Since the start of the pandemic, Chinese exporters have had to contend with a shortage of containers and high freight costs. Photo: Martin ChanRunning out of time to get its products on store shelves ahead of the holidays, the Basic Fun toy company made an unprecedented decision: it is leaving one-third of its iconic Tonka Mighty Dump Trucks destined for the US in China.

Why? Given surging prices for shipping containers and clogs in the supply network, transport costs to get the bulky yellow toy to US soil is now 40 per cent of the retail price, which is roughly US$26. That is dramatically up from 7 per cent a year ago. And it does not even include the cost of getting the product from US ports to retailers.

“We’ve never left 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 sparse shelves for the holidays. They are trying to find containers to ship their goods while searching for alternative ports. Some are flying in some of the toys instead of shipping by boat to ensure delivery before December 25. And in cases like Basic Fun, they are leaving toys behind in China and waiting for costs to come down.

Like all manufacturers, toy companies have been facing supply chain woes since the pandemic started and temporarily closed factories in China in early 2020. Then, US stores temporarily cut back or halted production amid lockdowns. The situation has only worsened since the spring, with companies having a hard time meeting surging demand for all sorts of goods from shoppers re-entering the world.

Manufacturers are wrestling with

bottlenecks at factories and key ports

 like Long Beach, California – and all points in between. Furthermore, labour shortages in the US have made it difficult to get stuff unloaded from ships and onto trucks.

But for toymakers that heavily rely on holiday sales, there’s a lot at stake for the nearly US$33 billion US industry. The fourth quarter accounts for 70 per cent of its annual sales. On average, holiday sales account for 20 per cent of the overall retail industry. And 85 per cent of the toys are made in China, estimates Steve Pasierb, CEO of The Toy Association.

The snarls are so severe that some retailers are telling companies they do not want products if they are shipped after mid-October. That is because products that typically took four to six weeks from when they left a factory in China to landing at a US distribution centre now take 12 to 16 weeks, says Marc Rosenberg, a toy consultant.

The struggles are happening as the US toy industry enjoyed a nearly 17 per cent increase in sales last year and a 40 per cent increase in the first half of this year as parents looked to entertain their kids at home, according to NPD Group, a market research firm.

But while analysts expect strong growth in 2021, many toy companies said they will see their sales reduced because they will not be able to fulfil orders on hot items, particularly surprise hits. They are also incurring big costs that will force some toy companies to close.

Toy executives say they cannot raise prices any more than 10 per cent – even though it will not completely cover the higher costs – because they are worried about shopper reaction. Mattel, the nation’s largest toy company, warned this summer it is raising prices in time for the holiday season to offset higher shipping costs, though it did not say by how much.

Costs of containers on ships have increased more than six-fold from last year with some brand executives saying they have gone up to US$20,000 from roughly US$3,000 a year ago. That has forced big retailers like Walmart and Target among others to charter their own ships.

Foreman calculates 1,800 Tonka trucks fit on each 40-foot container. So at US$20,000 per container, that is costing him US$11 each. That is up from an average of US$1.75 each in a typical year. He says he is focusing on shipping smaller items like Mash’ems – soft, squishy, water-filled collectibles – onto containers as he looks to maximise the total dollar value of the container and profit margins. He estimates he can fit US$150,000 worth of Mash-ems in a container versus US$40,000 worth of Tonka trucks.

Some like MGA Entertainment, the maker of L.O.L dolls, are expediting the flying of its toys because it now costs roughly the same as shipping.

Jim Silver, editor-in-chief of TTPM, a toy review site, says big discounters like Target and Walmart should have a healthier supply of toys compared with smaller ones because of their clout. Target says it has been teaming up closely with its vendors and transport partners to keep stores well-stocked and ready for its customers.

But Melissa McCollum, owner of Learning Express Toys in Birmingham, Alabama, says she has received only 25 per cent of holiday toy stock as of mid-September; typically, that figure is 50 per cent. And The Toy Book, the leading trade magazine serving the toy industry, is promoting a curated list of in-stock products that retailers can get fast from US warehouses.

Many toy companies like Basic Fun and PlayMonster have reduced advertising.

“We would be advertising to empty shelves,” said Tim Kilpin, president of PlayMonster, who says 15 per cent to 20 per cent of its holiday goods are snarled in the supply chain. Koosh, a toy ball made of rubber filaments, was completely sold out in August, and he did not think there would be a chance of it being replenished by Christmas, he says. But on Wednesday, Kilpin said he received word that some of the containers including shipments of Koosh are flowing from the west coast.

The bottlenecks are expected to have lingering consequences. Toymakers are facing pressure from retailers to ship the first flow of holiday 2022 goods in early March instead of late April and the second cycle in June instead of by late July, said Andrew Yanofsky, head of marketing and operations at WowWee.

That will force companies to make decisions about how much to make and reorder without having a full picture of the sales data, he said.

Yanofsky said he placed a big bet initially on Got2Glow Fairy Finder, a light show in a jar that allows children to find virtual fairies, because he knew he wouldn’t be able to replenish the production given the snarls.

“We took a risk on excess material beyond the scope of what we thought we could sell, ” he said.

Even the few toy companies that make goods in the US have struggled because of labour shortages.

John Gessert is CEO and president of American Plastic Toys, based in Walled Lake Michigan, with another plant in Mississippi. He said the company is missing 35 per cent to 40 per cent of its front-line workers. Now, it is shifting away its focus on play kitchens that require six workers toward less labour-intensive toys like basketball sets, which require just three workers to put together.

“I have never had such a complicated puzzle to fix,” he said.

Source: South China Morning Post

December 16, 2021

Write more, thats all I have to say. Literally, it seems as though you relied on the video to make your point. You obviously know what youre talking about, why waste your intelligence on just posting videos to your blog when you could be giving us something enlightening to read?

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