U.S. toy manufacturers and retailers are facing a bleak future ahead as they endure uncertainty caused by the escalating trade war between China and the United States.
Toy Association, the trade group overseeing the toy industry in the country, said 85 percent of the toys sold in the United States was assembled in China. These would mean that the United States is at risk of losing about 85 percent of its toy supplies when the next rounds of tariffs take effect in the coming days.
Rebecca Mond, the vice president tasked at managing government affairs for the Toy Association, told CNN that the U.S. toy industry, in general, is still bleeding from Toy "R" Us bankruptcy which cut the majority of the demands from toy manufacturers.
There had been reports that Toy "R" Us would be coming back. Hopefully, its return would save U.S. toy manufacturers from further loss. Still, Toy "R" Us' return could not happen before this year's holiday season, The Wall Street Journal noted.
While the toy chain's absence opened billions of dollars of opportunity for other toy sellers, the challenge of finding new suppliers remain. This is a problem that could not be addressed by having toy factories back to the United States, said Mond. For one, there is still a lack of skilled laborers in the country and toy manufacturing depends heavily on manual tasks that cannot be replaced by automation.
Also, the toy industry enjoys a seasonal demand which means that it will be impractical for American manufacturers to set up new facilities with an automated system.
Brian Goldner, CEO for Hasbro, said they may pull out their factories from China but they would definitely look for other emerging markets where they transfer their production instead of having their factories in the United States. This is because Hasbro could not afford the wages they have to pay employees if they will return to the country, Goldner said.
Now, if all toy manufacturers will decide to pull out from China and move to other emerging markets, it will take them years to stabilize their operations anywhere else, said Kloster Trading CEO, Lutz Mueller. This would mean that the toy industry will experience lull for years.
The outlook for the 2018 holiday retail sales, meanwhile, continued to be positive, according to the National Retail Federation. It said sales are expected to increase between 4.3 and 4.8 percent from sales last year. Specifically, the federation is expecting a total of $720.89 billion in sales this year compared to $717.45 billion in 2017.
