Toys in the Time of Coronavirus

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Toys in the Time of Coronavirus

by Nick Truss

Despite best hopes and safety measures implemented the world over, the pandemic continued to cast its shadow across global supply infrastructures, leaving suppliers and retailers alike in the dark for yet another year. Holiday 2021 was impacted heavily by continued supply line woes, delaying critical retail products for many companies. Consequently, holiday products will be arriving on shelves in Q1 of 2022, necessitating possible shi s in marketing and sales strategy. We reached out to several key toy executives across the industry for insight on this consequence, and more.

Andy Yanofsky, COO of WowWee says “From a sales perspective, Xmas in January will be a rallying cry for retailers and toy companies alike as they try to capitalize on pent up demand due to inventory shortages in Q4. Carry-forward items at brick and mortar will be well positioned to deal with price compression whereas non carry-forward items could be subject to liquidation strategies with Fall shipments still inbound. From a marketing perspective, I think toy companies will nd themselves in the market for ads/media without pause from Xmas as is usually the case.”

Andy Keimach, President at VTech Electronics, takes a glasshalf-full mentality, remarking, “We know the holidays are the most popular season for gi ing, but people celebrate children’s birthdays year-round, and look for gi -giving opportunities throughout the year. We are partnering with our retailers to help move inventory and look forward to a strong rst half of the year as we lean into more non-traditional holidays and gi ing occasions. Customers will be able to nd popular, award-winning toys on shelves as they search for the perfect gi .”

Isaac Larian, CEO of MGA Entertainment adds, “ e demand for innovative toys is very strong. MGA is fortunate to have many innovations. But, I believe there will be a glut of consumer goods hitting the rst half of the year that will clog the shelves for the rst half of the year.” Sharon John, CEO and President of Build-A-Bear re ected on the unfortunate side e ects of product delays, saying, “Some will be seasonally irrelevant, therefore that may cause certain manufacturers and/or retailers to pack-and-hold which will tie up cash for a year until the next holiday season. Another possible outcome could cause a glut of toy availability in the rst half that may create downward retail pricing pressures due to supply and demand reaction. Unfortunately, many of the manufacturers and/or retailers may have already over-paid for the product when adding in the increased manufacturing and shipping costs, so it would add insult to injury to have to lower prices.”

Some companies found themselves fortunately well prepared ahead of time, due to their vast, cultivated, and interconnected networks. Max Rangel, CEO and Global President at Spin Master commented, “Our supply chain and commercial organizations were very successful in working through global supply chain disruptions with our retail partners to ensure we delivered our goods to stores and digital shelves. We pulled forward nished goods production to increase capacity, and we invested in more tooling to dual source manufacturing of certain product lines. We leveraged our diversi ed third-party manufacturing footprint across China, Vietnam, India and Mexico to optimize availability, and we worked with our logistics providers to secure access to additional ports and shipping lanes. We think that because of these e orts our risk is manageable.”

Ultimately, consumers are likely to see some positive side e ects as products hit shelves early this year. Laura Zebersky, President of Jazwares postulates, “ e impact I expect in the rst half of the year is that we will start to see better in-stocks at all retailers; a more robust retail promotional cycle, and manufacturers being able to o er discounts around Easter in mid-April.”

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A moment of necessary change

e key di erence in year two of the pandemic was a shi in resolve, and an earnest desire to get things rolling again. Where many saw an unavoidable cease in business as usual, others saw opportunities for improvement, and subsequently adapted.

A common conclusion was that every step in the production timeline must be moved up. Mr. Yanofsky remarks, “We’re rebuilding our assumption sets to deal with what we believe is the new normal: that supply chain congestion isn’t going away, and that the economics that accompany it will persist. In short, we have to be earlier at every level. We have to make portfolio choices earlier, develop earlier, manufacture earlier, and ship earlier. We have to rethink how we do business domestically. Freight costs will preclude us from o ering certain items on a domestic basis, and we’ll have to frontload shipments on those items we believe in most to ensure we can meet demand.”

Charlie Emby, Co-President of Just Play o ers, “We have accelerated our development time, tooling releases and overall preview and shipping timelines. It has taken an enormous amount of coordination working with licensors, our internal design/development teams, our factories and retailers to plan the business for the next couple of seasons.”

Brands with comprehensive factory infrastructure were far less impacted on the whole, but their shrewd industry leaders remained vigilant.

