18 March 2020
New York Toy Fair Proves Last Hurrah for Sector in Shadow of Covid-19
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Overseas attendance actually appeared to rise at the recent New York Toy Fair with many attendees and exhibitors seemingly sensing the show could well be the last opportunity for the industry to assemble for a very long time indeed.
The 117th New York Toy Fair saw members of the toy community from 100 countries gather for this annual event. As ever, the show set out to showcase the latest developments from the US and global toy industries and, this year, extended across an area equivalent to eight American football fields with more than 100,000 toys and games on display.
Over the years, the event has evolved from a series of clandestine business meetings in New York City's iconic Toy Buildings – where then, as is still the case with the event's Hong Kong counterpart, many companies occupied private showrooms – to a fully-fledged trade show. Despite this greater transparency, confidentiality remains a top priority for many exhibitors, with the number of closed stands in New York far higher than at any comparable event. At the same time, an over-proliferation of Non-Disclosure Agreements (NDAs) has made reporting on new lines the proverbial minefield.
Valued at US$27 billion, the US toy market remains the largest in the world, although some figures have indicated it may be overtaken by China within a few years. Whether that remains the case in the post-coronavirus world, of course, remains to be seen.
Confidentiality aside, the New York Toy Fair remains an outlier in a number of other ways compared with the various events in the sector. This year's event, for instance, took place seven long weeks after the Toy Fair Season kicked off in Hong Kong. This, though, was something of an anomaly and next year will see it contract once more, with the New York show taking place a week earlier.
The fair also runs over a full weekend, an unusual configuration compared with the majority of trade events. Indeed, in the toy sector, only Nuremberg includes both a Saturday and Sunday and that seems to be predominantly in order to cater to its domestic market.
The event is also something of a one-off in that – arguably – retail is not the dominant element. Of at least equal importance is the sizable number of media representatives and analysts in attendance, both of which are seen as integral to the success (or otherwise) of major US toy companies.
In total, there were almost 1,000 media attendees at this year's event, including representatives of ABC News, CNBC, CBS News, CNN, Fox News, The Today Show, Good Morning America, The Ellen DeGeneres Show, Shark Tank, Newsweek, The Wall Street Journal, The New York Times and Forbes.com. Accordingly, on the opening morning, the queue for press registration was almost as long as the queue for general attendees, something very few other trade shows could lay claim to.
Even while accepting it is not purely a retail-driven show, attendance from the sector remains impressive and, if anything, has grown in recent years. For 2020, buyers from all the US's top 25 toy retailers were said to be present, including Walmart, Amazon, Target, eBay and Walgreens.
At the same time, the show has continued to grow its international retail presence, with representatives from nearly all the major UK retailers, for instance, present this year. The post-show report also noted this year's event had attracted visitors from many countries that didn't attend the previous year – including Bolivia, Finland, Ghana, Guyana, Haiti, Hungary, New Zealand, Thailand, Turkey and Ukraine.
There was a suggestion that international attendance had climbed this year as many global retailers and distributors believed it may be their last chance to visit a toy show until whenever the coronavirus outbreak finally subsides. Inevitably, though, this was counterbalanced by the lack of Asian visitors and exhibitors. Fortunately, the Toy Industry Association, the show organiser, was successful in reallocating the stands forsaken by Chinese exhibitors, though their absence remained, of course, regrettable.
Unsurprisingly, the coronavirus remained the main talking point of the show. In particular, it was abundantly clear that the knock-on effect to the supply chain was going to be felt way beyond China, and that few immediate solutions were to hand. Summing up the sentiments of many, Steve Pasierb, Chief Executive of the Toy Industry Association, said: "Getting out of China – especially at short notice – is simply not an option."
For those companies seeking to manufacture their products elsewhere, the reality remains that most production facilities – regardless of their location – still obtain the majority of their raw materials from China. Equally dispiriting, those who rely on US manufacturing plants (such as companies with printed products) were being quoted unprecedented 10-12-week delivery times due to the backlog created by the crisis in China. There was even a rumour that representations have been made to both Walmart and Target to delay the set date for new toy launches this year in order to give suppliers some much-needed breathing space.
