After two years of navigating first product shortages and then excess inventory, many in the licensing industry have been looking forward to a return to a more stable market in 2023.

Before that can happen, however, there are several issues being addressed—including a potential nationwide rail strike in the U.S., continued unrest in China amid a Covid-19 crackdown, and inflation causing rising consumer prices.

Facing down a December 9 deadline, the U.S. House of Representatives passed a bill Wednesday that will impose a labor agreement between rail companies and workers. The measure now heads to the Senate where, if approved, it will be signed by President Joe Biden. Any strike would offload capacity that the trucking industry isn’t likely to be able to absorb, licensing industry executives said.

In China, meanwhile, there are now signs of an easing of the Covid-19 restrictions that sparked nationwide protests, which slowed production during the heart of the holiday selling season.

Yet even if those potential obstacles clear, there is still a fair amount of uncertainty. While the prices for 40-foot containers from China have dropped to $6,000-$8,000 from a peak of $24,000, freight rates in the U.S. have risen. And though some retail orders have been placed for spring, in many cases they are smaller than a year ago as retailers expect to spend at least part of the first half 2023 selling off excess inventory.

“We have learned to expect the unexpected and to react quickly as things tighten up,” said Jay Foreman, CEO of toy company Basic Fun. “You also need to have a broader network of shippers, both overseas and domestically, and make sure you are tooled up and ready to ship earlier than usual.”

But despite precautions, business in 2023 remains “a moving target,” said David Zrike, president of tabletop supplier Zrike Brands, which is forecasting a sales increase next year.

“We are working hard to understand our customers’ needs and forecast as accurately as possible,” said Ross Patterson, president of housewares supplier Robinson Home Products. “We need to keep a track on what the new ‘normal’ is as we get into the spring.”

Many retailers are delaying commitments on spring orders as they work through excess inventory that, after previously being predicted to clear by year-end, will now carry into the first half of 2023, licensing industry executives said. Indeed, Target this week is offering up to 40% off prices on some of its toy assortment.

Only a few of the largest retailers are committing to orders for fall 2023, according to Foreman. “Everyone is on pins and needles now and for the next five weeks,” he said.

Some retailers, however, in preparing for 2023 are measuring against 2019 results and predicting that sales next year will be “on par or slightly up” given that 2021 was an “unusual year” for sales, said Matthew Kavet, president of licensed candy tin and energy drink supplier Boston America, which sells through specialty retailers. That said, retailers are placing “smaller orders” more frequently as a result of suppliers being in stock with most products versus the shortages experienced in 2021, Kavet said.

The one constant appears to be that despite the unrest, China will likely remain the manufacturing base for many products, industry executives said.

While Apple has lowered the percentage of its products made in China to about 50% (compared to more than 60% previously), companies involved in toys, housewares, tabletop, and other categories aren’t expecting much change. Basic Fun, for example, has 90% of its toys made in China, Foreman said.

Few countries can rival China’s infrastructure, which is built for mass production, Kavet said. Boston America plans to introduce 15 new items in 2023, including some under new licenses for Crunchyroll’s Jujutsu Kaizen and JoJo’s Bizarre Adventure anime properties.

“China is the best country right now to get anything made between the infrastructure and alignment,” Kavet said. “That won’t change for the foreseeable future because they are just too well set up.”