Since the business launched in 1998, Funko has become well known for its diverse line of pop culture-themed consumer goods. These commodities include collectable figurines such as bobblehead figures and plush toys. In 2010, the company released its first collection of “Pop!” vinyl figurines. The line immediately became a substantial source of revenue. The figures helped the company increase its net sales in 2018 by 33% to $686.1 million.
Today, surplus stock and a massive rise in storage and rental costs, causes Funko Inc. to destroy between $30 million and $36 million worth of Pop figurines in its inventory. They evaluated that the excess inventory was the root for five and a half point decline in its quarter four gross margin, hence it was essential to destroy them in order to focus on more popular items and minimize surplus inventory. .“This rapid growth brought challenges that we’re now addressing,” Funko CEO Brian Mariotti said during an earnings conference call.
“Funko’s volume of inventory is restricting the distribution of centres, the factory was running at 100% capacity but needs to run at 80% to be as efficient as we like” said CEO Brian Mariotti. Funko incurs various kinds of storage costs, both in terms of off-site storage that they had to forcefully purchase for inventory and rent which only seems to be rising daily. The only way of fixing it is to reduce inventory and maintain a sound warehouse management system, which will take a while. But the CEO believes, that it’s the only way to go.
The company intends on destroying the oldest inventory first which is mostly in good condition and focus on the products that sell well but have excessive inventory. And to ease the operational constraints the company is also handing out inventory that it thinks can still be sold. The products are to be destroyed in Arizona, where their central warehouse is located and will be carried out by a third party company, called Buckeye which can provide certificates of destruction to licensors. Several brands also fear public backlash with the destruction of unsold goods, which is often done to protect brand margins and equity. Due to environmental concerns, the public might perceive it as negative because natural resources were used to create the product and the pollution that might be caused with the destruction may damage the environment.
Funko is also aiming towards more lucrative deals with entertainment giants like DC, Marvel and Star Wars, which provide them with a huge influx of revenue. They plan to focus on its “core collectibles” segment while spreading out into new avenues like NFT’s and board games.
References:
https://www.cbsnews.com/news/funko-pop-30-million-inventory-collectibles/
https://www.supplychaindive.com/news/funko-destroying-30-million-toys/644972/
https://www.retaildive.com/news/funko-destroying-30-million-toys/645138/