While such challenges are real and very tangible, there were also a number of more intangible issues. In many cases, these were being driven by the kind of over-reaction that had seen people boycotting their local Chinese restaurants or as evidenced by the one journalist who asked Pasierb whether the toys being shipped from China could be carrying the virus. To his credit, the Chief Executive responded by emphasising the need for the whole toy community to help its Chinese factory partners throughout this traumatic period.
Of course, the coronavirus is just the latest in a long line of challenges the US toy community – in particular – has faced in recent years. Acknowledging this, Pasierb said: "I wish we could catch a break. It would be nice, for once, to have a boring year."
Foremost in his thoughts, no doubt, was the demise of Toys R Us in April 2018, the collapse of which still reverberates throughout the US toy community to this day. While the loss of the continent's largest – arguably only – specialist toy retail chain was always going to weigh heavy on industry sales in the short term, the Toys R Us-shaped hole at the centre of the US toy market is about more than just lost retail space.
Above all, Toys R Us was an innovator and a risk-taker. It took chances on new vendors and new ranges, chances that other US majors, such as Walmart or Target, couldn't – or wouldn't – take. Many small companies, as well as inventors and designers, owe their success to Toys R Us, and no other retailer has yet stepped up to take its place.
Even before the dust had begun to settle from the Toys R Us debacle, last year saw another huge panic descend on the North American toy community, with Donald Trump, the US President, threatening to introduce new tariffs on Chinese-made goods, as well as increase the level of existing tariffs. Had it been implemented, this could have proved catastrophic for US toy sales. Thankfully, though, for now at least, Trump was persuaded to back down.
The Toy Industries Association is now lobbying for the government to roll back the tariffs that are already in place, arguing that they restrict both innovation and creativity. After the turbulence of recent years, US toy companies understandably crave stability and remain nervous when it comes to investing and taking risks, without having to additionally worry about tariffs.
As if the onset of the coronavirus, Toys R Us' toxic legacy and the possibility of an extended tariff regime weren't enough for the US toy industry to contend with, there was also the growing challenge of sustainability, the rising probability of a string of mergers and acquisitions and the huge incursions being made by online retailers, particularly Amazon. In all likelihood, each of these issues is likely to be around for quite some time, leaving the sector at the mercy of evolving consumer attitudes and an ever-changing retail landscape.
The issue of sustainability, for one thing, certainly isn't going to go away any time soon. Consumers want it and retailers inevitably have to deliver on it as a consequence. The challenge, though, is to find the sweet spot between doing the right thing and commercial viability. As for mergers and acquisitions, the big companies are seemingly getting (even) bigger, leaving the smaller companies to become increasingly concerned that they will be left behind or even barred from some retail opportunities.
Many of the issues relating to Amazon show no signs of going away either. While the Seattle-headquartered online giant has arguably benefitted more than most from the demise of Toys R Us, its ascendancy hasn't been without a downside, especially with regard to the growing prevalence of counterfeit and unsafe goods.
For his part, Pasierb was quite clear as to Amazon's responsibilities, saying: "It can't get away with maintaining: 'Yes, we built the Town Square, but we can't control what happens there.' Neither is it reasonable to make toy companies responsible for policing its website."
While some of the new legislation that has already been proposed would be a huge step forward in terms of addressing the issue, there is no guarantee that any such laws will make it to the statute book. In the meantime, every time fresh problems arise, the negative media coverage affects the whole toy industry, not just the misbehaving online marketplaces.
Despite these seemingly perpetual challenges, the New York Toy Fair always appears to maintain its characteristic vibrancy and energy. This is, perhaps, hardly surprising given its location – truly, it really is show-time all the time in New York. Accordingly, exhibitors go all out and, whether large or small, everyone is putting on the Ritz, all the while, of course hustling to the max. That 'always on' dynamism gives the show an upbeat mood, regardless of any concerns that may be bubbling away just below the surface.
Indeed, despite everything happening in the toy space right now, the show still felt largely positive, with many exhibitors even conceding it had exceeded their expectations. As the event – and the overall Toy Fair Season – drew to a close, though, it was clearly the coronavirus outbreak that was most preoccupying exhibitors and attendees alike. Undoubtedly, this issue, above all others, will test the resilience and fortitude of every business in the sector over the months to come.
The 2020 New York Toy Fair took place from 22-25 February at the Jacob K Javits Convention Center.
John Baulch is the Publisher of Toy World,
the UK's leading toys and games trade publication