represent the views of Toyjobs, it’s parent company or any of it’s affiliates not to mention the taco stand where I sometimes eat lunch on Fridays.”
Holiday sales are predicted to be strong as several varieties of government stimulus have left households flush. Savings now represent 10% of consumers disposable income which is quite a way above the pre-epidemic norm. The Labor Department reports that hourly wages were up 4.6% in September. Monthly retail sales increased 13.9% from a year earlier. That said, consumer inflation – higher prices – accounted for 5.4% of that increase.
Strong top line sales figures don’t necessarily mean “Happy Days” for toy manufacturers in a year where shipping container rentals cost more than the profit of the goods inside. 2021 remains a year where most companies will be glad just to pay their bills and maintain their hard fought shelf space rather than enjoy strong bottom line profits.
Through it all, toy industry hiring has been quite strong since mid-July. Toyjobs has been running at full throttle (more car metaphors?) We’ve been filling mostly Marketing and Product Development slots. That makes me optimistic. Hopefully it means that companies are looking to do something new. Perhaps it’s a harbinger of them investing in new products, lines and categories.
Typically in August and September we see a lot of Sales searches, as companies gear up for next year’s sales cycle. This year, that hasn’t been the case and I chalk it up to retailers penchant for taking sales meetings on a remote basis. Manufacturer’s don’t need as many Sales Execs if no one is trapped at the airport and everyone just needs to stroll down to a pre-set Zoom Room.
I suspect that this too will gradually revert back over time as certain manufacturers seek to gain advantage by visiting buyers in person. Relationships are key when it comes to squeezing that one extra SKU onto the shelf or scoring a rumored private label line. Competitors will soon follow suit once that begins to work. Experience has shown me that even during times of great disruption, things gradually tend to revert toward the mean and only change permanently at the margins.
Lastly, just a short word about Brian Goldner. I didn’t know him well as Hasbro hasn’t been a Toyjobs client since the mid- eighties. I did work with him a bit back in his Bandai days. One unusual thing about him was that he was able to combine his hi-energy, hard charging way with his basic friendliness and good humor. His vision and perhaps even more importantly his execution, took Hasbro against the tide and into entertainment business which led them from being the perennial Number Two past Mattel into the leadership position of the toy industry (yeah, yeah I know Lego actually has higher sales volume). My condolences to his family and friends. I hope that it’s meaningful that he left his mark and he made a difference. He left us way too young. May his memory be a blessing.
Who would have thought a global pandemic wouldn’t be the biggest challenge facing the toy industry and indeed all of world trade. With logjams affecting nearly every pinch point in the supply chain, retailers are desperately searching for product to fill shelves and manufacturers are wrestling gators to bring product in and move it across the country.
I’m not going to pretend to have anything to offer those of your who are on the front lines of this battle every day. However, I will warn about the potential for echo effects in 2022. What happens when all of those containers bobbing offshore from Ningbo to Long Beach to Rotterdam and baking in marshalling yards from Shenzen to Savannah finally do get delivered? It could create a big enough pile to create an inventory recession. Could there be so many goods stacked on store shelves, in stockrooms, and in warehouses owned by every conceivable player that nobody needs to order anything for a pretty long time?
In addition, the consumer is quite flush now, I can see a euphoria of spending once the 2021 holiday sales season hits and hopefully COVID begins to wane. Will they overshoot their budgets? You betcha! Add to that, in July, Equifax reported that consumer borrowing was at ten year highs. That’s a recipe for a big spending hangover in the new year.
Let us not forget that, with movie theaters shut down for two years, there will be a mad rush of licensable films released in 2022. It can be extremely difficult to sort out the winners from the losers. We may be able to finger the clinkers but a lot of companies will make suboptimal choices.
With this triumvirate of risk, I would suggest that companies proceed cautiously with their weight on the back foot. Then again, what do I know. I’m just the headhunter.
Regarding toy industry employment – despite outstanding toy sales in 2020 which have continued into 2021, supply chain woes have affected hiring, too. In the spring, clients were telling us: “We’re busy. We need people but there is so much uncertainty in the supply chain that we’re going to hold off for now.” That all changed in mid-July and search starts have been through the roof since then. Those should start resulting in hires during the next few weeks. The surge in search starts is continuing which is a positive indicator for everyone.
That said, I do see Dark Clouds on the near horizon. Hopefully that’s just because I’m writing this on Hurricane Henri weekend but I don’t think so. Schools will reopen in a couple of weeks and most school districts have not prepared at all for at home or hybrid learning. Everyone wants schools to be open and children enjoy a better education when they are physically in schools – but – the powers that be seem not to realize that when it comes to the pandemic, we are not driving this tiger, we are riding it. Masks, no masks, three masks – it doesn’t matter. Everywhere you have groups of unvaccinated children spending the day sitting in classrooms together, you are going to have outbreaks. Outbreaks all over the map. Disease may not be as severe – or it may be. We don’t know. I see bad weather ahead. I wish that I didn’t. I hope that I’m wrong.