Toyjobs Blog

The toy industry faces choppy seas as we move into the holidays sales season. Many retailers asked for product to be brought in early this year as they sought to avert a repeat of 2021 when supply chain congestion caused product delays and shortages. They are now dealing with an inventory glut of overstocked shelves and stuffed warehouses.

Major retailers have issued billions in cancellations. Walmart has containers stacked in their parking lots because stores are still full of back-to-school merchandise. Amazon is now scheduling multiple Prime Day-like events as many retailers are beginning their Black Friday Blowouts even before Halloween.

Their profits will certainly decline as they compete to cut prices faster than their peers in a race to the bottom. This will cause their margins to take a beating. Although they have already whacked suppliers with cancellations, you can be sure that they will be eager to share their margin squeeze with their vendor “partners” who will be “made offers they can’t refuse.”

As the pandemic seems to be winding down, instead of consumers buying “things” to feather their cocoons, they have switched to getting out there and spending on services: restaurants, travel, fun! Hasbro reported pretty awful earnings last week which they blamed on consumers becoming increasingly price sensitive amidst rampant inflation.

These will both be major factors in this year’s holiday sales season but it’s early. My gut feeling is that in what will hopefully be the first (mostly) post-pandemic Christmas, people will live it up and spend on both services AND products. The annual hangover will occur in the first quarter of next year when consumers look at their elevated credit card balances and the sky-high interest rates they will have to pay. That will likely coincide with the recession hitting in earnest. Hangover 2023 may prove to be particularly nasty.

On the positive side, the pandemic-driven stop-start-stop economy is now at a point where freight costs have significantly declined. The general thesis seems to be that, as retailers digest and work through heavy inventories, supply chains will be normalized (excluding chips) by next summer.

What has this meant for toy industry hiring? For the past year and a half, companies have been hiring hand over fist, but search starts literally dropped off a cliff on Labor Day. During September we were able to complete the searches that we had already started but no new searches came in. We weren’t sure if that was due to the rocky economy (uh oh!) or just the usual cycle as companies prepare for and participate in major trade shows and gain insight into their fortunes for the following year. Then, during the second week of October, search starts lurched into gear again. It’s still too early to call – it’s only been two weeks – but I am cautiously hopeful. “Hopeful” is assuredly not as good as “optimistic,” but we shall have to wait and see what happens.

If I were to look into my rather murky crystal ball, I envision an okay sell through season – which ain’t bad coming after two years of stellar growth – followed by a very rocky first half of 2023. After that, things could smooth out although that’s much too far away to see with any clarity and we should always be wary of another Covid Knuckleball. I may be completely wrong and I have been completely wrong before. In any case, my current posture if to keep moving forward but with my weight heavily set on the back foot.

May you live in interesting times,

Tom Keoughan

During the past year, toy companies have been hiring hand over fist. Toyjobs is poised to have one of its best years ever. Why then do I have this feeling of uneasiness? I think it’s because things feel like we are at the tipping point to a downturn.

Search starts appear to be slowing. That is probably due to one of two factors and at this juncture I can’t tell which. First, we are at the beginning of the 2023 sales cycle. Target and Walmart have been out in LA during the past couple of weeks. They, and many of the rest of their retail brethren, will be back out there a few weeks hence. That will be followed by a migration to Dallas for toy industry’s first trade show in a couple of years. Maybe that’s it. Toy companies usually pause hiring before a trade show in order to gain visibility into what business will look like in the year ahead. After that, they crunch numbers for a week or two and then move forward with staffing adds or changes – or they don’t. Hopefully, that’s all that is going on and search starts will rev up again in early October.

On the other hand, we are in an increasingly difficult economic environment. Inflation is running at 8 or 9%. Shoppers are spending more but getting less. We are in a recession, at least according to the generally accepted definition of one. Companies, in all categories, are growing cautious. Many have begun hiring freezes and even layoffs.

image via Motley Fool

Closer to home in the toy business, even though container costs have come down dramatically and are also moving a lot faster, plastic resin prices are still high and obtaining chips is a difficult dance. I often hear people say that the toy industry is “recession resistant” but I can’t help thinking: “Sales may be but margins are not.” Target has been cancelling billions in orders while Walmart has been doing the same, as well as cancelling its own people. The retail names on every salesman’s lips these days are Ross Stores and TJ Maxx. This all portends a much uglier scenario.

So, which is it? Pre-trade show pause or economic slowdown? Probably some of both. That said, I can’t shake the feeling that the economy is like a car that has run out of gas but is still coasting. Moving slower and slower until it finally rolls to a stop. Yellow lights flashing…

image via giphy.com

All the best,

Tom Keoughan

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.

All the best,

Tom Keoughan

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 2^nd 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.

All the best,

Tom Keoughan

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.

image via kcparent.com

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.

All The Best,

Tom Keoughan