Skip Kodak, President of Lego Americas says, “We have a global network of factories and distribution centers located close to our markets, which gives us the exibility to meet shi ing consumer demands and reduces our need to ship products long distances. However, the current global supply situation is very dynamic. We are working very hard to minimize any disruption, taking swi action to respond to any issues that arise and monitoring the situation very closely.” Ynon Kreiz, CEO of Mattel adds, “Having already restructured our global supply chain as part of Mattel’s transformation strategy, it is now a true business partner, strategic asset for the company, and a competitive advantage for Mattel. While I cannot comment on the fourth quarter, in terms of recent supply chain challenges, exiting the third quarter we reported that our supply chain and commercial organizations were successful in working through global supply chain disruption and closely collaborated with our retail partners in trying to meet consumer demand. It’s not that we were not impacted, but we anticipated short supply and longer lead times and factored that into our planning with several mitigating actions. We believe the strong performance of our supply chain was attributable to our scale, expertise, and exible model.”

Given the emergent issues of 2020, Build-A-Bear took preventative measures in advance of Q4 2021. Ms. John comments, “At Build-A-Bear, we increased orders of evergreen/ core products and pulled forward the holiday-speci c products in 2021 when some of the factory, container and shipping issues became evident and, therefore, we were able to receive the vast major of holiday goods prior to November resulting in comparatively little sales disruption for business. On the few Christmas products that were not shipped, we were able to pack and hold until next year.”

Ms. Zebersky adds in relation to Jazwares, “Fortunately, we were prepared for challenges in the supply chain by having our own domestic warehousing in place, along with strong agreements with our transportation network. e importance of being nimble remains critical to our success.”

Prior e orts to innovate proved useful for Spin Master, as Mr. Rangel remarks, “We’ve been focused on diversifying our manufacturing for some time, and it provides us with greater exibility to shi vendors as needed. Additionally, as we put more emphasis on strengthening our three creative centers, toy, entertainment and digital games, there will be less of our portfolio which is reliant on physical items.”

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is year was a time for re ection on operational pipelines, as Mr. Keimach adds, “ e supply chain issues have given us a chance to step back and evaluate where we can make improvements in e ciency. Internally, we will be putting an emphasis on longer lead times and carrying additional inventory. We will also continue to work closely with our retail partners to align on forecasts and inventory strategies. Additionally, we will be focusing on improving visibility throughout the supply chain to identify any issues early on so we can get ahead of them. By establishing contingency plans, we can quickly implement solutions and mitigate any repercussions.”

Changes that are here to stay

When asked what pandemic changes would remain permanent in the toy business, our interviewees had a wealth of wisdom to o er.

Eric Nyman, President and COO of Hasbro comments, “ e pandemic caused retail experiences to move online more than ever before. At Hasbro we’ve continued to grow our leadership in ecommerce capabilities with our focus on Omni-channel, pure-play, and our own direct to consumer business, and Hasbro Pulse. e pandemic also meant many of the in-person interactions we have with our fans and consumers had to change. Over the past two years, Hasbro has ventured into new digital initiatives such as our Bring Home the Fun campaign of 2020, and Hasbro Pulse Con. ese have allowed us to directly reach our consumers and fans through virtual content and events.”

Lego’s marketing focus has undergone a few key shi s. As Mr. Kodak explains, “Our rst instinct during the pandemic was to put the brand in service to families, and inspire them to play together. We’ve dialed up our focus on grown-ups too, introducing items designed to catch their attention such as Botanicals, Art, and replicas of popular TV series like Friends and Seinfeld. We also experimented with di erent types of virtual and physical experiences to understand how our brand can ex in less than ideal circumstances, such as the rst ever virtual Lego Con, with learnings we will apply to future programs.”

Mr. Kreiz adds, “ e industry continues to face ongoing COVID-related challenges, so this chapter is not yet nished on this unprecedented period for our world. However, we clearly saw the further acceleration of online retail and ecommerce during the pandemic. Most importantly, the toy industry has played a key role in providing support and positive experiences for children and families during the pandemic. Our industry has always been resilient in challenging economic times and this time has been no exception.”

