After a week with very few fresh developments in the tariff wars, the repercussions are starting to be felt across the toy community. Obviously many US suppliers and retailers are caught firmly in the crosshairs of Trump’s policy – and at least one person suggested to me this week that some of those companies are “freaking out”, with the ongoing saga being described as “Covid 2” in certain circles. Some have seen share prices tumbling, although of course that would be reversed if the tariff dispute can be resolved swiftly.
The toy market started the year well – +7% across January & February in the 12 countries tracked by Circana, largely driven by higher income households. Indeed, there is evidence that some US consumers are buying larger items now to avoid tariff charges. But that will only last for so long.
There are reports that some companies have temporarily halted production and shipping to the US. There have also been suggestions that large US retailers have suspended FOB shipments – at least if the order is with a US supplier, the retailer can negotiate or insist the supplier picks up the tab. You can’t do that with FOB orders.
What about products already on the water? I did read somewhere that if the product was physically shipped before the tariffs were announced, there would be no 145% surcharge when it landed – although some LinkedIn posts from toy companies this week seem to contradict that theory, so as they say, “citation needed.”
For all of these reasons, while the epicentre of the problem is in the US, the rest of the world is certainly not immune to the aftershocks. If a large volume of product isn’t going to the US, where does it go? Will Europe, the Middle East, South America, even Australia suddenly find they have opportunities to pick up stock that would normally be destined for the US? Maybe – however, as I learned this week, total toy sales in the leading 7 EU countries are the equivalent of the toy turnover of Walmart and Target combined. Can the rest of the world really absorb that level of stock?
Hence this week’s Blog title – Challenges and Opportunities. For some toy companies and retailers (especially in the US), this will all be a major headache. For others, there are undoubtedly opportunities for the more nimble, reactive and cash-rich toy suppliers, distributors and retailers. I was going to go with ‘Don’t Panic Mr Mainwaring’, but as that is a very British reference and the problems are being more acutely felt 3,000 miles away, it didn’t quite work (although I stand by the sentiment).
We continue to hope that the amazing efforts of the Toy Association and leading players in the US toy market to persuade the administration to exempt toys from the tariff nightmare are successful.
Read the rest here.
