One of the victims of the COVID-19 pandemic, a coronavirus-infected shopper, browses Target stores in King of Prussia (Pennsylvania), November 20, 2020.
Mark Makela | Reuters
Even from the porch of his home in Malibu, toy executive Isaac Larian can’t escape this holiday season’s biggest business challenge. He is able to see the Port of Los Angeles’ long list of unoccupied container ships, which are about 70 miles away.
Larian, MGA Entertainment CEO said that congestion at the port has been an ongoing view of the California coast from May. It’s an ongoing problem that Larian is trying to ignore by relaxing and watching the sunset. It is a reminder of all the toys yet to arrive. Parents may not be able to buy toys in the time they need. This could lead to delays in loading the ships. Toys could be left on shelves for months with clearance stickers if parents miss this opportunity.
He said, “I see an ocean filled with containers.” There were “ship after ship upon ship of empty containers, waiting to be unloaded.”
According to him, MGA Entertainment, which makes LOL Surprise, Rainbow High, and Little Tikes products, has sufficient inventory at present to fulfill approximately 65% of outstanding orders. MGA Entertainment expected to achieve a sales increase of 50% this year. However, it now anticipates that the company will grow 18%-20%. The company’s revenue figures are not available because he isn’t able to share them.
Larian is one of the many toys manufacturers facing a huge bottleneck in global transport due to the coronavirus pandemic. This has been exacerbated by the blockage of the Suez Canal in March.Larian stated that shipping containers, which once cost $3200, are now selling for upwards of $20,000. Unloaded containers can be shipped by truck, but not enough to haul them.
China’s power shortages, high labour costs and a lack of resin have all contributed to increased supply and price increases.
Larian stated, “It is a complex and complicated set of issues that have a chain effect. I am afraid this will continue for many years.”
Every company has its own unique challenges. The resources of larger companies are greater. Home DepotAnd CostcoHave gone to such an extent as contract dedicated container shipsOrders can be expedited. Cash is also available for larger companies. to place orders well in advanceWhen they are required. HasbroAnd MattelAlthough executives didn’t reply to our request to comment on this article, they have stated that the large toy manufacturers are more equipped to deal with these problems.
Brian Goldner, CEO of Hasbro, stated that the company uses “all kinds of techniques and tactics to make sure that it will have what we need” at a Goldman Sachs conference. That includes nearly doubling the number of ports it’s using in the U.S. and adding a number of new ports in Asia, he said.
Hasbro believes that toys might arrive later than expected, in the middle of the fourth quarter, instead of the last. But toys will reach shelves by the peak selling season, he added.
“We believe we’ll have all the products, albeit, maybe we’d like a little more product in certain categories but we’ll have the product for the holidays,” he said.
The products are likely to be more costly. Ynon Kraiz, Mattel CEO, said that they were raising prices for toys to offset higher costs. However, they didn’t believe that that would slow down demand.
Kreiz explained that “we believe the whole toy industry will be retained as a strategic category by retailers.” The items aren’t expensive. Spending money on your children is a priority, even if it’s quality items and trustworthy brands.
According to the NPD Group (a market research firm), holiday spending will increase by 3% and 5% respectively in November and December. This is if October and January are included. Consultants Bain and Deloitte estimate that the holiday spending will rise 3% to 5% in November and December, respectively. that holiday sales will grow at least 7% and reach around $800 billion.
According to industry analysts, there’s no one must-have holiday item this year. Analysts predict consumers will choose items most beloved during lockdown.
There are some character-driven roles. [toys]With Batman, Grogu Paw Patrol and Frozen all over the place,” Nikki Baird said, Vice President Retail Innovation, Aptos. Aptos is a retailer technology company. But more importance [is]On sensory play, such as with Legos and water toys or fidget toys. There are toys for exploratory play.
If parents wait until December or November to buy sales, they will be unable to access their children’s wish lists earlier in the year.
Steve Pasierb CEO, Toy Association, stated, “If your kid is passionate about something, buy it now.” Do not wait.
