Toys R Tariffs: The Melissa & Doug Connection

President Trump’s on-again, off-again tariff decisions have rattled the global economy.

Here in the US, sectors ranging from aluminum to footwear have felt whipsawed by decisions made and remade in the White House. The latest industry is a big one: toys.

Earlier this week, the president delayed a new 10 percent tariff on some Chinese imports, from September 1 to December 15. That gives toy manufacturers some breathing room, before and during the make-or-break holiday season.

Melissa and Doug Bernstein

Westport has an important dog in this hunt. Melissa & Doug was founded in 1988 by Doug and Melissa Bernstein, in his parents’ garage on Guyer Road. Over the past 31 years it’s become a highly respected creator, manufacturer and distributor of educational toys, including wooden puzzles, arts and crafts products and more.

Bernstein breathed a sigh of relief at the tariff delay. But, he said yesterday, the larger question is the entire concept of a “trade war.”

“Wars are not good,” he said. “They cause casualties: human, social and economic. Calling this a ‘war’ is not a good thing.” He would prefer to see trade policy discussed “amicably.”

Like most American toy companies, the vast majority — 85 to 90% — of Melissa & Doug’s products are made in China.

This founders did not set out to manufacture overseas. Years ago, Bernstein said, he brought prototypes to factories across in the US. No one wanted the job.

The issue was not price. Rather, it was the “massive amount of handiwork” that goes into each Melissa & Doug item. “They can’t be stamped out” — and American factories could not do it at a price that would be reasonable for consumers.

A small selection of Melissa & Doug toys.

Over the years, Melissa & Doug built strong relationships in China. Today, around 200 or so employees oversee quality and inspection there. “They work for us,” he said. “They’re not 3rd-party contractors.”

While other companies talk about moving production to other parts of the world — Vietnam and India are often mentioned — Melissa & Doug worries about losing quality control.

“We have 3 tenets,” the co-founder says. “We make educational products for children; we make them with the absolute best quality we can, and we price them as affordably as possible. We don’t want them accessible only to kids who grow up in a place like Westport.”

So — even with higher tariffs — Bernstein and his wife are committed to “not passing on higher pricing to consumers. Other companies say that if the tariffs take effect on December 15, they’ll have to raise prices by 10, 20 or 25% in 2020. We’re working very hard not to do that. We would probably absorb most, if not all, of the cost.”

They’ve already been tested. In addition to toys, Melissa & Doug produce items like chalk and markers. They’ve already been hit with several million dollars in tariffs — and have not raised prices.

Bernstein sounds a hopeful note, though. “Honestly, I didn’t think the tariffs would happen on September 1. And I think there’s a high likelihood they won’t happen on December 15. This is a game of chess, and we’re pawns. No one gains from a trade war. I think agreements will be reached.”

Besides chess, Bernstein uses another analogy to describe the last few months.

“We’ve been on a roller coaster,” he says. “It would be one thing if there were transparent discussions. But for us — and everyone in the industry — it’s been up and down, on and off, 10%, 25%, September 1, December 15.”

That’s one game the Westport toy manufacturer has no desire to play.

10 responses to “Toys R Tariffs: The Melissa & Doug Connection

  1. Good one, Dan. They have 200 payroll employees in China?!? Wow. I thought the postponement would allow manufacturers to stock up at pre-tariff prices to sell for Xmas. Either way, it is torturous to watch foreign policy and trade policy played out like hard-knuckle New York real estate deals.

    • Eric William Buchroeder SHS ‘70

      I don’t think the war analogy holds up as anything other than hyperbole. The trade relationship with China is as much under its control as under our control whether you agree or disagree with Trump on the issue. I feel heartache for Melissa and Doug but like any other business in a cyclical market they’ve profited from the ups and should be able to withstand the downs.

  2. Tom Duquette, SHS '75

    Relax everybody, remember that trade wars are “easy to win”. Sure.

  3. He seems to be taking it in stride.
    International chess game.
    Thanks for the insight. 🇺🇸

  4. Melissa & Doug- you guts ROCK! Beyond thrilled @ all your personal & professional successes. Good guys (& gals) do not finish last!

  5. Bobbi Essagof

    Great article and nice to put some info for those who did not know behind the Melissa & Doug signs (Compo Fireworks, Levitt Concerts and so many other ways they support our town.) Doug was my son’s first little league coach in 1998. He was the kindest guy then and I’m sure he is still is still a great guy. After all he was raised by Bob Bernstein, Elementary school Principal for many years who was always kind and generous to the community. Thanks for being a great coach to my son who is now 26! Thanks for all you do for Westport and kids all over!

  6. Beth Thompson '67

    You should keep your personal, unsubstantiated opinions about Trumps tariff policies out of your otherwise excellent articles. Your lack of gravitas is showing.

    • Please tell me what part of what I wrote is “personal, unsubstantiated opinions.”

      Meanwhile, I apologize for not demonstrating the gravitas shown by, oh, let’s say the President of the United States.

  7. William Strittmatter

    Interesting story that raises a few questions.

    The article first notes that Doug says manufacturing in the US is not a matter of price but that US manufacturers didn’t want to do it. But he then apparently contradicts himself that it was really because US manufacturers couldn’t do it at a price that would be reasonable for customers. Two different things of course.

    The article notes that Doug and Melissa instead manufactures in a China with their own employees/factories which is nice since presumably they can ensure they don’t use child labor and pay fair wages rather than outsource to factories where labor is apparently regularly abused. Of course, that suggest that even if (cost aside) they couldn’t find a US manufacturer willing to build their products, they could have built their own factory in, say, Bridgeport or the Naugatuck Valley (I’m sure the labor force is no less capable in those areas as in China) but I’d imagine that cost thing gets in the way again.

    None of that is intended to be a criticism of Doug and Melissa – its the same issue every US manufacturer/business person faces given the US population’s demand for lower prices notwithstanding those lower prices might cost fellow citizens their jobs and throw them on the dole.

    Interesting cognitive dissonance, however, given the push for higher minimum wages and/or “living wages” notwithstanding those would tend to continue to push jobs offshore increasing the unemployment in the US and need for higher taxation to provide a social safety net.

    Similarly, calls for universal basic incomes to counter the “changing economy” (aka job losses to lower cost countries) sound great but I wonder if anyone has analyzed whether higher tariffs might not both stem the tide of job losses as well as pay for UBI for those that are still displaced. But that would mean higher consumer prices (though, of course, more consumers).

    I guess most ideas work best when we don’t feel the cost ourselves. Just leave my prices alone and tax those rich people that are reaping the benefits of offshoring notwithstanding the bulk of the benefits are actually being reaped by everyone via lower prices.

    But, back to Doug & Melissa for a second. If they can really absorb the impact of tariffs raising cost of goods sold by 15-25%, they must have incredibly outrageous margins so maybe they should pay more taxes. Just joking, by the way.

  8. I manufactured toys overseas in the 80-90
    for all the reason you mentioned. WJFantasy
    was my trade name. Recently I was in Vietnam
    and worked with the people
    I highly recommend them .