I have mentioned in several pieces recently that the fact it’s an election year in both the UK and US could have far-reaching implications for the toy community. The most obvious area where this could manifest itself is in the economic arena. Typically, an incumbent government holds back tax giveaways in the years heading up to an election, so it can unleash the maximum benefit just as people are about to cast their votes. You could call this deeply cynical and manipulative, but it’s a tactic that isn’t going away – especially when a government is as unpopular as the current UK one, it’s one of the few weapons in its armoury.
One thing is for certain: alleviating the pressure on consumer budgets will be welcomed by all suppliers and retailers right now, even if it’s only by small margins. It’s not been a bad start to the year by any means, but there are a lot of special offers and discounts flying around to tempt consumers. Whether these are driven by retailers or suppliers is unclear, but pricing remains a thorny subject with many of the people I have been speaking to. It’s not just mainstream toy ranges that are affected either: many toy stores have benefitted from the growth of World Book Day in recent years, and I saw some very aggressive promotions from the likes of Tesco and Matalan on their dress-up ranges this week, so the ‘disease’ of discounting ahead of a peak sales period is obviously catching.
Anyway, I digress – it’s not just fiscal policy that comes into play in an election year. Candidates will put forward proposals that they see as vote winners, which may have a profound effect on businesses. We saw it with the UK and Brexit: it has been nearly eight years and it’s still an unholy mess that businesses are having to deal with on an ongoing basis (as we found ourselves when we sent a bulk delivery of magazines to Nuremberg this year…). But the sad truth is that neither UK political party dares to speak the unspeakable for fear of prompting a backlash and losing votes.
However, our Brexit challenges could pale into insignificance compared to what might happen in the US this year. Former president Donald Trump is attempting to return to the White House, and one of his more eye-watering policies is a promise to impose tariffs of more than 60% on Chinese goods. I can only imagine what is going through the minds of US toy companies and the US Toy Association right now, regardless of their political persuasion.
Trump is positioning this as a patriotic measure aimed at “making America great again” with the unspoken subtext of punishing China in the process. On the face of it, that might appeal to his core voter base. In practice, it would of course be a spectacular own goal, inflicting damage on the American people by pushing up the prices of just about every consumer product (although he’s hardly going to come out and call it what it is – a “60% patriotism tax”).
The knock-on effect could be huge. Toy companies would have to frantically scramble to reshore production, or at least move it to new countries – although that would have its own challenges. And to make matters worse, Trump is suggesting a blanket 10% tariff on all imports – so nowhere across the world is safe from tariffs apart from domestic US production (I bet those few US toy companies with a domestic manufacturing base are practically salivating at the thought…).
The likely upshot would be that US toy prices would soar in the short term, and that in turn could heavily impact sales volumes. Chinese factories would either find themselves with massive over-capacity, or with not enough orders to stay operational. And historically, if the US toy market catches a cold, the whole world ends up getting it too.
Of course, there is no guarantee that Trump will win – although reports increasingly suggest it is at very least plausible (which, incidentally, to the rest of the world seems beyond insane). And even if he does win, maybe this is just bluster aimed at winning votes of people who naively think this would benefit them. Perhaps it is simply a threat or a negotiating tactic with China and will never be enacted – very much Trump’s modus operandi. Nevertheless, another trade war between the US and China really isn’t something that anyone across the globe should be relishing. We reported earlier this week that Lego will begin work on its new US manufacturing site in Virginia later this year, with an expectation of being fully operational in 2027. There may be a few other toy companies running feasibility studies to see if they could follow suit if Trump really does do the unthinkable and win (heaven forbid).
Back here in the UK, I was sad to report that Barry Harding passed away recently. Barry had a long and successful sales career in the toy market, making many friends along the way – as the warm comments under my LinkedIn post attest. He was a consummate professional, always a pleasure to speak to – although he retired in 2018, I gather he kept in touch with many people from the toy community, and I am sure many are planning to attend his funeral. Our condolences to his family and all those who knew him.
It’s only five weeks until Easter, so we should get a decent gauge by then of how the early part of the year is shaping up. In the meantime, the UK toy community is waiting for the first wave of the new Entertainer toy sections in Tesco to open, to get a sense of how they will differ from previous Tesco toy aisles. And we’re all waiting for the election to be called to see what changes that may bring. I feel like a character in a Samuel Beckett play…just a bit more cheerful and (cautiously) optimistic that this year is going to turn out fine, as long as the voting public in both the UK & US does the right thing.
