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NEW YORK (AP) – Three months before Christmas, toy company Basic Fun has made an unprecedented decision to leave a third of its iconic Tonka Mighty dump trucks destined for U.S. store shelves in China.
Why? With soaring prices for shipping containers and clogs in the supply network, the transportation costs to get the bulky yellow toy on U.S. soil are now 40% of the retail price, or about $ 26. This is significantly up from 7% a year ago. And that doesn’t even include the cost of getting the product from US ports to retailers.
“We have never left a product this way”, says Jay Foreman, CEO of Basic Fun. “We really had no choice.
Toy companies are rushing to get their products to retailers as they grapple with a severe supply network crisis that could mean sparse shelves for the crucial holidays. They are trying to find containers to ship their goods while looking for alternative ports. Some are stealing in some of the toys instead of shipping them by boat to ensure delivery by December 25th. And in cases like Basic Fun, they leave some toys in China and wait for the costs to drop.
Like all manufacturers, toy companies have faced supply chain issues since the onset of the pandemic and temporarily closed factories in China in early 2020. Afterwards, US stores temporarily cut back or halt production. in the midst of blockages. The situation has only worsened since the spring, with companies struggling to meet the growing demand for all kinds of products from reintroduced buyers around the world.
Manufacturers are struggling with bottlenecks at key factories and ports like Long Beach, California – and everything in between. In addition, labor shortages in the United States made it difficult to unload goods from ships and trucks.
But for toy makers who rely heavily on holiday sales, there’s a lot at stake for the nearly $ 33 billion US industry. The fourth quarter represents 70% of its annual turnover. On average, vacation sales represent 20% of the entire retail industry. And 85% of toys are made in China, says Steve Pasierb, CEO of The Toy Association.
The growls are so bad that some retailers are telling companies they don’t want products if they ship after mid-October. That’s because products that typically took four to six weeks from leaving a factory in China to landing in a U.S. distribution center now take 12 to 16 weeks, says toy consultant Marc Rosenberg.
The hardships come as the U.S. toy industry saw an almost 17% increase in sales last year and a 40% increase in the first half of this year, with parents looking to entertain their children at home. , according to NPD Group, a market research company. .
But while analysts expect strong growth in 2021, many toy companies have said they will see sales decline as they will not be able to meet orders for hot items, especially surprise hits. . They also incur significant costs that will force some toy companies to close their doors.
Toy officials say they can’t increase prices by more than 10%, although that won’t fully cover the higher costs as they worry about the reaction of buyers. Mattel Inc., the nation’s largest toy company, warned this summer it would raise prices in time for the holiday season to offset higher shipping costs, but did not specify by how much.
Container costs on ships have more than six-fold from last year, with some brand executives saying they jumped from around $ 3,000 a year ago to $ 20,000. This has forced large retailers like Walmart and Target, among others, to charter their own ships.
Foreman calculates that 1,800 Tonka trucks can be fitted to each 40-foot container. So at $ 20,000 per container, it costs him $ 11 each. This is up from an average of $ 1.75 each in a typical year. He says he’s focused on shipping smaller items like Mash’ems – soft, spongy, water-filled collectibles – in containers as he seeks to maximize the total value of the container. and profit margins. He estimates he can put $ 150,000 worth of Mash-ems in a container for $ 40,000 worth of Tonka trucks.
Some, like MGA Entertainment, the LOL doll maker, are speeding up the theft of their toys because they now cost roughly the same shipment.
Jim Silver, editor of TTPM, a toy review site, says big discounters like Target and Walmart should have a healthier supply of toys compared to smaller ones because of their influence. Target says it has partnered closely with its suppliers and transportation partners to keep stores well stocked and ready for its customers.
But Melissa McCollum, owner of Learning Express Toys in Birmingham, Alabama, says she only received 25% of the holiday toys in mid-September; typically this figure is 50%. And The Toy Book, the leading trade magazine serving the toy industry, promotes an organized list of in-stock products that retailers can quickly get from U.S. warehouses.
Many toy companies like Basic Fun and PlayMonster have cut back on advertising.
“We would advertise on empty shelves” said Tim Kilpin, president of PlayMonster, who says 15-20% of his holiday products are nibbled down the supply chain. Koosh, a toy ball made from rubber filaments, ran out completely in August, and there’s no way it’ll be replenished by Christmas, he says.
Bottlenecks are expected to have lingering consequences. Toymakers are facing pressure from retailers to ship the first flow of holiday 2022 products in early March instead of late April and the second cycle in June instead of late July, said Andrew Yanofsky, head of marketing and sales. operations at WowWee.
This will force companies to make decisions about how much to manufacture and revamp without having a full picture of sales data, he says.
Yanofsky said he initially placed a big bet on Got2Glow Fairy Finder, a jar light show that allows kids to find virtual fairies because he knew he wouldn’t be able to piece production together. held grunts.
“We took a risk on the excess material beyond the scope of what we thought we could sell,” he said.
Even the few toy companies that make goods in the United States have experienced labor shortages.
John Gessert is CEO and President of American Plastic Toys, based in Walled Lake, Michigan with another factory in Mississippi. He says the company misses 35% to 40% of its frontline employees. Now it’s focusing more on play kitchens that require six workers and more towards less labor-intensive toys like basketball sets, which only require three workers to assemble.
“I have never had such a complicated puzzle to solve. “he said.
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