Two Toy Shocking news of the week!

It has been sometime I wrote such stuff and this could be heavy.

Warning: Wall of text ahead.

We are well in the third quarter of 2017 and this week 2 news really shocking personally.

LEGO job cut as sales slide (
Just a week after ForceFriday where the LEGO UCS Millenmium Falcon that is about to go on sale for USD$800, LEGO announced that they will cut 1,400 jobs because of sales not doing well.
Well many of us who recently bought LEGO products were very puzzle why would the sales slide? Come on! I know many of the people around me has been buying LEGO for the past 2 years or more almost every month! What do you mean sales go down?

There were more LEGO related sales by offering poly pack and season sales.

Just in Quarter 1 of 2017 there was news of LEGO reports highest revenue in 85 year history!

So how would it after 2 quarter they mention not doing well and job cut?

While I was still puzzle on this news, the second toy related news explode!

Toys R Us hires law firm as it explores possible bankruptcy filing

This was more closer to home as recently just this year Toysrus had open 2 more outlet at Marine parade and Jurong in Singapore. It was not really a new opening but kinda re-opening as those 2 locations used to have Toysrus before but close after some years.

That was a welcoming move as those area have high walk in (even more than Orchard Road) as most Singaporean do not want to travel far due to fear of random MRT breakdown and overcrowded. Many drivers would go neighbourhood area as ease of parking too.

ToysRus have been a part of my growing up and a regular place I check out toys and share new arrivals to all of toys friends.

To see them not doing well, I would think what could be the cause?

Many would say overhead as Toysrus don't make toys but rather distribute and resell them. So it has to be overheads. So what cover overhead cost?

How much you pay for your workers. Now that I am not sure so I assume the pay is rather fair.

This is how much electricity you use in your stall and warehouse. Now that is rather subjective but coming next year Singapore water bill had to be readjusted to 30% increase. So do your math how it affect businesses.

Storage and Rental
Now this could be the killing factor as year by year we know rental of the greedy landlord would raise prices as they did nothing but speculating market price to raise rental. The land lord thinking as they are rich would always think if you don't want to renew the rental, they will ALWAYS others who would pay.

But how would a operating company who reseller toys work without an outlet or storage? So many business owners are pull by the nose on this.

Stocks and products
Many of you may not know this but as a re-sellers in order for you to sell products from other manufacture, you need to take in minimum order. Now some of you may think it is the reseller who place an order and determine the number correct?

No. Not really. most of the time the numbers are determine by the product makers. So it is either you take that amount of stocks if not no deal. Taking into account ToysRus do have exclusvie toys would mean that the numbers they took in from toy manufacture must be big.

At this point your thinking would be what if we cannot sell that much? Well that basically the reseller problem. Is a deal or no deal. So when you see Sales period, the discount to the shoppers are the lost of income to the reseller. Now at this point some may think it is not my problem. Is they are greedy right? So that will be the next point.

Consumer mentality, No loyalty
Consumer will always go for the best offer of the same product. If the final payment is cheaper and same goods, why not? that is where online sales come about by third party which get from overseas. Like the price of LEGO maybe cheaper in US than in Singapore. So some people import or order online and get some to ship in. That would mean more stocks stuck in local reseller. Does that affect the toy manufactor? No. Why? because the same number of product was already sold. So if more Singapore buy from US. The US number will go up while SG number remain.
So how will that spell out?

Resellers are the one to take the blow.

Finally the last point I would add is the following

Raising of product pricing
Now the pricing of products are determine not by reseller but from the makers. That is why there is always a term "recommended retail price". That is the price it is worth so to say but end of the day consumer are the one who really decide on the price. Why? because if you think the toys are too expensive that would translate to the actual worth of the product which consumer will not buy.
By buying on that pricing, it is a seal of approval as the number come in to the maker, hey it worth that price and guess what? They will stuck to that pricing and the next product will be higher.

Their reason would be the cost is higher now which may point to rental and manufacturing cost.

So this is like a bubble and someone have to foot that price.

If Toysrus the biggest toy retail go bust, what will happen?

Consumer will not really feel the blow as they already can go online to buy toys but who is promising the number of making the number of toys?
If toys are too high to afford, what happen to them? it will sell cheaper but the lost wouldn't really go to the makers but the one who is holding the stocks as they pay up front.

The true loser would be the makers of the products. 

So time for toy makers to rethink and help the reseller to make affordable and quality products.
Don't give crap and think mindless people will buy because movies are made.
Don't take the pie of exclusive and put a tag because those who can afford that prices are getting older to retirement.

There are so much alternative now beside toys as there are games and such and people are some are moving on in life.

In short, this is an egosystem.

Okay that's my rant. What your take? leave a comment so I know.


Alphonse said…
It is unfortunate that toys manufacturers and toys resellers are impacted by today's economic downturn.

That said, businesses are responsible to transform the way they do business. This is why we see some organisations branch out to open new companies for new ventures to generate alternate income for the organisation and keep arms length in case the ventures is not sustainable.

Back to the context of toys, I am afraid the reality is there are many places to buy toys. Price becomes the most only important factor to the buyer. As long as toys manufacturers and resellers stick to the current way they do business it only shows they are not interested in their customers.

LEGO needs to cut jobs because they are going to focus their resources on what actually sells. Toys R Us needs to reach out to customers to find out what makes customers not keen to visit their stores. On the subject of resellers, there are other contract matters the resellers signed with the goods supplier. Resellers are pretty much both hands and feet tied.

I can only say both buyer and sellers could suffer because there is no economists who could step in to transform the messy supply and demand scene. I do not say we should restrict new and creative ideas, goods and services. I say people (any one) are not fond of being at the losing end.

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