High-stakes Christmas looms as surging toy demand meets supply-chain snarls By Reuters
© Reuters. Mattel toys, Hasbro toys and other products are displayed at Macy’s in New York on September 16, 2021. REUTERS/Vanessa O’Connell
By Richa Naidu and Lisa Baertlein
CHICAGO/LOS ANGELES (Reuters) – With demand for toys at an all-time high, U.S. suppliers and retailers are racing to outrun severe air, sea and land shipping snarls so Santa has a mountain of dolls, scooters and video game consoles to deliver at Christmas.
Holidays account for nearly 33% of toy industry annual sales. LEGO blocks and MGA Entertainment’s L.O.L. are a big part. Surprise dolls, Mattel’s Barbies and Sony (NYSE:)’s PlayStation game consoles were among top sellers last year.
Hitches in logistics could result in empty-handed consumers and lost sales for retailers like Walmart (NYSE:) and Target (NYSE:) – where Reuters and analysts this year have seen some gaps in shelves among seasonal items, from school supplies and backpacks to Halloween decor and costumes. Reuters spoke to six of the top toy companies, MGA, Kids2 & Funko (NASDAQ.) Inc., who stated that they have been using expensive cargo planes to transport their shipments and are asking Target and other retailers to handle shipping.
According to Jason Miller (associate professor of supply chain management, Michigan State University’s Eli Broad College of Business), U.S. imports of toys, dolls and games, which is one of the key segments of the market for toys, averaged $1.88 million per month in the first seven months of 2021. This was up 50% from the previous period of 2019.
Miller checked the imports going back to 2002 and said that 2021’s first seven months are record-breaking.
Isaac Larian CEO, California-based MGA said that there is “more demand than we can provide”. He was referring to retail orders.
Target and Walmart, both of which hired ships to help them secure the goods they needed, didn’t comment on their holiday toys inventories.
Macy’s, N:), announced that it would have Toys’R’Us section in 400 more of its stores next season. The company hopes to capitalize on the nostalgia of the chain which has been the most popular U.S. toy retailer for many decades until it closed down in 2018. Stephen Moore, an executive with the department store said that Toys’R’Us has been selling toys online for three months before the usual.’IT WOULD TAKE A MIRACLE’
Mattel Inc (NASDAQ:) in July warned that its supplies were disrupted when COVID-19 related temporary port and plant shutdowns in Asia worsened shipping container shortages. This story was not confirmed by Mattel Inc.
MGA is among many companies that ship toys to the United States to bypass ocean delays. These can range from days or months to several weeks. Frederic Horst from Cargo Facts Consulting (Australia), said that toys imported into the U.S. via air were more than twice the amount for the previous seven months.
Much of that gain was fueled by pricey video game consoles https://www.reuters.com/article/gaming-sony-microsoft-focus-int/clash-of-consoles-new-playstation-and-xbox-enter-150-billion-games-arena-fight-idUSKBN27P09A, the data showed, signaling another year of shoppers battling it out https://www.reuters.com/article/retail-ecommerce-scalper-bots/insight-good-luck-finding-a-playstation-5-walmart-and-other-retailers-battle-bots-snatching-up-hot-products-idUSL1N2IO02C for PlayStations and Microsoft (NASDAQ:)’s Xboxes.
Flexport’s global head for air freight Neel Shah said that most of the planes are now sold. One-way charter flights cost around $1.2-$1.5million, which is a significant increase from the normal $500,000 per flight. Jones Shah explained that “there’s not enough capacity, so it wouldn’t be a surprise for you to find charter flights between now and November end, or early December.”
Cargo ships can hold thousands of containers simultaneously, and so planes cannot easily replace them. To avoid global gridlock, toymakers have been tweaking their ocean shipping plans to help navigate the international seablock. Kids2, the company behind Baby Einstein toys, has grown its seaports by nine. Seven freight forwarders were also added to the Far East. These forwarders arrange shipping for businesses and have increased production by 30%. ‘PROBLEM ON PROBLEM ON PROBLEM’
With the holiday toy push gearing up, supplier LEGO said it isn’t “experiencing any significant disruption to the overall supply of our products or raw materials and are able to meet demand” because its factories and distribution centers are close to its markets.
Although stores have good stocks, this could shift as the Christmas season approaches and shipping disruptions such as COVID-19 or overbooked cargo vessels cascade. Desmond stated that “we just don’t know what’s going to happen down to the road” as companies struggle with shipping problems.
Ryan Gunnigle, CEO of Kids2, said that there have been multiple containers sitting in Asia. The factories are back up. “It’s just problem after problem.” Funko claimed that 70% of non-plush Pop was produced by Funko. Products are manufactured in Vietnam, where COVID-19 locks hit port operations. Funko is therefore sending toys to China for customers such as Amazon (NASDAQ) and Walmart.
According to Andrew Perlmutter (incoming CEO), the demand for Funko’s Christmas products, including Bobble-head figures such as Jack Skellington from The Nightmare Before Christmas and Minnie Mouse wearing Santa hats, is high. However, supply has never been tighter. Perlmutter projected that some of his company’s products would be sold out by November. Manhattan Toys is the worst affected, as it sells stuffed animals to Target, Walmart, and other outlets. “We’re a small company so even we get lucky on a vessel, they bump us – we’re trying to accommodate for that by paying anywhere from five to 10 times as much for a container,” said Nora O’Leary, Manhattan Toys CEO.
Rick Woldenberg (CEO of Learning Resources, an Illinois toy manufacturer) said that the whole system needs to be adapted and that it can be difficult. “Christmas cannot be delayed.”