President’s Letter: We’re All in on Industry Defense and Growth in 2023
January 17, 2023 | As we charge full-speed into 2023, I have been questioned by several sources on everything from the future of Toy Fair, to macro challenges facing the industry, to multiple regulatory and legislative threats around the globe, to somehow my prognostications for the sales year. So, with strategic plan in hand, and as a follow-up to my 2022 year-end summary last week, here is my quick summary of The Toy Association’s must do’s in the coming year and a dose of optimism for our collective future.
Zero Forecast for Snow at Toy Fair 2023
Toy Fair moving to September is either seen as the greatest, long-overdue shift our Board of Directors could possibly have made for the majority of toymakers, or a prime reason for a visit to a psychologist. What I do know is that 2022 saw a strong and confident finish, with Toy Fair enthusiasm translating to 93 percent of all 2023 exhibit space already sold and 53 sponsors on board – much earlier than any past pattern and with nine months still to go until the show. New commitments, like the Spielwarenmesse World of Toys Pavilion, has further fueled international interest. The research and multiple focus groups conducted in 2021 and 2022 as part of the Reimagination Project documented in vivid detail that the tradition of Toy Fair is beloved perhaps foremost on an emotional level.
Now in early 2023, the booking pace has normalized as remaining inventory trends toward up-and-coming companies with smaller booths typically booked in the last months prior to opening. Toy Fair 2023, at its newly designated time of year, will sync with the dominant August/September dealmaking period and with the ability to preview 2024, promises to provide even more engaging and meaningful opportunities to the toy, play, and entertainment industries than ever before.
While the tradition of a Q1 Toy Fair has existed on the global calendar, for many out of a treasured habit not concrete outcomes, toys are top of mind in the fall. This timeframe offers newly focused and energized potential for the global media to discover hot and notable in-year playthings – at just the perfect time for readers, viewers, and consumers to make their holiday choices, while simultaneously providing toymakers and retailers the chance to finalize spring lines and of course privately preview the next holiday’s offerings.
While appropriate for the overwhelming majority of the industry’s annual sales movement, concern exists that September is too early for a portion of the specialty sector. Participation by specialty toy retailers remains extremely important as their perspectives and discussions with exhibitors will continue to have influence on what toys are made in the coming months and year. Toy Fair and actual specialty purchasing have always been a bit out of sync albeit closer, with Toy Fair providing excellent product discovery and meetings with vendors while purchases were still a ways off. That remains as does the exceptional networking and community of Toy Fair. Indeed specialty is well-served by a range of high-quality regional markets across the country and the invaluable annual ASTRA Marketplace & Academy. It’s the totality of all these interactions that make for great product and move the industry forward.
So, the die is cast. From August through the first days of October, the U.S. industry, our companies, and global buyers will be doing what is arguably 80 percent of the annual sales negotiations. I hope to see you in New York City from September 30 through October 3.
Top Brands Make it a Play Date
But wait! Valuable Q1 exposure in the media capital of the world is still happening. The Toy Association and Adventure Media & Events have joined forces to give manufacturers the opportunity to showcase their 2023 lineups for an exclusive group of media at “The Play Date," taking place March 8, 2023 here in NYC. The Play Date will provide top-tier members of the media with direct access to the hottest toys and play products for this coming year. Companies of all sizes — including Spin Master, LEGO, Moose Toys, Just Play, Funko Games, Crazy Aaron’s, and more — have already signed on to exhibit. It’s a super opportunity to showcase priority items including new spring launches and products yet to hit store shelves. The ability to have face-to-face interactions and deliver hands-on product exposure to media is certain to create buzz around brands and product lines.
Challenges, We Got Challenges, We Got Lots and Lots…
I’ll actually start with an obvious opportunity. That is, keeping the proven developmental benefits of play in front of parents and caring adults however and whenever each of our organizations and companies can, while toymakers and retailers offer truly great products that those same adults will want to bring into their homes! It’s good for the kids in the lives of those adults and it’s paying dividends among playful adults driving engagement and purchases for their own purposes.
We are encouraging our members to continue to focus on supply chain diversification while our commitment remains on providing research, education, and connections to help them find new resources whether here at home, nearshoring in Mexico, or elsewhere. On the subject of sourcing, Steve Reese together with Kids Brands Insights and Toy Team Asia created our white paper, “Toy Sourcing: The Next 10 Years, Changes, Challenges and Opportunity!” Well worth a look. China as the predominant manufacturing location won’t diminish anytime soon, but it’s vital to open up our minds to opportunity, including what’s available right here at home.
The constant drumbeat of inflation, potential for recession, and a tumultuous geopolitical outlook infuse uncertainty into business planning, yet toy companies cannot lay low or take a conservative mindset; rather, they must chase growth while the Association works to clear a path free from undue regulatory burdens and trade barriers. We’re seeing renewed interest among legislative and regulatory bodies that want to place new demands on companies, with the result adding little to nothing to increase already high product safety and without clear consumer benefits. In the environmental and extended producer responsibility space, there will be activity across a host of states and cities that both the Association and companies need to engage in while we continue to reduce packaging and address post-consumer products.