Mr. Keimach remarks, “E-commerce was on the rise before the pandemic, but it exploded in 2020 and continued in 2021. Whether people stayed home because they wanted to avoid crowds, stores limited hours and/or capacity levels or people were sick, COVID really pushed consumers towards e-commerce. It’s become second nature, even to people who were new to online shopping and may not have been comfortable at the start of the pandemic. Across demographics, consumers have become accustomed to instant access to everything they need via e-commerce, and I think that’s a change that’s here to stay.”

Re ecting on silver linings as a result of the pandemic, Mr. Emby remarks, “One positive that has come from the pandemic is the way the industry has pulled together to give back to those in need from COVID relief and beyond. e toy industry has always been very philanthropic, but the continued expansion in charitable donations is something that will continue post pandemic.”

Mr. Emby adds, “From a business perspective, Zoom meetings have become an acceptable way to conduct business and I don’t see that changing.”

ings to look forward to

As for the future, we asked what up-and-coming products for 2022 most excited our interviewees, looking forward.

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Ms. Zebersky comments, “We are super excited about our entire Jazwares portfolio in 2022. From Squishmallows, to CoComelon and Dino Ranch, to Pokémon and Roblox, we certainly have many of the hottest brands, and they have certainly struck a chord with consumers. e demand for our toys is strong. Coupling this with the launch of exciting new products, and our costumes business featuring Marvel and Disney licenses, we are expecting a very strong year.”

Mr. Larian says of MGA, “As you know, MGA has been an innovative and disruptive toy company since the launch of Bratz in 2001. We will continue to innovate. I’m excited about the new LOL travel segment , LOL queens and LOL tweens. In addition, we are launching another new $100 million brand Mermaze in January, and of course, Bratz are back very successfully, and the Little Tikes brand keeps on growing. Furthermore, Rainbow High is a number 1 fashion doll brand, continuing to grow.”

Hasbro’s Mr. Nyman adds, “We’re proud to unveil so many new innovations across our entire portfolio of iconic brands from Nerf and Transformers to Monopoly, Play-Doh, and Peppa Pig. Hasbro is continuing to bring kids and families new toy and gaming experiences as well as strengthen collector product lines for fans of our many entertainment-based brands, and our partner brands. Some highlights include: new My Little Pony products launching in Spring 2022, Power Rangers Dino Fury Season 2 products in Q1, Star Wars Products to celebrate May the Fourth, new Marvel movie product lines, and so much more” pany has been leaning into new and di erent gi ing occasions, and recently launched an online initiative called “Heart Box.” We are very excited about this, as we see it as an incremental opportunity to drive sales to a broader addressable market within the large and growing gi ing category.”

Mr. Kreiz, re ecting on Mattel, says, “ ere is much to be excited about in the year ahead, both for Mattel, with multiple growth engines across the company, and the toy industry as a whole. As part of our growth strategy, we are actively expanding our portfolio of licensed partnerships. In 3Q21, we announced an expansion of our relationship with Disney consumer products, games, and publishing for Disney and Pixar’s eagerly anticipated movie Lightyear. We also are pleased to have exciting product tied to other highly anticipated 2022 movies, including Jurassic World and Minions. In 2022 we are eager for the reboot of another iconic piece of Mattel IP, Monster High. We will unveil new content, lifestyle product and fashion dolls in 2022 and we are working with Nickelodeon on a new animated series and live-action television movie musical to debut this year.”

Mr. Yanofsky adds for WowWee, “From a continuing brands standpoint, we’re incredibly excited about the evolution of the Got2Glow Fairy Finder product line, and the expanding partnership with Nickelodeon on My Squishy Littles, and continuing the expansion of our Baby Shark’s Big Show line.”

much more.”

Mr Rangel of Spin Master remarks, “We have an innovative and imaginative 2022 line up with toys from award-winning franchises, highly sought-a er licenses, and trailblazing new intellectual property. Some of the lines that I am most excited about include PAW Patrol, Purse Pets, DC movie toy lines, and

Ms. John remarks, “Build-A-Bear is celebrating its 25th Anniversary in 2022, and as such is also recognizing the multi-generational aspect of the brand, its growing relevance in pop culture, and appeal beyond young children to tweens, teens, and adults. With that in mind, given that the brand is highly associated with making memories and having celebrations, our com-

Mr. Kodak says of the Lego brand, “2022 marks the 90th anniversary of the Lego Group, and we have lots of exciting products and programs planned to celebrate. Not only are we focusing on our history at this time, but also what the future of Lego play will look like as we forge ahead. We look forward to unveiling much more in the months to come!