ICYMI: Here comes the rain again …it’s the Friday Blog!

Published on: 24th May 2021

First up this week, a polite request to all the Art & Craft, Puzzle and Games suppliers – could you please stop doing your rain dances? I appreciate that you have some very big numbers to anniversary from last year, but I think we’re all fed up with the incessant downpours now. As it looks like many of us won’t be heading abroad for either holiday or business this year, it would be so much easier to come to terms with if the weather was being a little kinder. Last year, Lockdown 1 was so made so much more palatable by the beautiful weather – but this being the UK, I guess that hoping to get that lucky two years in a row was always going to be a long shot.

On the subject of international business travel, there was some potentially good news for the toy community this week, as the Bavarian region of Germany – home to the Nuremberg Toy Fair – has provisionally given the green light for trade shows to run again from September. There are inevitably caveats regarding the infection rate and vaccination process continuing to go in the right direction, but it’s an encouraging first step. Of course, we have been here before, so I doubt anyone is getting too carried away yet. Indeed, the fact that IFA Berlin – a leading consumer electronics trade show – has decided to cancel its event planned for September shows that exhibitor and visitor sentiment isn’t quite there yet. Hopefully that will change by the start of next year.

However, a key component of the announcement was the fact that business travellers will be exempt from local quarantine restrictions. The idea of having to spend anything between 10-21 days in a hotel room before setting foot into the public realm is obviously one of the major barriers to visiting trade shows and events across the globe. And with the tightly-packed trade show schedule in January – when the Hong Kong, London, Nuremberg and New York Toy Fairs all take place within a six-week period – writing off two weeks stuck in a hotel room makes an international trip a non-starter for so many. With over seven months to go before Toy Fair Season ’22 starts, there are no doubt many twists and turns ahead – but this is certainly positive news for those who are looking forward to the return of trade events.

Before then, we have the little matter of the second half of the year to attend to – Q3 and especially Q4 is where the toy trade really wins or loses. 2021 has got off to a very positive start, so hopefully the business end of the year will continue in a similar vein. I have little doubt that demand for toys will remain strong, but it is going to be interesting to see what happens in terms of pricing in the coming months.

We’ve written extensively about container shortages, shipping capacity issues and the scarcity of computer chips in recent weeks – all of these factors will have a significant impact on suppliers’ profit margins. To be fair, there is rarely a year when nothing happens to affect pre-determined pricing models as the year unfolds – but this year, it really does feel like a perfect storm is brewing. In addition to the challenges we’ve already covered, you can also add the strengthening of the Chinese currency (Renminbi) and a big surge in raw material prices. Currency fluctuations are way beyond anyone’s control (except perhaps the Chinese government…sorry, too political?), but the increase in raw materials is the real killer. Oil prices have recovered sharply since last year’s plummeting rates, sending the cost of plastic through the roof, while the price of paper & cardboard and metal have also shot up.

None of this is a big secret – most large global retailers have their own direct import programmes, so they know the challenges that suppliers are facing. Has it made them more sanguine about accepting price increases? I’m hearing conflicting reports: some say retailers appreciate that price rises are inevitable, while others say retailers are pushing back and refusing to accept them.

I suspect that some retailers are more accommodating than others, while equally they may push back a little harder on some suppliers than others. Conversely, perhaps suppliers adopt a tougher line with certain retailers. It’s all a bit ‘law of the jungle’, and there are hierarchies and pecking orders on both sides – but at least if there is an ongoing dialogue and negotiations are approached in the right spirit by both parties, a solution can hopefully be found which works for both parties.

But what constitutes ‘the right spirit’? For example, I heard this week of one very large online retailer (I doubt you would be shocked to find out which one I’m referring to) which replied to a supplier two months after price rises had been suggested, refusing every single one. A textbook case of ‘computer says no’, it exemplifies the challenges which suppliers constantly face with this account: how can you explain the rationale behind such a difficult decision, or even have a conversation to explore potential compromises, when no-one is listening?

Whether or not a person is actively involved in the dialogue in question is open to debate, but the net result is abundantly clear: “We don’t care what issues your business is facing, or whether there is a good reason for you to do this… the answer is still no.” The business equivalent of sticking your fingers in your ears and saying “La, la, la…I can’t hear you” over and over until someone gives up and walks away. My personal feeling is that this isn’t the right way to conduct a negotiation – it is just about as far removed from the concept of ‘partnership’ as you can get. Perhaps I should count myself fortunate that the vast majority of our customers are fundamentally decent, understand the value of a good working relationship…and are human.

It has emerged that Amazon is being investigated by the German anti-trust watchdog over whether it has exploited its market dominance. I wish the watchdog all the best with that process – if supplier’s experience is anything to go by, Amazon will just ignore the emails for several months, then send a reply saying ‘no’. I doubt even AC12 could get them to talk…