For toy manufacturers selling in the world’s largest consumer market, 2010 is all about mobility and affordability. It’s part of the latest trend in an industry adjusting quickly to the lessons learned from last year’s recession, while taking a cue from the White House about what might be this year’s hot sellers.
And, having weathered last year’s recession better than many consumer products industries, manufacturers aren’t only ready to play the game, they’re prepared to win it.
|It won’t be easy, though, considering unemployment is hovering around 10 percent and consumer sentiment, while certainly improved from 2009’s moribund state, is still fragile despite indications of a return to consumers’ free-spending ways of earlier this decade.
Still, February’s annual Toy Fair 2010 in New York featured a number of modestly priced toys expected to sell well this year, so shippers believe a double-digit increase in imports is possible. Members of the Toy Shippers Association, for example, expect volume to increase 12 to 14 percent. “They had depleted their inventories and they are replenishing their stocks,” said Dave Akers, the group’s managing director.
U.S. toy sales of $21.5 billion were down less than 1 percent from 2008, according to NPD Group, a Port Washington, N.Y.-based market research organization. And globally, toy sales actually increased 4 percent. NPD expects global sales to increase up to 4.5 percent this year.
Several trends emerged at this year’s toy fair, said Stacy Leistner, vice president of strategic communications at the Toy Industry Association. Manufacturers, aware of the recession’s toll on consumers, will concentrate on affordable products — many of the toys on exhibit in New York were priced lower than $25.
Manufacturers this year also will emphasize products that are transportable, such as card games that children can play in the car while on a trip. Educational games, such as those that teach children about environmental sustainability, likewise will be popular.
And, in line with First Lady Michelle Obama’s campaign to reduce childhood obesity, toys and games that encourage movement will get a big marketing push.
Nations in the Asia-Pacific region produce about 85 percent of the world’s toys, and the largest toy manufacturers — including Mattel and Hasbro, two fixtures on the JOC’s ranking of Top 100 Importers — source much of their product in Asia. Small and midsize companies account for 40 percent of toy sales in the U.S, according to Leistner.
With imports expected to be strong, the big question heading into this summer’s peak shipping season will be availability of space on container ships in the trans-Pacific. Toy shippers aren’t taking any chances, planning early to secure space. “We’re in the same position as other importers,” said Akers, referring to the capacity crunch in the Pacific.
Container lines last year slashed capacity about 10 percent to maintain tenuous rate increases they implemented late in the year. Rather than falling in the traditionally slack winter months, imports remained strong into 2010, and importers engaged in a bidding war to secure space as the market tightened.
Industry analysts estimate importers, which just completed annual service contract talks with carriers, will pay $2,000 to $2,100 per 40-foot container from Asia to the West Coast this year, and $3,400 or higher per FEU on all-water services to East Coast ports. That’s a far cry from the sub-$1,000 Asia-West Coast rates common at the depth of last year’s downturn.
While carriers needed the rate hikes to return to profitability, Akers said, traffic managers are finding the increases to be a difficult sell to their management at a time when all companies are attempting to control costs.
It is critical, then, that carriers fulfill their service obligations by providing sufficient vessel capacity, Akers said. Carriers appear to be doing just that. With contract negotiations drawing to a close this month, a number of carriers said they would add vessel strings or upgrade services.
The toy industry is no longer seasonal, with most of the imports shipped for the holiday season. Manufacturers have expanded into pet products and promotional items that ship year-round. This allows toy importers to guarantee a steady stream of cargo to carriers throughout the year.
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