TVC and Tariff Pricing

[Jeff]

Thought this was interesting (from Yakface Twitter).

Looks like Hasbro is prepping for some pre-order price hikes...  if there is something you've been thinking about buying, maybe now is the time to pre-order (you can always cancel the pre-order later if you change your mind).

[Rob]

I was surprised we didn't see the price hikes today...

I think it's paywalled, but this article was outlining where we're headed with toys, 80% of which are made in China.

Retailers Fear Toy Shortages at Christmas as Tariffs Freeze Supply Chain
Toy makers and stores are freezing holiday orders, predicting shortages and higher prices. Some are consulting bankruptcy lawyers, fearing their firms won’t survive.

President Trump’s China tariffs are threatening Christmas.

Toy makers, children’s shops and specialty retailers are pausing orders for the winter holidays as the import taxes cascade through supply chains. Factories in China produce nearly 80 percent of all toys and 90 percent of Christmas goods sold in America.

The production of toys, Christmas trees and decorations is usually in full swing by now. It takes four to five months to manufacture, package and ship products to the United States.

Mr. Trump’s 145 percent tariffs have caused a drastic markup in costs for American companies. Most of the entrepreneurs that have shared their plans with The New York Times have not yet canceled their orders. They hope that the president will back away from the tariff brinkmanship.

But the alarm in the industry is palpable, with the companies predicting product shortages and higher prices. Some business owners, citing how crucial holiday sales are to their bottom lines, are consulting bankruptcy lawyers.

“We have a frozen supply chain that is putting Christmas at risk,” said Greg Ahearn, chief executive of the Toy Association, a U.S. industry group representing 850 toy manufacturers. “If we don’t start production soon, there’s a high probability of a toy shortage this holiday season.”

For America’s Christmas industry, Chinese manufacturing is unmatched in its production speed and capability. Toy makers overhaul large portions of their product lines every year to adapt to the changing preferences of children. From materials to machinery, China’s factories are one-stop shops for importers.

Kara Dyer, founder of Storytime Toys, a maker of children’s books with playset puzzles, usually places a big holiday order with her Chinese factory in the first two weeks of April to have enough inventory by mid-July. The Christmas holidays account for about two-thirds of her annual revenue.

Ms. Dyer placed a small order of $30,000 worth of products before the latest tariffs, never expecting they would surge to such high levels. That shipment is en route to the United States. When it arrives, she said, she expects to owe $45,000 in tariffs. The shipment will provide the company with enough inventory for a few months, and she said she would probably raise prices at least 20 percent to cover the tariff costs. But she is waiting to make a big holiday purchase.

“I’m going to hold out hope for another two weeks that the tariffs will be removed and I’ll be able to place the order,” she said. “But if not, I will have to put my business on pause. I will definitely not place an order if the tariffs are in effect. It wouldn’t make any sense.”

In a Toy Association survey of 410 toy manufacturers with annual sales of less than $100 million, more than 60 percent said they had canceled orders, and around 50 percent said they would go out of business within weeks or months if the tariffs remained.

At West Side Kids in New York City, the shop’s owner, Jennifer Bergman, 58, is concerned that she may not have any toys to sell at Christmas. And the toys she can get her hands on could cost twice what they did last year, which would crimp her sales during the most important time of the year.

Toy companies are already marking up prices 10 to 20 percent, said Ms. Bergman, whose mother opened the store 43 years ago. She said that she would try to buy as much as she could now, but that the shortages were already starting. She had placed a large order of scooters to arrive for the summer. But the importer rerouted the shipment to Canada because it did not want to pay the tariff. She was told that she would get only a portion of her order.

If the tariffs remain, Christmas will be like “something we’ve never experienced before,” Ms. Bergman said. People will be standing in line to buy things that cost twice or three times as much as before, she said. Her business was already under pressure from competition by Amazon, but she fears that the tariffs will deliver a final blow.

“I don’t think I will be in business for Christmas,” said Ms. Bergman, who added that she was consulting a bankruptcy lawyer.

Nick Mowbray and his brother, Mat, founded Zuru Group in China, making an assortment of plastic dart “blasters,” water balloon accessories and bubble guns that are sold at Walmart and Target. He said retailers were not placing holiday orders. Zuru has cut its marketing budget for the holiday season in half, to $60 million, because it expects to be selling fewer products.

Mr. Mowbray, a native of New Zealand, said everything was in “a holding pattern.” If the tariffs remain at 145 percent, he expects prices for consumers to increase around 50 to 100 percent.

“That will be unaffordable for a lot of families,” he said.

Mr. Trump has in recent days struck a conciliatory tone toward China and the tariffs, fueling some hope among business owners that he may exempt industries that do not pose a national security threat.

Mr. Ahearn from the Toy Association said he was in Washington last week to lobby for a 24-month reprieve, which could give companies time to find ways to make their products in the United States.

But even if Mr. Trump grants importers temporary relief, significant disruptions will occur as companies rush to fulfill orders. Shipping costs are expected to surge, similar to the frenzy during the Covid pandemic, when a shortage of shipping containers led in some cases to a tenfold increase in freight prices.

Christmas is the busiest time of year for Aldik Home, a home goods store in Los Angeles. It generates more than two-thirds of its annual sales in the final three months of the year, selling artificial Christmas trees, wreaths, ornaments, lights and other decorations.

