With shipping costs skyrocketing, shipping containers scarce, and U.S. ports clogged with backed-up shipping traffic, everyone is feeling the shipping squeeze right now. Christmas is coming fast, and toymakers are having to make difficult decisions.
The iconic Tonka Mighty Dump Truck
"We've never left product behind in this way," says Basic Fun CEO Jay Foreman. "We really had no choice."
Faced with the price hikes, toymakers have had to look for new alternatives. Smaller, soft toys are being prioritized over bulky items. Some manufacturers have switched from boats to planes to get their toys overseas; others have looked for new ports where their ships can unload more quickly. Others, like Basic Fun, have left their shipments in China to wait for prices to recede.
Like all other manufacturers, toymakers were already struggling due to the pandemic when the supply issues started. Factories were shuttered due to lockdowns and staffing shortages; production was slashed or halted. Then, when demand began to pick back up, manufacturers were swamped with orders.
Last year, toymakers saw a 17% increase in sales, and sales increased by another 40% in the first half of 2021. That increase in sales would be a good thing, but toymakers say it's likely to be reduced because they simply can't fulfill orders. Some companies are expected to be run out of business.
The cost of shipping containers is six times higher than this point last year, and boats are waiting in lines to unload at every major U.S. port, lengthening shipping times.
It's true that virtually all manufacturers are facing shortages right now, but the toy industry, worth nearly $33 billion in the U.S., is in a particularly vulnerable spot thanks to toymakers' dependence on holiday sales. On average, toymakers make 70% of their annual sales in the fourth quarter. The Toy Association estimates that 85% of those toys are made in China before being shipped to the U.S.
It might seem too early to get worried about Christmas shopping, but the truth is that it may actually be late. Shipping times have increased from an average of five weeks to an average of 14 weeks, according to toy consultant Marc Rosenberg.
In some markets, manufacturers have raised prices in an effort to offset increased costs, but toy executives say that they can't raise prices enough to completely cover the additional cost. They say they can't raise prices by any more than 10% or sales could suffer.
If you're worried about not being able to find a specific toy this Christmas, your best option is likely to be bigger stores like Walmart and Target which are more likely to get their orders filled.
Smaller stores, however, may be left with empty shelves.
