Just when you thought it couldn’t get any worse they’ve gone and devalued the yuan. Washington politicians may have scored a few points with an undereducated public but it is the consumer, and American import businesses, who will pick up the tab.
This year’s manufacturing contracts are already set so the effects may not be immediately apparent and although a 2% devaluation may seem like small change, many experts are forecasting a devaluation of between 8 – 11% over the next eighteen months. With Chinese factory costs for labor, electricity and everything else going up, coupled with continuing sky high resin and transportation prices that money is going to have to come from somewhere. In a “perfect world” those costs would be passed on down the line from factories to importers to retailers and ultimately to the American consumer; in other words – inflation. What will happen in the real world is likely to be just a little bit different.
With Walmart’s sales being pressured by high oil prices as well as owing to their generally rapacious nature, it’s an easy bet that they will not raise their price points. It’s a little difficult for me to believe that I would decide not to buy a shiny new widget if it cost $7.99 rather than $6.99, but I guess that’s why I still have to work for a living. All of those extra widget dollars eventually add up.
With major retailers standing firm it will be between the importers and the Asian manufacturers to battle it out for their already shrunken profit margins. This will lead them to (and this could be Walmart’s new advertising slogan) “Make do with less!” (Ahem – sort of like Walmart store employees.) The other course will be to remove pieces and features, use cheaper materials and thinner walls or move manufacturing to Northern China where labor and electricity are cheaper. For consumers this means less creative, shoddier products with more safety problems that won’t last as long. Thank you, Walmart!
An example of the new and improved World Friendly Walmart is seen in West Virginia where workers have been ordered to be available to work any shift at any time or face dismissal. This “open-availability” policy states that “workers who cannot commit to being available for any shift between 7 a.m. and 11 p.m., seven days a week, will be fired by the end of the week.” So much for daycare, elderly parents, little league games, doctor’s visits, dance recitals, families, communities and anything resembling life as we know it.
In our ever diminishing Department of Good News; California ports have extended their hours and weekends so that all of the goods imported through there should reach their destinations in a timely fashion. Unlike Walmart employees, dock workers belong to a union which will guarantee them monetary compensation for working odd hours as well as some semblance of a regular schedule.
My summer reading has included James Stewart’s book, Disneywar — although I’d be a little careful about carrying a copy around Southern California. An alternate title might be Unwarranted Arrogance and Self Puffery for Dummies. It seems that Disney’s success in creating enduring properties for children can at least partially be explained by the fact that the company is managed by children – very badly behaved children (and I’m talking senior management as well as past and present board members). For those who enjoyed this tome I’d like to recommend William Golding’s, Lord of the Flies, as further reading. An illuminating alternative analysis of Disney’s recent courtroom escapades which I copped from the Wall Street Journal editorial page follows.
The days are growing impeccably shorter and summer fun is almost over so it’s time to dust off your crackberry’s, buy new batteries for your laptops and cell phones and get ready to run another weary lap on too little fuel and too little sleep.
Fall Toy Preview is just around the corner.
See you then,
Tom Keoughan
