HOW TO MEASURE TOY MARKET GROWTH IN TIMES OF HIGH INFLATION

HOW TO MEASURE TOY MARKET GROWTH IN TIMES OF HIGH INFLATION

As we head towards the end of 2022, we’ll soon be seeing data suggesting the overall level of growth, shrinkage or stagnation the overall market has delivered. As someone who spends a lot of time researching and analysing data, I have one area where I think the trade press and broader mass market media are missing something important.

If the Toy market has grown in a particular country by a few percentage points in £/$/€ terms, but inflation is officially 10% (but in reality is probably significantly higher than that as government institutions are incentivised to under report inflation), then the market hasn’t grown in reality, in fact it has shrunk in ‘real terms’. To unpack this and explain further – the actual $/€/£ amount might show an increase, let’s say for easy maths you have a Toy market worth $1billion and the market grows by a normally creditable 5%, then the market would grow to $1.05billion. But if inflation is running at 10%, then in order to stand still in terms of actual real-world value, the market would need to grow to $1.1 billion. So in fact, the market has actually shrunk when you take into account the reduced value of the currency.

Frankly, a lot of Finance & Economics is above my pay grade & definitely way beyond my comprehension but shouting out market growth when everybody can see that hard numerical ‘growth’ is clearly not ‘real’ growth is potentially misleading.

There is no doubt that as ever our mighty industry is performing better during the current tough financial climate we are living through than many other industries, but we should also keep a grip on reality!

We recently launched a Mentoring service for up-and-coming people in the Toy & Game business. If you or your teams could benefit from Mentoring to aid their personal development and to facilitate greater performance and results for your company, check out www.ToyBizMentor.com

What Is Friendshoring – And How Does It Apply To The Toy Business?

What Is Friendshoring – And How Does It Apply To The Toy Business?

Recently US Treasury Secretary Yellen referred to a move (particularly in the USA) towards ‘Friendshoring’ she stated the following:

“Favouring the Friendshoring of supply chains to … trusted countries, so we can continue to securely extend market access, will lower the risks to our economy as well as to our trusted trade partners,”

Clearly in this case, Yellen is referring to the long-term reliance of the USA on China for supply chains across various types of categories and physical product segments. There is much talk currently of ‘decoupling’, of the ‘end of globalisation’ and the move to ‘Friendshoring’ and ‘Nearshoring’ due to the changing nature of the U.S. relationship with China.

All of which sounds fine in principle, but in the Toy industry, there are not many viable alternatives currently. Vietnam has seen significant opportunity as Chinese factory owners opened up plants outside China choosing Vietnam due to it’s geographical and cultural proximity. India is set to take up some of the slack with a few good Toy factories. Closer to major Domestic Toy markets, Mexico is ramping up to a degree, but the bottom line right now is that there is no substantial alternative to China which retains the majority of Toy manufacturing at this point, albeit with a decreasing share on a year by year basis.

When we look at terms like ‘Friendshoring’ we need to see this as an ongoing and future trend – the industrial capacity and domain expertise is not there yet in other geographies. So yes, we absolutely should be looking at our ‘Plan B’ outside of China, but we need to see our industry (& the broader world) as being at the start of a long process of migration of Toy production. Just as China didn’t become the golden hub of Toy manufacturing overnight, so the process of moving from a single hub sourcing solution to a multi-hub solution will take time. Being all in on China right now seems risky but being all in elsewhere is realistically speaking not an option. So, we need to chart a careful course forward and not get to carried away by terms like ‘Friendshoring’ until our friends are ready for us!

If you want more insights into Toy Sourcing & the need for strategic diversification, check out this Linked In Newsletter article:

BIGGEST THREATS FACING THE TOY INDUSTRY: PART 1, LACK OF SUPPLY CHAIN DIVERSIFICATION

https://www.linkedin.com/pulse/biggest-threats-facing-toy-industry-part-1-lack-risk-our-steve-reece/

Did you know we run a Strategic Sourcing Consultancy to the Toy & Game business? We have worked in some guise with most of the major Toy companies globally, and regularly consult with clients to help them review their vendor base and to carefully plan their strategic supply diversification. For more info on what we do: https://www.toyteamasia.com/

Toy Sourcing: The Next 10 Years - Changes, Challenges & Opportunities

Toy Sourcing has become a fairly straightforward process over the last couple of decades with a number of factories in China becoming the core suppliers to most toy companies. In many ways it would be a much simpler world if things stayed as they were with China remaining the dominant hub with strong efficiency, capacity and capability. Alas things are changing, with major stock market toy companies like Hasbro & Spin Master announcing to the markets that they are now sourcing c. 50% of their production from outside China in places such as Vietnam, India, Indonesia & some other countries.

A couple of years back we released a video looking at the changing situation in China & the world beyond. You can check out that video here:

Recently the Toy Association asked us to relook at the topic of Toy Sourcing & how the next 10 years could pan out from here a few years on from the last time we looked at this topic. This snappily titled White Paper can be downloaded here:

TOY SOURCING: THE NEXT 10 YEARS – CHANGES, CHALLENGES & OPPORTUNITIES!

https://www.toyassociation.org/ta/research/reading/papers/toys/research-and-data/reading-room/white-papers.aspx?hkey=8623f248-da28-4039-a80d-bb353cc31b3f

If you have any issues downloading the White Paper, please message me & I will share with you. The White Paper covers the following topics:

1. Where we’ve come from – China & access to abundant cheap labor.

2. Challenge with Sourcing in China today – worker shortage, high labor costs & other risks

3. Alternative Sourcing Hubs: Realities, Potential, Risks & Opportunities.

4. Moving From A Primary Toy Manufacturing Hub To A Multi-Hub Situation

5. Is Nearshoring The Big Solution We Are Looking For?

6. Toy Manufacturing In The Long Term

Again, in case you missed the link you can download the White Paper here: https://www.toyassociation.org/ta/research/reading/papers/toys/research-and-data/reading-room/white-papers.aspx?hkey=8623f248-da28-4039-a80d-bb353cc31b3f

If you’re interested in the topic of Toy Sourcing, you may find our last Linked In Newsletter #9 interesting: IS INDIA THE ‘NEXT CHINA’ FOR TOY MANUFACTURING? In this newsletter we take a closer look at the Toy Manufacturing sector in India and profile India's leading Toy Factory group - MICRO PLASTICS PVT LTD https://www.linkedin.com/pulse/9-india-next-china-toy-manufacturing-steve-reece/

If you want to read previous editions of this Linked In Newsletter, you can access here: https://www.linkedin.com/newsletters/toy-industry-journal-6910540635838013441/