President’s Letter: The World Delivers Boatloads of Uncertainty but Not Always Toys
August 9, 2021 | Even as total sales results through the second quarter continue to demonstrate growth and positive news for the U.S. business of toys and play, the second half of 2021 is filled with risk for many toy companies across our broad and diverse membership. Equally true for all those who source outside the U.S. and those who manufacture here at home.
The worsening international shipping crisis of container costs, demurrage, and detention (and a host of outrageous tack-ons) that’s part of a systemic transportation breakdown, from factory loading dock to retailer receiving dock, is the headline. That comes along with rising costs across the supply chain and the need for toy companies to take offsetting price increases, all against a backdrop of continued evolution in retail and e-commerce driving low prices, as well as other concerns including COVID variants, which weigh heavily on the hearts and minds of toy people.
Many small- and mid-size toy companies are still in recovery mode after being shut out or shut down during the height of the pandemic. Their hopes are now pinned on a successful holiday season, yet their products may not arrive on time – or at a final cost that makes the effort worthwhile. U.S.-based manufacturers are facing similar steep increases in the price of raw materials and our nation’s ongoing worker shortage. What’s more, the families and kids who we exist to serve are facing a holiday season with the potential of limited selection.
As The Toy Association and our allies continue to push back on the shipping lunacy, we’ll also be telling consumers to #shopearly4toys. That toy your child has their heart set on may not be there if you wait. We’ll be leveraging the back-to-school season for this messaging and also marrying it to our usual safety messages through the holidays, since consumers may turn to unreputable sellers in search of product. More details on this from our communications team coming very soon.
From politicians to regulators to consumers, The Toy Association is aggressively engaged on this issue. Our team has been urging members of Congress and government officials to develop and implement short- and long-term solutions to the mounting problem. Our letters to the House Transportation Subcommittee and all members of Congress have underscored the significant negative impacts of shipping delays, increased costs, and container shortages, and how these disruptions are jeopardizing the toy industry’s business operations. Combined international and domestic hurdles threaten the industry’s annual U.S. economic impact of $97.2 billion (including $13.1 billion in annual state and federal tax revenue and 623,067 quality U.S. jobs).
Likewise, we and representatives of The Toy Association’s board executive committee met with the Federal Maritime Commission (FMC) and its chairperson to share members’ concerns and to explore what could be done; we are also in constant communication with the ports and collaborating with other associations to find solutions and provide resources to struggling businesses. The FMC has now ordered container lines serving Los Angeles, Long Beach and NYC, and the box terminal operators in these ports, to detail how they calculate detention and demurrage charges. Yet the FMC can only do so much given the limits of their charter while real impact of their investigations and actions will be off in the future, not now.
A bill we and others are supporting known as the Ocean Shipping Reform Act is about to be introduced in Congress which provides FMC additional tools and leverage, but it’s not a full measure of what we’d all like to see. Regardless, very soon we will be asking you to call on your representatives to support the legislation. For some, unfortunately, the combination of perceived "helping fuel the trade deficit" and the unrealistic knee jerk "just make it here" are the same we experienced during the successful tariffs battle. Our leadership at all levels in DC needs to hear your stories and understand this is also going to have broader impact on the economy in Q4 across all consumer products and retail. Our nation is not even helping our own ports deal with huge labor, chassis, and driver shortages! So, we’re not relenting. Again, for our industry and our slim margins, it is and will be an outright disaster for hundreds of companies.
I encourage our members to visit The Toy Association’s online resource center, which provides the latest information and tools to navigate the crisis. It includes links to a series of members-only webinars held over the past few months to provide insights from officials at the Port of Los Angeles, U.S. Customs and Border Protection, and the Toy Shippers Association (TOYSA). Bookmark this page as it will be updated as new resources, legislation, action-items, and information are available.
Like shipping, national issues present a similar challenge to building a sustainable business. Spiraling upward prices of raw materials are not simply “transitory inflation” as so often labeled, but rather real and opportunistic supplier price increases likely to last. Marry that impact with a lack of availability of some essential materials and a significant volume of unfilled essential factory positions. The search for qualified American workers being seen by employers is greatly influenced by both federal and state supplemental benefit programs. It’s difficult to embrace Made in America, when one finds it increasingly difficult to make in America.
From the far reaches of Asia to the heartland, this latest set of challenges will require all of us to demonstrate great perseverance, determination, exacting attention to detail, and a willingness to question everything and challenge every assumption, along with a huge dose of optimism. We’ve got to press forward while risks continue to mount.
If you would like to get involved in our domestic and international legislative activities, help spread the #shopearly4toys message, or if your toy company needs direct assistance, please contact Ed Desmond, The Toy Association’s executive vice president of external affairs. Any company that wishes to share their story with the media is encouraged to reach out to a member of the communications team.
Stay safe and be well,
President & CEO