The magic shrinks: Toy industry trims the fun as China tariffs squeeze margins
Toy makers that serve retail giants like Walmart, Target and Amazon are reducing the number of accessories in toy kitchen sets, removing batteries from electronic playsets, simplifying doll makeup and reducing packaging, as a 30 per cent blanket tariff currently imposed on Chinese imports puts a damper on their bottom lines.
The duties imposed on China by US President Donald Trump are particularly painful for companies like Hasbro and Mattel, as 80 per cent of toys sold in the US come from China, according to trade group The Toy Association.
Educational toy maker Popular Playthings — whose China-made animal sets, trucks, and magnetic food sets can be bought on Amazon — is delaying and paring down a magnetic cake set it had planned to launch in June, CEO Jason Cheung said in an interview. The company is reducing the power of the magnet, using cheaper packaging, and removing one of two serving plates that were to come with the set — all while upping the price from US$29.99 (RM126.49) to US$34.99.
'Originally it would come with two plates so two kids can have cake at the same time,' Cheung said. Now, 'one (child) will serve, while the other can eat.'
'Still multiplayer, but less cost,' Cheung said, while adding 'the original item would have been better.'
Toys are a top category in the US holiday shopping season, the biggest spending season of the year. Adobe Analytics projected an US$8.1 billion online spend on toys last holiday season, marking a 5.8 per cent increase from the previous year.
Toy maker Basic Fun!, which sources most of its products from China, makes 40 per cent of its annual sales in North America through Amazon, meaning the company can't risk removing merchandise from the ubiquitous e-commerce platform this holiday season, CEO Jay Foreman told Reuters.
The company, which also sells to Walmart and Target, is offering retailers the option to remove batteries from the packages of its electronic toys, and plans to reduce or remove its toys' packaging in 2026, said Foreman.
'The consumer will either pay more or get less value,' Foreman said.
Some companies, like Bratz and L.O.L. Surprise! dolls-maker MGA Entertainment, are moving supply chains out of China, — a costly endeavour — while others are reducing the number of items available on shelves this winter.
Isaac Larian, the CEO of MGA Entertainment, one of the biggest US privately-held toy companies, said it takes nine to 12 months to make cost-cutting changes to toys. MGA is planning to modify its products for later next year.
'But we cannot take the magic out of the box,' Larian said. 'Too much cost-cutting, destroys the play value for the toy, and you turn off the kids.'
Historically, sector giant Mattel has invested in more 'playable packaging' — making the boxes part of the game itself — to reduce costs. Hasbro, which sources roughly 50 per cent of its US toy and game volume from China, said on a Wednesday earnings call it 'retooled and reimagined' its board games Candy Land and Operation, as part of a larger initiative to revamp its materials sourcing, manufacturing processes, designs and packaging to help with cost reductions amid tariffs.
ECR4Kids — whose roughly 1,000 school and daycare supplies range from toys and games to bookshelves and play mats — also sources primarily from China, and makes 'well over 50 per cent' of its revenue from selling wholesale to Amazon, according to managing partner Lee Siegel.
'We're very tethered to Amazon,' Siegel told Reuters, explaining that he can't make substantive changes to the products he sells on the platform, including a US$175 foam climbing set for toddlers. For some products, though, the company is reducing variations in color and model, and prioritizing more efficient packaging that uses every inch of space.
These kinds of efficiency efforts were on Siegel's radar even before tariffs, he said. 'But now, you really have no choice.' — Reuters
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