While the past year has seen the toy industry achieve great results through channels nimble enough to adapt to the demands of the pandemic, for many a big name retailer, the road has been a rocky one. Among them, the iconic toy shop, Hamleys has suffered its fair share of knocks.
With an eye for analysis, Utku Tansel LLB, MBA, an industry analyst who has led global research programmes across the entire toys, games, and licensed consumer products spectrum, turns his attention to the ongoing fight for survival of one of London’s biggest tourist attractions.
Hamleys has become famous worldwide for its brick-and-mortar stores, captivating experiences as well as eye-catching shop windows. However, it has faced an increasing struggle for survival in recent years, failing to make a profit for some time in the UK.
The company’s accounts for 2019 reported a loss of nearly £10m on revenue of around £48m. In August 2020, it also parted ways with its UK chief executive after just seven months in the role.
Like many stores deemed non-essential closed to curb the spread of COVID-19 around the world, its London flagship store has been forced to close during all three lockdowns and even when trading, the lack of tourism and lower consumer footfall have made a big impact on sales, while the big chunk of office workers have continued to stay away.
In October 2020, the company made 60 (out of 208 staff) redundancies from its Regent Street flagship as a result of the negative effects caused by COVID-19. The ongoing pandemic has also delayed its plans to refurbish the seven-storey toy shop which has traditionally been a key attraction of London’s West End.
Ecommerce offers a glimpse of hope
However, despite the gloomy brick-and-mortar sales, it was reported that Hamleys’ online sales have been ‘through the roof’. The retailer was a relative latecomer to multichannel retailing, which means rivals have managed to bypass it with stronger cross-channel propositions.
In December 2020, it was announced that the toy store was preparing to launch its entire range of products on eBay’s marketplace as a move to modernise and expand its online presence, selling over 1,600 products via the online marketplace.
Office for National Statistics (ONS) data highlights that in January 2021, the proportion of online sales within total retailing reached a record high of 35.2 per cent up from 19.5 per cent a year ago, a true reflection of the impact the pandemic has had on British consumer behaviours. According to ONS, the proportion of online in non-food stores – which also includes toy specialists – jumped to 39.4 per cent due largely to the imposed lockdown and the forced closure of non-essential shops in the UK.
The store experience is one of Hamleys’ USPs differentiating it from rivals making its outlets a destination in their own right. This approach also enables the company to command high prices. Considering the forced store closures, the restrictions on its signature in-store interactive toy demonstrations/puppet shows due to the pandemic, the retailer has a steep hill to climb when it tries to make up for the lost trade through online.
Sink or swim
As I highlighted in my “Retail and E-commerce: The Impact of COVID-19 in the UK” Opinion piece previously*, the COVID-19 pandemic has transformed shopping behaviour completely in the UK making a profound effect on the retail industry.
One of the biggest outcomes is the accelerated shift to online which has resulted in booming e-commerce while traditional shopping experiences are challenged. For consumers, a shopping day out will continue to be a leisure activity and it will increasingly be a choice rather than a necessity. Overall, the retail landscape will be leaner, the battle for consumer attention will be fierce and even if the economy recovers, consumers will remain value conscious.
The future of retail requires an understanding of the new consumer. Going forward, like many other retailers, Hamleys will need to be much more agile, continue to invest in online services ensuring a seamless shopping experience for its customers. The company may also have to adopt a completely new pricing strategy to increase sales and be able to compete with Amazon and other online retailers.
These are undoubtedly transformative times and Hamleys UK will either adapt and become a viable/profitable business as a result of it or fail to address the shifting consumer priorities at its peril.
Utku Tansel has 17 years of success in driving global thought leadership, project and content management, delivering strategic business intelligence and insight to major international companies. He can be contacted via LinkedIn