Mattel toy recall raises concerning issues

LOS ANGELES There’s an ancient Chinese motto that says ‘Crisis is Opportunity.” And—from a glass-half-full perspective—that’s one way toy retailers and manufacturers can look at the current mess created by two massive toy recalls spawned by shoddy product sourced from China.

There’s no good time for Mattel to recall millions of toys coated with lead paint or rigged with tiny magnets. But this recall comes just six weeks before retailers head into the fourth quarter with a wind to their back following a rebound year for toy sales in 2006. And it raises a number of issues for both suppliers and retailers that will be challenge to resolve.

Safety concerns are never easy to address and they can have long-ranging effects. That’s something pet retailers can attest to following a rash of food recalls earlier this year that were also traced back to tainted product from China. And while there have been no reports of sick or injured children, the red flags raised by the recall won’t soon be forgotten by parents.

And, as in the pet food saga, we can expect more recalls in the coming weeks as retailers and suppliers comb through their inventory for potential hazards. Then those aftershocks could be followed by hearings, when Congress reconvenes in a few weeks, that will call major suppliers on the carpet and grill them about import oversight and toy safety guidelines.

That will leave the industry scrambling to right the ship well into September and present retailers like Toys “R” Us, Wal-Mart, Target and KB Toys with a major headache heading into the holidays. With a cloud still hanging over the business, retailers could be proactive with new signs in stores promoting new toy safety standards or a ‘Made in the USA’ guarantee. But that kind of reassuring approach could also remind shoppers that millions of toys already slipped through the cracks and that it could happen again.

And then there’s the issue of sourcing from China, one that’s almost impossible to remedy since China produces about 80% of the world’s toys and keeps costs down. And with toy prices drifting higher already due to increasing gas prices and the higher cost of producing plastic, suppliers are in no position to tap into new sources.

Overall, it’s a trying scenario for the toy industry, but one that will present retailers and suppliers with the “opportunity” to get creative this fall. And that’s especially true for Mattel, which will probably have to take costly steps to reassure wary parents.