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The domino effect…it’s the Friday Blog!

Published on: November 22nd, 2019

It’s not often that the first meaningful email which arrives in my inbox on a Monday morning comes from a major retailer – but this was one of those rare weeks. The retailer in question had just arrived home from a trip to Hong Kong and was keen to understand whether the mood back here in the UK had changed in light of recent events.

If you had asked me a few weeks ago – as numerous people did – whether there was a question mark over the January trip for anyone in the UK toy community, I would have said not. At that stage, while the protests were certainly lively, they differed from other examples of social unrest. In particular, they were neither random nor indiscriminate; hotels were reportedly giving out information sheets with details of the areas that would be affected that day, so visitors could plan to steer clear. Even those who found themselves in the midst of the protests reported that they didn’t personally feel threatened; they could comfortably walk through the crowd unmolested. International visitors were never the target of the protestors’ ire.

Sadly, events appear to have taken a darker turn over the past week, and the mood seems to be changing. It seems that some companies are already reacting to this shift; one major UK grocery account (taps back pocket twice) is apparently not allowed to stay in Hong Kong for insurance reasons, while at least one major global toy company is strongly rumoured to have pulled out of the January trip. Across the pond, US Toy Association president Steve Pasierb posted a LinkedIn update this week which suggested that Disney, Target and Burlington are all unlikely to go in January, and I have since received my first direct email from a US company announcing that it would not be attending. There are rumours of other absentees, but I suspect some may be wide of the mark, so I am nervous about bandying names around until confirmed.

To be fair, none of this comes as a huge surprise: I always believed that it would be the big corporate American operations who would be the first to pull out if the situation escalated. The litigation culture which is so prevalent in the US means that if anything unfortunate happens to one of their staff while they’re out there, they could potentially sue the company for squillions. The question now is whether the trickle becomes a torrent; does the domino effect kick in and cause other international visitors to follow the US’s lead. I do think it is worth remembering that Hong Kong is a truly international gathering and while there are some mightily powerful US visitors, it is by no means a ‘one territory’ party.

Of course, the scenes from the Polytechnic University – literally a stone’s throw (or a molatov cocktail throw) from the showrooms in TST – make uncomfortable viewing. Reports of police firing tear gas just outside the South Seas Centre are no less disturbing. The big hope is that we are witnessing the apex of the violence and that things will have calmed down by the time the toy community arrives in January. I am sure that we will all be watching media reports of the disturbances closely between now and then – having recently slipped into recession, the last thing that Hong Kong needs right now is a repeat of the Sars-era mass boycott by international travellers.

While people have one eye on events on the other side of the world, events in the UK retail channel are perhaps more pressing for the majority of toy people right now. I heard whispers earlier this week that some companies have been experiencing a few credit insurance issues with Very as we head towards 2020. So news this week that fresh funding – in the form of a £75m equity injection- has been secured from its parent company will hopefully help to allay concerns. Rumours persist that the Barclay brothers are looking to sell parts of their business empire, which may or may not include the Very operation. However, for now, credit insurers will hopefully reconsider their decision to remove cover, as Very remains an extremely valuable account for many toy companies.

Meanwhile, the CMA has thrown a curveball into the proposed takeover of eOne by Hasbro, after announcing that it would be launching an investigation into the deal and whether it might result in what it described as a ‘substantial lessening of competition’. After the CMA blocked last year’s takeover of Asda by Sainsbury’s, it would be foolish to dismiss the probe out of hand. However, I do feel that this deal is a rather different scenario; it was no great secret that eOne had been looking to sell up for some considerable while, and I am not sure why the CMA potentially feels that Hasbro would not be a suitable owner, as opposed to any other prospective purchaser. A deadline of 21st January has been set to decide whether or not the CMA will refer the merger for an in-depth Phase 2 investigation – coincidentally the day that the London Toy Fair opens. The trade will be watching developments with interest.

Toy suppliers have been warned to be wary of bogus orders in the run-up to Christmas after Brainstorm uncovered an attempt to obtain goods from them by fraudulent means this week. More details on that scam here: unfortunately, as anyone who has been in the toy industry for a while will know, this often happens at this time of year, and most toy companies will be on the lookout for potentially dodgy activity. However, anyone new to the market might want to familiarise themselves with the modus operandi of these nefarious individuals.

Finally, for those undeterred by recent developments in Hong Kong, a quick reminder to purchase your tickets for the perennially-popular Hong Kong Football event, which will be taking place on 7th January. There will be no need for riot police at the Happy Valley Stadium; the supporters are always a well-behaved bunch, even with an inclusive bar which is open all night. Further details and tickets can be obtained from david.bramford@charactergroup.plc.uk or Sharon.Ford@charactergroup.plc.uk. See you there (providing, of course, there is no further escalation in the situation).

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