The Grinch may steal Christmas as toy delay looms
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 crucial holidays
Given surging prices of shipping containers and clogs in the supply network, transportation costs to get toys for kids to U.S. soil are reaching new highs with three months until Christmas.
"The pandemic has caused worldwide supply chain disruptions that have slowed imports into the U.S. and impacted retailers across the board," Jonathan Gold, National Retail Federation vice president of supply chain and customs policy, told Fox Business. "Issues include U.S. port congestion, overseas container availability, ocean carrier capacity, lack of warehousing, lack of truck and rail capacity, and a shortage of labor. Retailers are doing whatever it takes to make sure shelves are well-stocked for the holidays, from bringing in merchandise earlier to chartering their own ships. Consumers should be able to find what they need for the holidays, but it’s always safer to shop early than to wait until the last minute."
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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 crucial holidays. They’re 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 Dec. 25.
Like all manufacturers, toy companies have been facing supply chain woes since the pandemic temporarily closed factories in China in early 2020. Then, U.S. 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 at key ports — and at all points in between. Furthermore, labor shortages in the U.S. have made it difficult to get stuff unloaded from ships and onto trucks.
But for toy makers that heavily rely on holiday sales, there’s a lot at stake for the nearly $33 billion U.S. industry. The fourth quarter accounts for 70% of its annual sales. On average, holiday sales account for 20% of the overall retail industry. Eighty-five percent of the toys are made in China, estimated Steve Pasierb, CEO of The Toy Association.
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The snarls are so severe that some retailers are telling companies they don’t want products if they’re shipped after mid-October. That’s because products that typically took four to six weeks from when they left a factory in China to land at a U.S. distribution center now take 12 to 16 weeks, said Marc Rosenberg, a toy consultant.
The struggles are happening as the U.S. toy industry enjoyed a nearly 17% increase in sales last year and a 40% 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’ll see their sales reduced because they won’t be able to fulfill orders on hot items, particularly surprise hits. They are also incurring big costs that will force some toy companies to shutter.
Toy executives said they can’t raise prices any more than 10% — even though it won’t completely cover the higher costs — because they’re worried about shopper reaction.
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Costs of containers on ships have increased more than six-fold from last year with some brand executives saying they’ve gone up to $20,000 from roughly $3,000 a year ago.
The bottlenecks are expected to have lingering consequences. Toy makers 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 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.
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Even the few toy companies that make goods in the U.S. have struggled because of labor 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% to 40% of its front-line workers. Now, it’s shifting away its focus on play kitchens that require six workers and more toward less labor 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.
The Associated Press contributed to this report.