Home Grown and Far-Flung Regulatory Threats
Legislatures of all sizes and sorts are shifting focus from the pandemic to passing new laws and requirements, and we anticipate the Association’s global government and regulatory affairs work will face down significantly more risks to the toy community and take on more challenges to the rights of businesses than in many years. From local and state governments to federal agencies and a new Congress, our domestic agenda is extensive. We’ll be on Capitol Hill in the coming weeks doing outreach to educate new members about the toy and play community and the role we play in lives of American families. We’ll also be heard in statehouses across the nation.
The Association’s multiyear push against counterfeits will continue. While heartened by the passage of our priority federal legislation, the INFORM Consumers Act, which was signed into law by President Biden as part of the Omnibus bill, the sheer volume of bad actors selling dangerous, violative products in the e-commerce space remains. Continuing to pursue passage of the SHOP SAFE Act, which was excluded from the Omnibus, remains a priority. As families, and especially children, consume greater volumes of digital and social media and toy companies meet them in those spaces with product promotions, we will be doing more to help people of all ages develop the vital skills of media literacy.
As the North American trade association, today’s work and the responsibilities we tackle exist far outside the 21 nations that comprise North America. We are right now engaged in a range of global concerns including issues in Canada, the European Union, Chile, the Gulf States (including UAE and Saudi Arabia), India, Indonesia, Israel, and several other nations important to the future of the industry. The world is a “ball of confusion” as The Temptations song says.
The Toy Association continues to hold the invaluable role as Chair of the ASTM F963 Toy Safety Standard, with recent revisions becoming federal law. Our team also holds a role as Convenor of the ISO international working group on mechanical and physical properties of toys and is engaged in a range of ISO working groups. As a founding member of the International Consumer Product Health and Safety Organization (ICPHSO), our commitment to action there remains steadfast.
As one toy company Chairman put it, “Without The Toy Association playing aggressively in this role, pushing back on legislative threats and managing regulatory affairs, there would be no organization stepping in on behalf of the U.S. toy and play community on these issues.”
In total, The Toy Association’s strategic blueprint contains 28 priority actions and over 150 specific tasks on timelines all designed to protect and promote the business of toys and play and in direct response to member needs.
Predictions for 2023? All Will be Clear by 2024!
There’s no sense in making predictions. Preparing for a range of scenarios, keeping constantly alert in sensing mode, and staying responsive and strategically agile are paramount. Time has proven the simple fact that companies that continue to innovate and capture consumer attention by providing engaging, innovative products and play experiences will prevail. Retailers that offer products relevant to their consumers and geographic area together with truly appealing shopping experiences – both in-store and in the digital space – will outperform. I’m plowing no new ground here.
Holiday 2022 was challenging for all, especially the lackluster fall weeks in the extended holiday period and while a late sell-through surge cleared a lot of inventory, strong weeks 51 and 52 were not enough to reverse an annual retail decline of what looks to be in the low single digits. The NPD Group will make that clear for the toy category any day now. And there’s still much general merchandise inventory to clear. Think of it not just as toy inventory, which appears to have slimmed down with cautious ordering and out of stock items, but as all the aging general merchandise that must move competing for finite consumer dollars. The latter half of 2023 should see strength for us as retail stocks up for the fall and holiday seasons.
Fortunately, despite headwinds, including a global shipping crisis and constant pandemic upheavals (I’m still in counseling over the cancellation of Toy Fair 2022), over a three-year basis, the average U.S. toy industry annual growth is still at about +9 percent. The booming growth of 2020 and 2021 defied all soothsayers and certainly required difficult management tactics. 2022 brought us a dose of reality – more like 2019, and what 2020 might have otherwise portended if not for that virus. Now is the time to be all-in, relentless on growth! The upsides include stabilizing raw material/input prices, underutilized manufacturing capacity, and a return to more usual shipping rates.
From the standpoint of membership, I can’t say enough that the past three years have brought great fortune to some companies while others have struggled, furthering their 2023 challenge. This disparity remains especially among smaller toymakers. It’s the total health of the industry from inventors and fresh startups to established global players that keeps us up at night. Love all. Serve all. 2023 for everyone will demand grit, risk-taking and fresh thinking. With still higher than average inflation and the potential of a mild recession, consumers will continue to be under pressure, scrutinizing every discretionary purchase, so again we have to capture their attention and value calculus. Fortune favors the bold.
Every Day Protecting, Promoting, & Helping Drive Growth
As for The Toy Association, we have much to do and even more to prove. Look back at my 2022 year-end summary of accomplishments and most every one of those issues is still in motion and risk is as close as any legislator seeking to make a mark. Add a dash of potential recession. Deliver a phenomenal Toy Fair in September! Take on threats around the world. We’re growth champions; everything we do is designed to better the prospects of our members – and almost always extends to the broader toy and play community. We protect and advance your business rights and persuasively promote both the proven value of play and the industry’s products that bring that magic to life. Shorthand everything to “protect and promote” and you’ve got us nailed. Not a prediction, rather, I know that whatever may come, we’ve got your back.
President & CEO
The Toy Association