Mumbai/Delhi: A struggling 261-year-old U.K. toy-store chain is seeking a new lease of life in the hands of billionaire Mukesh Ambani, who’s looking to India where about a fifth of the world’s babies are born to fuel its revival.
Hamleys, a British retail icon that hasn’t made a profit for a number of years, plans to quadruple its outlets in the former British colony to more than 500 in three years despite the pandemic, according to Darshan Mehta, chief executive officer of Ambani’s Reliance Brands Ltd. Besides the main growth market, the company is also adding stores from Europe to South Africa and China, he said in an interview.
Ambani, 63, bought Hamleys in 2019 to strengthen his retail footprint as part of the ongoing transformation of his oil-and-chemicals conglomerate Reliance Industries Ltd. into a consumer and technology behemoth. The deep pockets of Asia’s richest man and India’s demographics could help breathe new life into Hamleys, whose share of global toy sales was estimated at 0.6% last year by Euromonitor International, and see it avert the pitfalls faced by rivals such as Toys “R” Us Inc.
With a backer whose net worth is $72 billion, Hamleys is seeking to tap into what it sees as an inadequately serviced section of India’s almost 1.4 billion people, of which about 27% are children under 14. The country accounts for just 1% of the $90 billion global toy industry, meaning the potential for growth is high, Mehta said.
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“There is a lot of headroom and India is no way near saturation,” Mehta said. “We are now mulling how we can roll out stores in newer geographies and new formats.”
Hamleys stores are famed for the carnival-like experience, allowing children to race toy cars, enjoy model train sets and play various games. In a country like India, with its densely packed cities and limited entertainment options, such an environment could be a hook to get customers to visit again. Product prices appealing to buyers of modest means as well as the super-rich make Hamleys an “elastic brand,” said Mehta.
In Asia, Hamleys is seen as “high class and it’s on par with Harrods in some ways,” said Marc Alonso, a London-based senior research analyst at Euromonitor. “So it’s attracting that customer base, which is why in some places like India and China, it has been seeing some good sales growth in the past few years.”
While the pandemic has been hitting parts of India’s economy, Mehta sees the toy industry as “recession proof’’ because many families choose the happiness of kids over anything else.
But other chains have struggled before the virus. Toys “R” Us was the biggest victim of the U.S. retail apocalypse when it filed for bankruptcy in 2017, crushed by debt and felled by competition from online sellers such as Amazon.com Inc. Though the American chain is on a recovery path now under a new owner, a protracted pandemic points to an uncertain future for retailers.
Nailing online sales is key to avoiding the fate of other high-end toy chains, according to Reliance. As part of Ambani’s e-commerce and technology pivot, his group is building Jiomart, a shopping portal, to take on giants such as Amazon.com and Walmart Inc.’s Flipkart in the local market. Reliance Industries has roped in Facebook Inc. and Google as investors to fuel those ambitions.
With Covid-19 accelerating the group’s digital strategy, Mehta expects 30% of Hamleys’ sales coming from orders online in five years, versus 20% now. Direct selling over the phone or via WhatsApp would account for 20% in the same period, he said.
Euromonitor’s Alonso said that target may be too ambitious because some customers could go to another portal that offers cheaper prices. “You can get the same product much cheaper by going straight to Lego, for example, on their e-commerce site,” said Alonso.
Founded by William Hamley in 1760, Hamleys has seen its share of troubles. Ownership of the London-based chain has changed at least three times in the past decade alone — from an Icelandic bank to a French group and then to a Chinese fashion retailer. Two years ago, Ambani snapped it up for about $89 million in cash. Hamleys’ most recent books for 2019 show a loss of almost 9 million pounds ($12.4 million) on revenue of about 48 million pounds.
The onset of the pandemic just months after Reliance took control compounded Hamleys’ financial distress in the U.K., where it runs 21 outlets. Like most shops in the deserted streets of London, its grand seven-story Regent Street flagship store that opened in 1881 remained closed for much of the past year until earlier this week, while it cut a quarter of its staff to weather the crisis.
Mehta believes the U.K. operations will “come out very strongly” with non-essential stores reopening this week following the easing of curbs. Another coronavirus wave could temporarily disrupt the business globally — like delayed plans for the U.S., a market it wants to crack.
Prior to the acquisition of the chain, Reliance had the master franchise for Hamleys in India. The retail unit of Reliance is also the local partner for over 45 international brands including Burberry, Hugo Boss, Jimmy Choo and Tiffany & Co., according to the company’s website.
The pandemic has limited Hamleys’ India target to just about 50 new stores this year before the roll out picks up pace. The toy retailer is looking at outlets in the U.S. this year or next, depending on travel restrictions, as well as in tourist hot spots in European countries, including France and Italy, the Reliance executive said.
Still, India is likely to be a key market, said Arvind Singhal, chairman of Indian retail consultancy Technopak Advisors. With about 26 million children born in the country each year, Hamleys is unlikely to be short of customers there even if only the top 5% of the population can afford to shop at its store, he said.
“Toys is one category where emotions sometimes overtake your financial abilities,” said Singhal. “Hamleys is probably one of the best investments from Mr. Ambani’s point of view in retail — the visibility the Hamleys brand has in India is unparalleled.”- Bloomberg
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Ambani is taking away the joy of mud based toys from kids and giving them modern toys – this is capitalism. Because of these toys children are wasting their time in playing rather than helping their parents in MGNREGA/JNU/Jamia protests.
You selling all made in China products procured from Alibaba. That too of 3rd grade quality. Those who were smart purchased directly from Aliexpress, but that you shut it down in the name of China threat.
Why this China threat is not applicable on you when buying Made in China 3rd grade products.
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