NEW YORK, Oct. 7 (US): Running out of time to get its products on store shelves before the holidays, the fun staple toy company has made an unprecedented decision: It’s leaving a third of its iconic Tonka Mighty Dump Trucks bound for the US in China.
With shipping container prices and plugs in the supply chain rising, the transportation costs for getting the huge yellow game to US soil are now 40% off the retail price, which is roughly $26. That’s a significant increase from 7% a year ago. The Associated Press (AP) reported that it does not even include the cost of transporting the product from US ports to retailers.
“We’ve never left the product behind in this way,” says Jay Foreman, CEO of Basic Fun. “We really had no choice.”
Toy companies are racing to get their products to retailers as they grapple with a severe supply-network crunch that could mean scattered holiday shelves. They are trying to find containers to ship their goods while searching for alternative ports. Some fly on some rides instead of shipping by boat to ensure delivery before December 25th. And in cases like Basic Fun, they are leaving games behind in China and waiting for costs to drop.
Like all manufacturers, toy companies have faced supply chain problems since the epidemic began and temporarily closed factories in China in early 2020. After that, US stores reduced or temporarily halted production amid the closures. The situation has only worsened since the spring, as companies struggle to meet the increasing demand for all kinds of goods from shoppers who have returned to the world.
Manufacturers grapple with jams at major factories and ports like Long Beach, California — and all points in between. Moreover, labor shortages in the United States made it difficult to unload cargo from ships and trucks.
But for game makers who rely heavily on holiday sales, there is a lot at stake for the nearly $33 billion US industry. The fourth quarter accounts for 70% of its annual sales. On average, holiday sales represent 20% of the total retail industry. And 85% of games are made in China, estimates Steve Passerb, CEO of the Game Association.
The crises have been so severe that some retailers are telling companies they don’t want products if they ship after mid-October. That’s because products that normally take four to six weeks from the time they leave a factory in China to a US distribution center now take 12 to 16 weeks, says Mark Rosenberg, a gaming consultant.
The struggles are occurring as the US game industry enjoyed a nearly 17% sales increase last year and a 40% increase in the first half of this year as parents looked to entertain their children at home, according to the NPD Group, a market research firm. .
But while analysts expect strong growth in 2021, many gaming companies have said they will see their sales decline because they won’t be able to meet demand for hot items, particularly surprising results. They also incur high costs that will force some gaming companies to close.
Game managers say they can’t raise prices more than 10% – although it won’t fully cover the higher costs – because they are concerned about the reaction of shoppers. Mattel, the country’s largest toy
The company warned this summer that it was raising prices in time for the holiday season to offset higher shipping costs, though it didn’t specify how much.
Container costs on ships have increased more than sixfold from last year, with some brand executives saying they have risen to $20,000 from about $3,000 last year. That has forced major retailers like Walmart and Target, among others, to charter ships of their own.
Foreman calculates 1,800 Tonka trucks that fit each 40-foot container. So at $20,000 per container, that costs him $11 per container. That’s higher than the average of $1.75 per normal year. He says he’s focused on shipping smaller items like gametes — soft, squishy, watery collectibles — on containers as he looks to maximize the container’s total dollar value and profit margins. He estimates it could fit $150,000 worth of Mash-ems in a container versus $40,000 worth of Tonka trucks.
Some like MGA Entertainment, the maker of LOL dolls, are speeding up the flight of their games because they now cost about the same freight.
Jim Silver, editor-in-chief of TTPM, a toy review site, says big discounts like Target and Walmart should have a healthy supply of toys compared to smaller toys because of their clout. Target says it has been working closely with vendors and transportation partners to keep stores well stocked and ready for their customers.
But Melissa McCollum, owner of Learning Express Toys in Birmingham, Alabama, says she has received only 25% of holiday toys as of mid-September. Usually, this number is 50%. The Toy Book, the leading trade magazine serving the toy industry, promotes a curated list of in-store products that retailers can quickly obtain from US warehouses.
Many game companies like Basic Fun and PlayMonster have reduced ads.
“We’re going to announce the empty shelves,” said Tim Kilpin, president of PlayMonster, who said 15% to 20% of its holiday items are stuck in the supply chain. Kush, a ball game made of rubber strings, sold out entirely in August, and he didn’t think there would be a chance of refurbishing it by Christmas, he says. But Kilpin said on Wednesday he had received news of some container flows, including Kush shipments, from the West Coast.
The bottlenecks are expected to have long-term consequences. Toy makers are facing pressure from retailers to ship the first batch of 2022 holiday merchandise in early March instead of late April and the second cycle in June instead of late July, says Andrew Yanovsky, WowWee’s chief marketing and operations officer.
That, he says, will force companies to make decisions about how much to do and rearrange without getting a complete picture of sales data.
Yanovsky said he initially placed a big bet on Got2Glow Fairy Finder, a light-in-a-jar show that allows kids to find virtual fairies, because he knew he wouldn’t be able to regenerate due to the snarls.
“We risked excess material well beyond what we thought we could sell,” he said.
Even the few toy companies that manufacture goods in the United States have struggled with a labor shortage.
John Gesert is CEO and president of American Plastic Toys, headquartered in Walled Lake, Michigan, with another factory in Mississippi. He says the company is missing 35% to 40% of its frontline workers. Now, it’s shifting its focus away from play kitchens that require six workers toward less labor-intensive games like basketball sets, which require only three workers to assemble.
“I’ve never had such a complicated puzzle to fix,” he said.
RAE