Cash from chaos…it’s the Friday Blog!

Published on: 22nd October 2021

It was great to see so many of the great and good of the toy community come together for this week’s BTHA Industry Day. Continuing the theme from every post-pandemic industry gathering I have attended thus far, everyone seemed delighted to be out and about, mingling with their peers and colleagues once more.

It was good that so many managed to carve time out of their busy schedules, during not just a busy part of the year, but also a period when curveballs are being tossed left, right and centre with alarming frequency. Being away from the desk right now means risking something big blowing up and you not being there to address it. Not that anyone was discussing confidential or commercially sensitive information with competitors, but with the whole toy community facing similar challenges, it can sometimes be reassuring to be amongst people who are exactly in the same boat as you.

As ever, the BTHA had gathered a line-up of fascinating speakers for the attendees’ listening pleasure: broadcasting legend Sir Trevor McDonald was as compelling as you might have expected. I was particularly intrigued by his admission that he ‘drew the line’ at interviewing former President Trump, having been happy to previously sit down with the likes of Colonel Gadhafi and Saddam Hussein. I also appreciated his tales of the complexities of setting up meetings with the aforementioned ‘leaders’: I feel his pain, having experienced similar labyrinthine process to secure interviews with some senior licensing executives in the past. I’ve also become accustomed to PR people hovering in the corner, but at least they haven’t taken to toting Kalashnikovs (yet…).

The first presenter, KPMG’s Don Williams, had a bit more to say that is relevant to the Blog’s audience. It is important to caveat some of his observations – the Big 4 accounting firms have a vested interest in promoting the theory that the business environment is in a state of perpetual turmoil and upheaval. They literally make cash from chaos – no-one tends to engage their services if business is just ticking along nicely.

However, I felt he made some very valid observations that are worth sharing for those who weren’t present. First up, Don predicted rising inflation and a subsequent increase in interest rates next year – and I suspect few would disagree with that prognosis. Along with the impending increases in taxes and national insurance, plus rising fuel, gas and electricity prices, this all points to the likelihood of a fall in disposable income for many consumers. All consumer goods markets have benefited from many customers having more disposable income over the past 18 months, but unfortunately the pendulum looks poised to swing the other way next year.

Don also pointed out that general retail spending would not return to pre-Covid levels until ’23, which shows just how remarkable the performance of the toy market has been over the past two years – we are way ahead of the general retail curve. However, the reduction in disposable income will herald some changes: according to Don, that is likely to include an increase in insolvencies (which in traditional Big 4 fashion he lauds as a positive thing for business as a whole, presenting opportunities for other companies to capitalize on), along with some big decisions for suppliers and retailers to take when it comes to pricing. Good can come of it – I loved his description of large retailers weaning themselves off the ‘drug’ of using discounts to drive volume. I was also intrigued by the conundrum of whether ‘just in time’ should be replaced by ‘just in case’, focusing less on how cheaply something can be manufactured and more on the optimal cost of putting a product in the hands of the consumer.

I appreciate that retail pricing is a highly complex and nuanced conversation, especially when you factor in the rise in online sales, with the inevitable challenges faced by brick-and-mortar retailers in competing on a far-from-level playing field. Every supplier and retailer is currently grappling with the thorny question of how far to increase prices and at what level a price increase starts to negatively impact rate of sale. But with supply chain issues likely to continue well into next year – both from a pricing and capacity perspective – it’s clearly going to be a source of lively debate over Toy Fair Season.

On the subject of supply chain issues, the shipping industry – another group of people gleefully making cash from chaos right now – appears to have turned on itself this week. Shipping owner Maersk is apparently considering cutting out freight forwarders and dealing directly with larger shippers. Allegedly, Maersk is unhappy that some forwarders have been taking contract rates – around $4,000/feu from Asia to Europe – and reselling the slots to customers for $20,000/feu. One industry source was quoted as saying: “That’s $16,000 Maersk is losing, so the line is looking to punish the forwarders.” Essentially, it seems that suppliers and retailers are now in the middle of a fierce ‘who is the greediest’ competition – I just hope it doesn’t get too ugly. I read a story a few weeks ago about the existence of scalpers in the shipping market – but it didn’t occur to me that legitimate freight forwarders were the ones being accused of doing the scalping.

I am sad to report that industry stalwart Tony Strodder passed away this week. A hugely popular toy community figure of the 80s and 90s, Tony worked closely with David Lipman for many years, before he went on to run his own successful toy business. He also used to organise the legendary toy trade cricket matches and was universally known as a thoroughly decent bloke. A lifelong Leeds fan and proud Yorkshireman, Tony had been battling a brain tumour for some while, but stayed in touch with many from the toy trade via social media. I am sure I can speak for his many industry friends and colleagues when I say his was a life well-lived, and he will be sorely missed.

Finally, a heads-up for those planning their ’22 diaries – after much discussion, Distoy has settled on its dates for next year, which will be 17th-20th May. Identifying clear dates proved to be tricky, with the Queen’s platinum jubilee celebrations and the Las Vegas Licensing Expo both falling on weeks which had potentially been earmarked by organizer David Potter. The chosen dates do clash with the Toymaster Show in Harrogate, although there is relatively minimal crossover between the two visitor profiles. It’s going to be a heck of a busy week (and month) for us though! Mind you, what’s new…