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Build-a-Bear has tough post-COVID-19 decisions to make holiday shipping looms

China 2435 Cons. Discr. - Durables 261 Cons. Discr. - Retailing 262 Coronavirus 303 Thailand 101 U.S. 4297

Toy retailer Build-a-Bear has faced significant challenges during the COVID-19 pandemic due to retail store closures across most locations since mid-March. One response from the firm is that it has “shifted our focus in remaining resources to support our e-commerce channel“, CEO Sharon John has stated, though store reopenings remain vital. There’s also been supply chain challenges to address with the firm “reworking processes at our fulfillment center” including moves to “expand dedicated assembly lines, utilizing simplified bundle offers specifically designed to service certain high-demand items“.

Managing the firm’s supply chain to support staggered store reopenings will also prove complex going into the peak ordering / shipping season. Panjiva’s data shows that total U.S. seaborne imports of toys typically peak in October / November with a run-up starting in July. 

With most toys still produced in China with a four week or more shipping time that means exports are needed from June onwards. It’s also worth noting that the peak of shipments was earlier in 2019 due to concerns regarding widening tariffs applied by the U.S. on Chinese exports. While applying tariffs on toys is hardly a vote winner in election year it is worth keeping an eye on deteriorating trade relations between the U.S. and China.

Imports in the off-peak season have been well down. Indeed toys were the worst performing category in terms of imports in early May as discussed in Panjiva’s research of May 26 which may mitigate the volumes of stock on hand. Year-to-date total imports are down by 13.0% year over year as at May 31.

HOLIDAY SHIPPING SURGE FOR TOYS STARTS IN JULY

Chart segments U.S. seaborne imports of toys by month. Source: Panjiva

For Build-a-Bear specifically shipments fell more quickly early in the year when Chinese factories were closed due to the initial COVID-19 outbreak. Imports linked to the firm fell by 54.5% year over year in Q1, followed by a 48.6% slide in April. Shipments have stabilized in May with a 1.6% improvement, potentially as the firm has started preparing for a reopening as well as receiving inventories previously ordered from China.

The firm has also diversified its supply chain away from China including sourcing from Hong Kong which will remain at risk as the Trump administration removes Hong Kong’s preferential trade status. 

Shipments from China represented 45.9% of U.S. seaborne imports linked to the firm in the 12 months to May 31 compared to 70.9% in 2017. Shipments from Thailand meanwhile rose to 39.9% of the total in the past 12 months from 15.6% in 2017. Shipments from Thailand also climbed 71.4% higher year over year in April, partly offsetting the 81.9% slump seen in shipments from China.

BUILD-A-BEAR BUILDS UP SUPPLIES FROM THAILAND

Chart segments U.S. seaborne imports linked to Build-a-Bear by origin on a monthly and three-month average basis. Source: Panjiva

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