Due to the pandemic, last year retailers encouraged consumers to buy gifts earlier than usual. AmazonTarget, Walmart and others started holiday sales events back in October. However, December was the most popular month for sales. NPD says that only a tiny portion of the sales increased in December.
NPD stated that October accounted for 16% in fourth-quarter toys sales, an increase of 33% from 2019. The December 2020 toy haul accounted for 55%, or 3% less than the previous year.
The 3% swing in toys sales means around $400M in sales earlier than usual last year. This is because the toy sector saw holiday quarter sales of $11.5Billion.
In order to deal with tight inventory, retailers are placing bigger bets on fewer itemsPasierb says that this is the case. This strategy was also used for back-to school season, so consumers will have fewer options.
MGA Entertainment’s LOL Surprise OMG House of Surprises set.
The pandemic has made it difficult for toys to be found that had been in high demand during this time. GlobalData Retail’s managing director Neil Saunders said that he has noticed a decrease in inventory for crafting toys and other “to-do” toys used by parents to entertain their children. He has also seen gaps with plush toys, fidget toys, and dolls.
Larian said for MGA, items like its LOL Surprise OMG House of Surprises playset — which is on Walmart’s top toys list — and LOL Surprise Movie Magic Studios boxset — which is on Target’s list — will be harder to find.
Larian explained, “The LOLhouse is over $200. And it’s huge.” It is impossible to fit 150 to 200 items into a single container. You can’t airfreight it.”
On the other hand, he said, numerous LOL Surprise blind bags — wrapped-up packs with small, collectible toys hidden inside — can fit inside of a 40-foot container or get shipped on a plane.
It will also have a shortage of the company’s handmade fashion dolls. Larian indicated that last year’s toy manufacturing cost averaged 22% more at MGA.
Larian said the supply chain has numerous broken links, not only in China — but also in the U.S. For instance, he said, there aren’t enough truckers to move containers once they hit the shore and workers for domestic manufacturing facilities.
MGA Entertainment has Little Tikes (an Ohio-based toy manufacturer). The company’s wage has risen by 60%, he said. This is because the company struggles to find manufacturing jobs.
Target and Walmart both have additional supply-chain workers for the holiday season. Walmart has approximately 1.6 Million U.S. workers. hiring 20,000 people for roles like order fillers and freight handlersTarget has approximately 350,000 employees. Target employs 30,000 people in supply chain.
Target stated that it would also highlight its toys department during the holiday season. roughly tripling the number of Disney shops inside of Target locations and collaborating with FAO Schwarz on a limited time collection.
Customers can expect to see an increase in labor and transport costs. Salesforce recently reported that holiday prices could increase as high as 20%.
Saunders explained that while there may be some bargains, supplies are limited and stores won’t like to make huge toys deals. This will make it a more expensive holiday.
New data from NPD Group shows that 29% more Americans will spend on holidays this year than they did last.
Aptos Baird stated that although prices might be slightly higher than usual, the discount will still be available.
“Retailers know they’re competing with other retailers for a limited share of consumer wallets – a one-time, seasonal spend,” she said. Because retailers compete for the same share of spending, promos will continue to be offered even if there are limited supplies.
LOL Surprise toys at Target
Larian explained that retailers can’t sell the toys they want if they don’t stock them. He also said that toys are often used as “loss leaders” by retailers to attract consumers.
He stated that toys can be an “emotional purchase”. He said that toys bring foot traffic because they are a gift for the grandmother, grandfather or mother who goes to Target or Walmart to buy toys or to go shopping. AmazonYou end up buying toys and then putting in more items than that.
Larian predicted that retailers will suffer if the merchandise isn’t available on time. Toy manufacturers will also suffer as retailers attempt to keep the merchandise in stock rather than place more orders.
Larian stated that Christmas is December 25. If we do not get merchandise onto the shelves by then, sales will drop significantly. These toys were already manufactured. If not, the inventory hangover could extend to January, February and March as well as April. Warehouses will be full.