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Iconic Hamleys is now a Reliance baby. What is the Indian giant’s plan for its retail business on global turf?


  • History of Hamleys
  • RIL’s acquisition of Hamleys is a part of the strategic plan to connect another dot on the retail network
  • What is the RIL plan for its retail business?

 

Reliance Industries Ltd (RIL), through its subsidiary Reliance Brands, acquired the 259 years old British toy store chain Hamleys last month for 67.96 million pounds (~Rs 620 crore). While the acquisition has expanded the Indian mammoth’s footprints on the global map for retail business, it is also seen as RIL’s first move to fight Amazon and Walmart on the global turf.

Hamleys is one of the largest and oldest retailers of toys in the world. The British company has now grown to 167 stores spread across 18 countries since its first store in London that was established in 1760. Its popularity can be seen at Hamleys flagship store on Regent Street, which is set over seven floors and offers more than 50,000 types of toys making it one of London's prominent tourist destination, which receives over five million visitors each year. But this is not the first time that Hamleys has witnessed a change in its ownership. In the last two decades, Hamleys moved to several hands before RIL bought the company from C Banner International Holdings, a Hong Kong-listed fashion conglomerate. Though Hamleys is a very popular toy brand, it has struggled to generate profits in recent years. The company was able to generate a net profit of £ 2.44 million ($ 3.13 million) in FY18 after reporting a loss of £11.24 million ($14.8 million) in 2017.

Hamleys made its Indian entry in 2010 with its first outlet in Mumbai, which was also its first move into South Asia. Reliance’s retail business already had the master franchise for Hamleys and it currently operates 88 stores across 29 cities. In India, Hamleys clearly is a premium toy player and it will be interesting to see how Reliance will take this brand locally and internationally as increasing trend of online shopping is not only affecting the toy business but the retail industry as a whole. The world saw the bankruptcy of the biggest toy retailer; Toys “R” Us last year (read our blog Toys“R”Us, re-birth or last breath?). Toy “R” Us is said to have completely lost out to the online giant Amazon and the retail giant Walmart as they were able to offer far more variety and SKUs to the customers under one roof with great deals to grab.

Reliance is an established leading Indian refining and petrochemical player; it is one of the largest players in terms of capacity and production in the world. Over the last decade, this conglomerate has significantly shifted its focus to consumer-centric operations and strategically diversified into fast-growing telecom, retail and digital businesses to leverage all these aspects and at present, it aspires to make a mark in the online commerce segment. While its telecom arm Jio is in the race to leave behind the leading companies with more than 300 million subscribers, its retail arm is already the country’s biggest brick-and-mortar retailer in terms of revenue and number of stores. Currently, Reliance retail operates more than 10,415 stores covering 6,600+ cities and with over 500 million footfalls. It generated more than 130,000 crores revenue in FY19, which is almost double from the last year. The company is now firming up plans for a retail onslaught to combine its traditional outlets with an online foray for creating the world's largest online-to-offline new e-commerce platform. In fact, as per Bank of America Merrill Lynch, Reliance’s entry into the online retailing will help expand the current 15,000 digitised retail stores in India to over five million by 2023.

Hamleys acquisition is the latest in the series of inorganic ways for expansion to push its consumer business. In FY19, it dealt with 33 mergers and acquisitions (M&A), and joint ventures and investments valued at $2.9 billion, while this number was only 16 in FY18.  This has been seen as combining of dots over a network of partners either through investments or outright acquisitions to create a grip on India’s growing retail and online shopping market. In the retail segment, it has acquired Genesis (one of India’s top luxury group retailing major luxury brand like Burberry, Canali, Paul Smith, Armani, Just Cavalli, and Jimmy Choo among others), Mothercare and Satya Paul businesses and has a joint venture with Marks & Spencer earlier to acquire a dominant space in the booming luxury market.

Indian toy market was valued around $1.5 billion in 2018 and is expected to grow $3.3 billion by 2024 at 13.3% CAGR (Source: Imarc Research Report). However, the availability of good quality toys is still a huge issue in the price-sensitive Indian market. While over 80% of branded toys in the country are imported, thus, making them an expensive choice over cheap Chinese made toys. Moreover, due to growing smartphone penetration, mobile games are also gaining children’s attention and moving them away from physical toys. As the footfall has declined many mom-and-pop toy stores have seen closures, while organised retailers have cut down space for toys in India leaving only a few serious toys retailers like Hamleys (run by Reliance under licensing agreements before acquisition) and Crossword among others.

India is a young country, the last census data showed that the number of kids under 11-year of age was around 300 million. Now it would be worth to see whether Reliance will be able to grow in the Indian toy market through Hamleys and channelise it through its retail plus digitalisation strategy. Reliance’s retail will definitely help Hamleys with its supply chain management and distribution network. On the front end, it is already reaching out to a wider audience in far corners of the nation through its network of Jio stores, notably, where e-commerce does not have much reach. Interestingly, Amazon and Walmart have taken a massive hit recently when a new e-commerce policy was instituted in India, giving an open opportunity to Reliance to dominate the e-commerce and retail space. While offering quality toys at an affordable price could be a snag, it will also unfold whether Reliance will able to create the same magical shopping experience of sprawling Hamleys store across the country or not.

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