Gifts / Sports & Toys

In early October, this was just the beginning of the so-called "peak" in the retail industry. But the industry is already in various forms of panic, which usually does not appear until a few weeks before Christmas. The boss of the global toy giant MGA said that he has never seen such a bad situation in 43 years...

At the beginning of this year, people hoped that most of the bottlenecks that plagued the global supply chain in 2020 will now be cleared. In reality, however, it will only get worse, and there is growing evidence that the holidays will be in danger.

Throughout Europe, retailers such as the clothing chain H&M were unable to meet demand due to delays in delivery. In the United States, Nike lowered its sales forecast after Covid-19 triggered the closure of its factories in Vietnam and interrupted production for several months. Bed Bath&Beyond's stock plummeted amidst the transportation woes, and CEO Mark Triton warned that the disruption will continue into next year. "There is pressure across the board, and you will hear this from other people."

The Covid-19 outbreak brought the port terminal to a standstill. There are still not enough freight containers, causing prices to soar 10 times compared to a year ago. The shortage of labor has caused truck transportation to stall and pushed US job vacancies to record highs. Before UPS, Wal-Mart and other companies start hiring hundreds of thousands of seasonal workers to meet the peak.

"I have been doing this for 43 years and I have never seen such a bad thing," said Isaac Larian, founder and CEO of MGA Entertainment, one of the world's largest toy manufacturers. . "All possible problems will happen at the same time."

According to Jay Foreman, CEO of American toy company Basic Fun, the cost of transporting a 12-meter container from China to a port on the west coast of the United States a year ago was US$2,500 to US$3,000, but it has now risen to 10. Times, more than 20,000 U.S. dollars, it's crazy.

It is now the goods that are pouring into the United States for Christmas stocking, which will be a disappointing holiday-although analysts are worried that profit margins may be hit, investors seem to be dismissive of it. The Standard & Poor's Retail Select Industry Index for 108 US companies, including Amazon, Macy's and Best Buy, has risen about 40% this year, and has almost doubled since the beginning of 2020. Its total market capitalization is US$3.3 trillion, which is only a little lower than a record and higher than earlier this year.

This cheer clashed with what happened behind the scenes. Steve Azarbad, co-founder and chief investment officer of hedge fund Maglan Capital, said retailers have turned to buying goods made a few years ago to ensure they have at least some inventory. The company invests in retailers and troubled companies. Under normal circumstances, these items would be cleared in clearance stores or foreign markets, but not now.

"It's really hard for retailers to fill up their shelves," Azabad said. "I have talked to many suppliers and they told me'I can't complete all the orders I received.'"

On the supplier side, Jay Foreman of Basic Fun has been manufacturing toys with manufacturing partners in China for more than 30 years. He has never seen anything like this. Basic Fun is expected to usher in its best year ever-sales may reach 170 million US dollars. There is no shortage of demand. As the epidemic continues, parents are buying gifts one after another. But due to the lack of freight containers, the company's Lite Brites and Tinker Toys have thousands of them waiting to be shipped. In a factory in Shenzhen alone, about $8 million worth of finished products can fill 140 containers.

"I have Tonka trucks in the south and Care Bears in the north," Jay Foreman, the company's chief executive, said of China's logistics issues. "Last year's sales volume must not be reached. The problem is that we don't know if we can ship in the last four months of this year. The supply chain is a disaster, and it will only get worse."

MGA’s Larian is willing to pay more than US$20,000 for each shipping container — up from about US$2,000 a year ago — and he runs a private company that is not accountable to shareholders. He had trouble picking up the cargo from the cargo ship in the port of Los Angeles. MGA recently has more than 600 containers filled with surprise dolls like its best-selling L.O.L., waiting to be unloaded for more than six weeks.

"There will be a shortage of toys this fall," Larian said. "For retailers, this will be a difficult year."

When the epidemic hit the global economy in early 2020, factories slowed production or closed. It turns out that it is much harder to start again. Lee Klaskow said that the supply chain has been stifled by numerous incidents such as the blockage of the Suez Canal, as well as market dynamics such as labor shortages and soaring transportation costs. It feels like one after another "black swan" incident. Bloomberg Information Logistics Analysis division.

"The supply chain will not have a chance to return to normal in the short term," Krasco said.

One of the better situations in the fourth quarter was that large retailers significantly increased their logistics spending — including using more expensive air freight or chartering entire cargo ships — but still maintaining their sales targets. This may mean that their profit margins will be hit, but it may also lead to smaller competitors who cannot match their financial resources to seize market share.

Transporting large items and low-value goods does not make much economic sense now. The iPhone is small in size and expensive, making it an ideal commodity for transportation or air transportation due to soaring transportation costs. But the same situation cannot be used for low-end furniture or large stuffed animals. At Basic Fun in Boca Raton, Florida, Foreman exported more Mash’em because small, soft collectibles worth $135,000 could fit in a container. He moved far fewer Tonka trucks because they were bulky and took up more space, limiting the dollar value in a container to 36,000 dollars.

At Whom Home in Los Angeles, CEO Jon Bass stated that he had to remove about 70% of the company's products-including wall decorations and furniture-from the websites of retail partners such as Wal-Mart and Wayfair. Thousands of products because the company cannot purchase them. Or in some cases, soaring material and transportation costs have resulted in commodity prices higher than the prices retailers are willing to pay.

Another effort is to allow Americans to shop early during the holidays. Efforts to create a new shopping event in early October, which will include retailers such as Guess? Host live events on their website. However, this seems to be a daunting task, considering that e-commerce has trained the masses to complete purchases in a few days like a clockwork. Retailers traditionally also save some large-scale promotional activities in the week before Christmas to promote delayed consumption.

The day before yesterday, the Biden government was intervening to solve the delay and congestion of the entire transportation supply chain. It will be announced that the ports of Los Angeles and Long Beach will start operating 7 days & 24 hours without holidays. Transporting cargo during off-peak hours will help alleviate the bottleneck in the port;

According to the White House, in the Port of Los Angeles, cargo transportation at night is 25% faster than during the day. The goal is to reduce congestion on highways, railways and warehouses during the day. Wal-Mart, the largest retailer in the United States, has promised to substantially increase its nighttime business hours and expects to increase production by 50% in the next few weeks. Target currently has about 50% of its containers transported at night, and promises to increase this number by 10% in the next 90 days to help ease port congestion.