The coronavirus is casting a large shadow over the business world, and many companies, including some U.S. small businesses, are struggling to cope with the financial losses.
Ben Baltes, cofounder and CEO of Toybox Labs, a 3D printing manufacturer based in Oakland, Calif., told Yahoo Finance’s “The Ticker” the outbreak has disrupted Toybox’s supply chain, pushing production significantly behind schedule.
“We came off a nice holiday season, and sold out of inventory,” said Baltes. Shortly after the holiday season the coronavirus outbreak hit China, stifling manufacturing and production throughout the country. “We have 600 printers left. Usually we’re shipping around a couple thousand per month so that’s impacting sales quite a bit.”
The toy industry relies heavily on China for its parts, making it particularly vulnerable to manufacturing closures throughout the country. It’s the world’s largest toy maker, responsible for approximately 85% of toys sold in the U.S., according to the Toy Association. And the slowdown in production is putting the toy industry at risk of another year of declining sales.
“The only thing we can do is hold this out and wait a couple months while this passes,” said Baltes. To slow sales, Toybox scaled back its marketing push, advertising ‘only a fraction’ of where it typically would.
In terms of the potential losses from the manufacturing slowdown in China, it’s still a bit early to gauge the full impact. For Toybox, its manufacturing facility reopened its doors Wednesday, but it’s only running at around 70% capacity.
“The impact from the beginning part of the year cascades into other parts of the year. Since our company has been experiencing pretty rapid growth throughout the last couple of years, this is really going to impact our later months quite a bit,” Baltes said.
The coronavirus outbreak has raised questions about the U.S.’s reliance on China, and whether businesses should start moving production to other parts of the world. While it may seem like a good idea, Baltes quickly pointed out that it’s not as easy as it sounds, especially for more complex products that rely on multiple levels of China’s supply chain.
“The issue is that China’s supply chain is very deep, so if we were doing something simple like plastic toys, which we’re not, it would be much easier to move to Vietnam,” he said. “The problem with China is that all the level-two and level-three parts of the supply chain —motors, magnets, steel rods— that’s all made in China. So if you’re building a product like Toybox which is a 3D printer, it’s much harder to move the supply chain because all of your pieces are going to come from China anyway.”
Seana Smith is the anchor for The Ticker.