A failing 261-year-old UK toy-store chain is looking for a new lease on life in the hands of billionaire Mukesh Ambani, who is looking to India, where one-fifth of the world’s babies are born, to jumpstart its revival.
Despite the pandemic, Hamleys, a British retail icon that hasn’t made a profit in years, plans to quadruple its outlets in the former British colony to more than 500 in three years, according to Darshan Mehta, CEO of Ambani’s Reliance Brands Ltd. In addition to the key growth sector, he said in an interview that the company is expanding its store network from Europe to South Africa and China.
Ambani, 63, purchased Hamleys in 2019 to expand his retail presence as part of his oil-and-chemicals conglomerate Reliance Industries Ltd.’s ongoing transformation into a market and technology behemoth. Hamleys, whose share of global toy sales was estimated at 0.6 % last year by Euromonitor International, could profit from the deep pockets of Asia’s richest man and India’s demographics, and avoid the pitfalls faced by rivals such as Toys “R” Us Inc.
Hamleys is attempting to tap into what it sees as an underserved segment of India’s nearly 1.4 billion people, of whom about 27% are children under the age of 14. The company has a $72 billion net worth backer. According to Mehta, the country only accounts for 1% of the $90 billion global toy industry, so there is plenty of room for growth.
With a $72 billion sponsor, Hamleys is attempting to tap into what it sees as an underserved segment of India’s nearly 1.4 billion people, of whom about 27% are children under the age of 14. According to Mehta, the country accounts for only 1% of the $90 billion global toy industry, indicating that there is a lot of room for growth.
Children can drive toy cars, play with model trains, and play a variety of games at Hamleys shops, which are known for their carnival-like atmosphere. In a country like India, where cities are densely packed and entertainment choices are minimal, such a setting may be a draw to entice visitors to return. Hamleys is an “elastic band,” according to Mehta because its products cater to both low-income and high-income consumers.
According to Marc Alonso, a London-based senior research analyst at Euromonitor, Hamleys is seen as “high class” and “on par with Harrods in certain respects” in Asia. “As a result, it attracts the consumer base, which is why it has seen some positive revenue growth in recent years in places like India and China.”
Despite the fact that the pandemic is wreaking havoc on parts of India’s economy, Mehta believes the toy industry is recession-proof, since many parents prioritise their children’s happiness above everything else.
However, prior to the outbreak, other chains had struggled. When Toys “R” Us filed for bankruptcy in 2017, it was the biggest casualty of the American retail apocalypse, crushed by debt and felled by competition from online retailers like Amazon.com Inc. Despite the fact that the American chain is on the mend now that it has a new owner, a long-running pandemic suggests that retailers face an unpredictable future. According to Reliance, nailing online sales is critical to preventing the same fate as other high-end toy retailers. Ambani’s company is developing Jiomart, a shopping portal, as part of his e-commerce and technology pivot, to compete in the local market with Amazon.com and Walmart Inc.’s Flipkart. To fund those goals, Reliance Industries has enlisted the help of Facebook Inc. and Google.
Mehta expects 30% of Hamleys’ revenues to come from online orders in five years, up from 20% now, thanks to Covid-19 accelerating the company’s digital strategy. In the same time frame, he predicted that direct selling over the phone or through WhatsApp would account for 20% of sales.
According to Euromonitor’s Alonso, the target may be too optimistic because some customers may opt for a cheaper portal. “You can get the same thing for a lot less money if you go straight to Lego’s e-commerce site,” Alonso said.
Hamleys, established in 1760 by William Hamley, has had its share of ups and downs. The London-based retailer’s ownership has shifted three times in the last decade, from an Icelandic bank to a French conglomerate, and finally to a Chinese fashion retailer. Ambani bought it for $89 million in cash about two years ago. On sales of about 48 million pounds, Hamleys recorded a loss of nearly 9 million pounds ($12.4 million) in 2019.
The pandemic’s arrival just months after Reliance took over added to Hamleys’ financial woes in the UK, where the company operates 21 stores. Its grand seven-story Regent Street flagship store, which opened in 1881, and has remained closed for most of the past year, while cutting a quarter of its workforce to , remained closed like most shops in London’s empty streets until earlier this week.
Following the easing of curbs, non-essential stores will reopen this week, according to Mehta. Consumers flocked to England’s shopping streets on Monday, after a 100-day lockout. Retailers like Hamleys are hoping for a surge in revenue as a result of the pent-up demand. Another coronavirus outbreak, according to Mehta, could result in temporary disruptions, such as postponed plans for the US, a market Hamleys is attempting to break into.
Reliance had the master franchise for Hamleys, in India prior to the acquisition of the chain. According to the company’s website, Reliance’s retail division is also the local partner for more than 45 foreign brands, including Burberry, Hugo Boss, Jimmy Choo, and Tiffany & Co.
The pandemic has limited Hamleys’ India expansion plans to about 50 new stores this year, before things pick up. According to the Reliance executive, the toy retailer is considering opening stores in the US this year or next, depending on travel restrictions, as well as tourist hotspots in European countries such as France and Italy.
Still, Arvind Singhal, chairman of Indian retail consultancy Technopak Advisors, believes India will be a key market. With around 26 million children born each year, Hamleys is unlikely to run out of customers, even though only the top 5% of the population can afford to shop there, he said.
“Toys are one category where emotions can often outweigh your financial capabilities,” Singhal said. “Hamleys is possibly one of Mr. Ambani’s strongest retail investments since the Hamleys brand has unprecedented exposure in India.”