Larry Gold, the store’s owner, said he had worked with a Chinese factory for many years to design Christmas trees. He places the order in January for shipment in June or July. This year, he planned to send seven 40-foot containers from China loaded with $600,000 worth of trees. The current tariff would require him to pay nearly $1 million at once.

“Right now, we’ve asked them to hold up and wait,” Mr. Gold, 72, said.

Last year, the store sold seven-and-a-half-foot trees for about $1,000. Mr. Gold said he would have no choice but to pass on the tariff cost to shoppers, which would put the price of that same tree at more than $2,000. He said that price would in effect “kill the product.”

“I can’t believe anybody in this country who is buying trees from China will pay the 145 percent duty, because they’ll never sell them,” Mr. Gold said.

At this rate, he said, he will not bring in the trees, and his store, which has been open for decades, will have nothing to sell during the most crucial period of the year. He said he would probably be forced to close, costing his 40 employees their jobs.

“There won’t be a Christmas industry here,” Mr. Gold said. “The product all comes from China.”

[Jeff]

Not TVC but posting this for comparison on how other companies are handling things -

Funko:
https://funko.com/funko-blog-home/committed-to-delivering-for-fans-even-in-a-changing-world.html

Details are light but just confirmation that price hikes are coming for Funko products.  They aren't blaming just the tariffs, but a whole pile of things - probably so they can keep the price hikes in place even if the tariffs go away.

[Rob]

That feels light on actual information.  It just says… prices are going up but we’re going to give you better sculpts and prettier packaging?

Ok.

[Jeff]

Mattel announced that they were revising some forecasts, planning for price hikes, and planning to move some manufacturing out of China because of the tariffs.  Then this happened...

Trump threatens toymaker Mattel with 100% tariffs
Steve Kopack

After toymaker Mattel said it would move some production from China to India to dodge 145% tariffs on China, Trump said he could hit the company with 100% tariffs.

Referring to the planned move that Mattel CEO Ynon Kreiz announced, Trump said, "I've heard them say ... we're gonna try going somewhere else. That's OK. We'll put 100% tariff on his toys."

"And he won't sell toys in the United States, that's their biggest market," Trump added.

Shares of Mattel briefly took a sharp drop on Trump's comments, and the stock remains lower by around 2%.

 

[Ryan]

I've had more than Kenough of these tariffs.

[Rob]

Me too, and the actual shortages and price shocks haven’t even hit yet.  It’s likely to be very very bad.

[Nicklab]

One mom & pop mini-chain near me is already trying to take advantage of the new climate.  They jacked up their TVC basic figure prices to $21.99 - and this was on OLD stock, like the CW Barriss Offee, Vel Sartha, Greef Karga and others.

Meanwhile I'm plugging more gaps.  SMH, this is not looking good.

[McMetal]

Why not cut out the middle man and just slap a tariff on the CEO? (I’m joking but also 100% sure that idea was spitballed) 🤦‍♂️

[Rob]

I’d expected to wake up this morning to Pulse preorders being available again at new prices.  Now I’m wondering if everyone is in a wait and see mode since the US and China are both saying they made some progress over the weekend at resolving at least some of this…

[Nicklab]

The news this morning is that talks between the U.S. and China in Switzerland have the two countries agreeing to temporarily slash tariffs.  The U.S. tariff on goods from China will be cut to 30% from 145%.  The Secretary of the Treasury said in an interview this morning that he expects there to be a longer term agreement negotiated in the next few weeks.

[Dave]

The tricky thing is that these are "temporary".  It takes a month+ to ship (pack, load, cross the Pacific, unload) something from China and clear customs in the US.  If there isn't clarity on how long the 30% tariff is in place it'll still be tough for companies to pull the trigger on importing things.

I know bigger companies like Hasbro *might* have import/export holding companies in China where items could technically clear customs before they ship, but I have no idea if Hasbro does this or if their stuff clears customs at the final destination.

Let's hope Hasbro has a bunch of stuff they can clear quickly and keep prices reasonable. 

[Rob]

I wonder what happened to moving-manufacturing-back-to-the-US... but this is for the best if it keeps things stable.  People can incentivize US manufacturing with more carrots and fewer sticks.

[Dave]

I wonder what happened to moving-manufacturing-back-to-the-US... but this is for the best if it keeps things stable.  People can incentivize US manufacturing with more carrots and fewer sticks.

Have plastic toys ever been made in the US, even in the "golden age of US manufacturing"  My 1978 Star Wars figures say Hong Kong on them...

[Nicklab]

The current tariff rollback is for 90 days.  The treasury secretary said that a more permanent agreement was currently being negotiated between the U.S. and the Chinese.

As for Hasbro or Kenner manufacturing in the U.S.?  There's a pretty well known photo of some lady assembling a Millennium Falcon back in the Kenner days, and it looks like it's a domestic factory.  But the commentary that I've seen linked to that photo also indicate that a lot of the parts were made in Hong Kong, with final assembly here in the U.S.  I can imagine the reason was it was less expensive to ship the parts from HK, rather than do final assembly and packaging there.  The final product would probably occupy far more space in shipping containers compared to the parts.