Just when you thought it was safe to go back on the water …it’s the Friday Blog!

Published on: 18th March 2022

Covid cases may be on the rise again in the UK, but over the past two years, we have found a way to co-exist with the virus. That truce has often been uneasy, and the government’s economy-first handling of the pandemic may have proved controversial at times, but ultimately, it feels like we are coming out the other side, having managed to strike a reasonable balance between health and the economy most of the time.

Contrast that with what is currently happening in Hong Kong and China – the latter territory has been in the news over the past week, as cases of the Omicron variant have rudely chosen to ignore the Chinese government’s insistence on zero covid and are popping up across China with increasing frequency. Shenzen – a major toy production hub – has been shut down this week, with residents told to work from home. Inevitably, this has had a knock-on effect on the supply chain: not only are factories shut, but key ports are effectively non-operational. Yantian – the world’s fourth largest port – has technically been open, but very little has been going on. ‘No workers’ means no truck drivers and no one to move product out of warehouses. The lights are on, but everyone is home.

The key is what happens next. The initial lockdown will last for seven days, and if everyone is allowed to return to their place of work thereafter, it could just be a temporary blip. But if seven days turns into 14, or 21…. that’s a whole other ball game. Just when you thought it was safe to go back on the water, just as there was a sense that reliability and rates were about to return closer to normal, we have a major potential curveball to deal with. When Yantian was shut last year, it led to greater disruption that the Ever Given blocking the Suez Canal. And the whole city wasn’t shut down then, just the port itself…

A strong sense of deja-vu is creeping in. We have been here before. I just hope this situation doesn’t spiral out of control this time round. A lot of stock arrived too late for the Christmas period last year, and there has been no shortage of promotional activity at retail since Christmas, presumably in an attempt to move a lot of that product through. However, if we end up with further supply chain complications this year, maybe those retailers and suppliers who chose to sit on stock rather than discount it to shift it will be glad they remained patient.

Over in Russia, IP owners have a very different challenge developing. This week, a Russian court ruled that trademarks can be used by Russian businesses without permission or compensation, and that no redress or punishment will be forthcoming via Russian legal channels. In dismissing a case brought by Hasbro over an infringement of Peppa Pig, the judge cited “unfriendly actions of the United States of America and affiliated foreign countries” in his ruling. The ruling has sparked fears that the Russian government may allow other brands and trademarks to be stolen on a wider scale – a prospect that will concern many IP owners, for whom Russia has developed into a substantial market in recent years.

To exacerbate the situation, the Russian government has also issued a decree that appears to give the green light for patented inventions and industrial designs from what it terms “unfriendly countries” to be used without permission or compensation. This list of unfriendly countries includes the UK, the US, the EU, Australia, Ukraine, Japan and 16 other nations. If you think this is just political sabre-rattling and it wouldn’t happen in the real world, bear in mind that Russia also passed a law this week allowing it to seize all 500 foreign owned airplanes in the country, worth $10 billion. So, if they are happy to openly steal planes, I think it is fairly safe to assume that wholesale theft of IP and brands is seen as fair game in the ‘new’ post-meltdown Russia.

And can you imagine what would happen if China decided to get involved on the side of Russia, as has been suggested in some American quarters this week (although that has been strongly denied by China, it has to be said) …? It doesn’t bear thinking about. Although, for what it’s worth, I suspect China is a lot more commercially savvy, and far less willing to open itself up to the level of sanctions and international condemnation that Russia seems prepared to accept.

Among all of this turbulence, there have been a few bright spots at retail: Marks & Spencer has announced that it will be extending its trial with The Entertainer’s Early Learning Centre range – it will now be introducing the range into 10 stores, in addition to offering it on M& and making it available for next day delivery or Click & Collect at over 700 M&S locations. The 10 stores include flagship locations such as Bluewater in Kent and Thurrock Lakeside, and with M&S having 22m customers, it certainly opens the brand up to a huge potential new audience.

Also, I have to hold my hand up and say fair play to John Lewis. I will admit that I was sceptical that the retailer could replace the business lost from closing a chunk of its physical stores, but last year it recorded its highest-ever turnover…from 16 fewer stores. Indeed, online sales accounted for 2/3 of its £4.93b sales. That’s impressive, especially from a retailer which you don’t automatically think of as a major player in the digital space. Of course, there is no way of knowing whether toys fared as well as some other categories, but it does seem that the retailer has managed to turn things around, even if the results showed a pre-tax loss of £26m – although that’s certainly a lot better than last year’s loss of £517m.

Finally, with all the debate around toy fairs, there is one approach I didn’t expect to see – a floating trade show. And yet, here we are. The event in question is being proposed by US indie retail organisation Astra, to take place aboard a cruise liner next February – ostensibly to replace the New York Toy Fair for the specialist channel. Can you imagine if this becomes ‘a thing’? Will next year’s Toymaster show be held on the Isle of Wight Ferry? Will INDX be taking over the Woolwich Ferry? Can 2022 get any more surreal? Based on the last couple of years, I suspect the answer is almost certainly ‘yes’.