Worrying reports of cancelled orders and changed payments terms have emerged which are having a serious impact on Chinese toy manufacturers, writes the Ethical Toy Program’s CEO & president.
COVID-19 is a crisis for our industry and indeed most other industries. The uncertainty of how long this situation will last, and how it may change our industry as a result, are worries everyone I speak with shares with me.
One of the biggest concerns right now is how can we ensure that our manufacturers survive and are there to respond to consumer demand when it comes.
I am pleased that there is positive news from some of our members right now. As more families stay at home, board games, building sets, arts & crafts and other similar products are in high demand. However, there are many in our industry who are seeing no demand at all.
When speaking with manufacturers, the words I hear most often are trust and hope. Many have no certainty about their future, and they understand this is the same for some of their buyers. Everyone voices empathy, sympathy and understanding of the others’ situation, but action is also essential. We must realise that there will be negative consequences if we do not work together at this time.
We have spoken with our manufacturer members, and over 90% report significant changes in their operations and business relationships. These include customers cutting orders significantly or totally, sometimes even when they are in transit, asking for extended payment terms, requests to hold produced goods for longer without payment, increased transit costs and restrictions on shipping.
The toy industry is resilient but COVID-19 is presenting us with challenges on a scale that we have no experience of managing. I’d encourage you to discuss the impact to your business with your suppliers and your customers and seek ways to work together that support each other. The industry is innovative and creative, and now is a time to utilise the skills of all parts of the industry to find solutions that provide confidence in the future.
I would urge those of you who rely on external manufacturers to think now about how you can help them. Some ideas to consider:
- Take the stock already produced and ready to ship
- Place even minimal orders where possible
- Stick to your pre-existing payment terms
- If you have to change your commercial agreements inform your suppliers and ask them how this will impact their business, work together to find ways to minimise any negative impact
- Consider the impact in the long term from any short-medium term decisions you may make – manufacturer capacity and capability will be critical enablers of the global recovery
- Think about how the workers at the factory will be affected, what can you do to reduce any negative impacts?
- Continue to follow your responsible purchasing practices and support your suppliers as much as possible in this crisis. Good communication with suppliers and customers is essential
No-one can offer certainty on when we will return to normal business, but it will happen and when it does the efforts taken now to support each other will be rewarded.
Lastly, I would remind you that there are nearly 1m workers employed at IETP Certified factories. These are the people who make the toys enjoyed all around the world. Please consider these people as you do your own colleagues. Through their efforts the industry has enjoyed much success – let us not forget them now.