Gifts / Sports & Toys

Right now, it is the peak demand season before traditional American holidays. However, due to the impact of the epidemic, international logistics is facing various bottlenecks, and transportation costs have soared, which means that consumers will pay higher prices this year.

• A toy's ups and downs from China to the United States

Take, for example, holiday essential products such as plush toys: if they are to be shipped from Ankang, Shaanxi, China to consumers on the east coast of the United States, what difficulties might they face? ①The cost of toys has risen; ②Waiting for the departure of empty containers; ③After arriving at the port of Los Angeles, California, continue to wait; ④The epidemic has caused a shortage of workers and greatly reduced transportation capacity.

On the whole, compared with the level before the epidemic, the total transportation cost of a plush toy has increased by 650% from the production to the arrival of consumers. All logistics bottlenecks in the end mean that consumers may have to pay higher prices. In the above-mentioned logistics process, every detail problem is difficult to solve in a short period of time. Jeremy Siegel, a professor at the Wharton School of Business in the United States, warned that the inflation problem in the United States will be much hotter than the Fed expected.

• Commodity supply is tight and prices are bound to rise

According to foreign media reports: The Port of Los Angeles is full of freighters waiting to be unloaded. Faced with the holiday shopping season at the end of this year, toy industry players can't laugh.

Isaac Larian, CEO of global toy giant MGA Entertainment, said port congestion has been a common phenomenon on the California coast of the United States since at least May. He looked at the ships on the sea every day, thinking of toys that hadn't arrived yet.

Delays in unloading may endanger whether parents can buy toys in time, pack them and hide them under the Christmas tree. If they cannot be bought in time, these toys may eventually be on the shelves at the end of winter and be cleared for auction.

As the manufacturer of LOL Surprise, Rainbow High and Little Tikes, MGA currently has enough inventory to satisfy 65% of unfulfilled orders. But Larian said that he originally expected sales to grow by 50% this year, but now it is expected to be only 18% to 20%.

Many toy manufacturers are struggling to cope with the huge bottleneck in global transportation routes caused by the epidemic, which was worsened by the blockage of the Suez Canal in March. Larian said that a container that used to cost only US$3,200 is now asking for more than US$20,000. And even if the containers are unloaded, there are not enough truck drivers to transport these goods.

China’s power outages, resin shortages and rising labor costs have also led to tight commodity supplies and rising prices.

No company is immune, but large companies have more resources. Home Depot and Costco have even contracted special container ships to speed up orders.

At the Goldman Sachs meeting held at the end of September, Hasbro CEO Brian Goldner stated that the company "is adopting various strategies and technologies to ensure that it has the products it needs." This includes expanding the number of ports in the United States. And new ports in Asia.

He expects that some toys will be postponed to the beginning of the 4th season instead of the end of the 3rd season, but they can still be put on the shelves in time during the shopping season.

But these products will be more expensive. At the same investor meeting, Mattel CEO Ynon Kreiz said that Mattel is increasing the price of toys to cover costs, but it is not expected to curb demand.

• U.S. toy manufacturers keep products in China

But for more toy manufacturers, the situation may be even worse-because there is no time to put the products on the shelves before the Christmas holiday, the American toy company Basic Fun! An unprecedented decision was made: to leave one-third of the dump truck toys in China and not to ship them back to the United States.

Because of the soaring price of shipping containers and the blockage of the supply network, the transportation cost of transporting this bulky toy to the United States has accounted for 40% of the retail price (US$26). And this does not include the cost of transporting products from US ports to retail stores.

Basic Fun! The CEO of the company calculated that each 40-foot container can hold 1,800 dump truck toys. Calculated on the basis of 20,000 USD per container, the container transportation cost of each toy is 11 USD. This is much higher than the average cost of $1.75 in a typical year. He said he is focusing on loading smaller items-soft, squashable toys into containers, because he wants to maximize profit margins. He estimated that he could fit Disney's surprise eggs worth $150,000 in a container, compared to a container of truck toys worth only $40,000.

The congestion is so severe that some retailers tell toy companies that if the product is shipped after mid-October, they don't want it. Toy industry consultant Marc Rosenberg said this is because it usually takes 4 to 6 weeks for the product to arrive at the US distribution center from leaving the factory in China, and now it takes 12 to 16 weeks.

Some companies even use airplanes to transport toys instead of ships—to ensure delivery before December 25.

According to the market research company NPD Group, sales in the US toy industry increased by nearly 17% last year and 40% in the first half of this year, because parents and children have longer time to stay at home. Although analysts expect strong growth in toy sales in 2021, many toy companies say their sales will decline because they will not be able to complete orders for popular products. The resulting huge costs will also force some toy companies to close.

"We have never encountered this situation before." Basic Fun! The CEO of the company said, "We really have no choice."