The number of challenges facing the toy industry has become so numerous and complex that we have decided to regularly report on the industry’s disruptions rather than treat each as a one-off event. As a result, we are starting a new feature on Global Toy News called “The Disruption Report.”
The Cardboard Shortage
Yes, there is a cardboard shortage. It seems that all of those direct to home deliveries from Amazon, Walmart.com, and other e-commerce providers has resulted in a depletion of cardboard stocks. The challenges started in the Summer as more and more consumers turned to the Internet for purchases. Here is how a Washington Post article put it:
Box demand typically peaks in September, then tapers off through the end of the year as merchandise arrives in stores. But this year, between June and October, box shipments met 34 billion square feet — an industry record — each month. Demand swelled as retailers and shoppers alike adapted to the pandemic….
The shortage appears to have hit the U.K. particularly hard. Here is how U.K. business magazine, BusinessMatters stated the problem in its article: “Small retailers face cardboard shortage as Amazon sparks national shortage:”
A boom in home deliveries has sparked a national cardboard shortage, delaying deliveries of everything from bicycles to wine. Industry experts said Amazon and other e-commerce giants were buying huge amounts of cardboard to meet “unprecedented” demand, leaving small brands battling to meet orders.
Hopefully, this will be a short term problem. We will, never-the-less, keep an eye on it.
The Supply Chain
We keep hearing from industry people that the supply chain is such a mess that container prices are in some cases being quoted in five figures. One major reason for the higher prices is a scarcity of containers and container ships. The reason is that it is is taking over a month to unload containers, and as a result, they are not flowing back to China. As a result, we are going into Chinese New Year with increased demand for toys and other consumer products and fewer containers and container ships on which to ship them. We hear that those who want to guarantee a container and a vessel are forced to pay premium rates.
We are also hearing that getting container ships into a port has gotten to the point that some companies are “port shopping” and looking for opportunities to bring in freight through ports they have never used in the past.
CHINESE NEW YEAR
There seems to be a whipsaw effect taking place in China due to mixed signals on Chinese New Year factory closings. Due to Covid-19, the Chinese government had discouraged workers from returning home for the long holiday. Because of anticipated worker availability, some companies have decided to close later and open earlier than in past years.
However, many workers are going home, and those who are going home are facing quarantines on both ends of the trip. In that scenario, there will be less anticipated worker availability and some manufacturers are looking at closing earlier and opening later.
Those with whom we have spoken are still trying to figure out which scenario, if not both, are going to be carried out.