Internet can't replace the Hamleys store experience: Gudjon Reynisson

Image: Mexy Xavier

Ever since its entry into India in 2010, British toy company Hamleys has scaled up aggressively. In six years, it has expanded to 26 stores in 11 cities and plans to double the count in the next two years. While the Hamleys model of making its stores a hub of activities works best when there are at least 1,000 footfalls a day, its ability to meet the target in the country makes the company’s CEO Gudjon Reynisson gung-ho about its prospects in India. The Icelander, who became CEO of Hamleys in 2008, is looking to cash in on rising incomes and greater social mobility. On a recent visit to the country, he spoke about his India experience, why Hamleys has an edge over ecommerce companies and its global expansion plans. Edited excerpts:

Q. Abroad, Hamleys is known as a place where children go to have a good time. How easy or difficult has it been to recreate that experience in India?
The core proposition of Hamleys as a brand lies in the experience of a visit to the toy store. This brand founded in 1760 (I never get used to the fact that this company is older than the US) by William Hamley, a Cornishman, has seen two World Wars and has never been out of business. From the first day, the store was about creating a place for children and families to experience the magic and theatre of toys; that concept is very much alive today and we have tried to enhance that. The landmark store on [London’s] Regent Street was opened in 1881 and has been one of the most frequented tourist destinations in the city over the years. To offer a truly interactive experience, we now offer things you would normally link to theme parks, for example a carousel. We just tell people to come and have a good time. I am often asked by journalists if I am worried that they might buy the same thing online. But guess what? They always buy [it here].

Q. Did you imagine that the Indian market would perform so well? Hamleys has now scaled up to 26 stores in India.
In 2010, we had only taken baby steps in internationalising the brand. At that time, the likes of Lego and others didn’t think India was ready and said they won’t be able to support us in a big way. We would not have entered India at that time if we felt that we hadn’t found a strong partner that understood the brand [In India, Hamleys has tied up with Reliance Brands. The company is an arm of Reliance Industries that owns Network18, the publishers of Forbes India]. As most inexperienced businessmen operating in India, I thought the country was a market of 1.2 billion people, but it is much smaller and of only 100 million. Yet, to be here opening the 26th store is a great moment for us.

Q. What have you done differently in India?
I have been lucky to take Hamleys into 23 markets and each one is very different. But the interesting thing is that the markets and people are more the same than they are different. I would put a number to it actually—they are 90 percent the same. We weren’t a retailer that was very big in the home market and then opened a small international division. We did it the other way around. We were an international company from the beginning with a small home market. We decided to become the best franchisors to international partners and that model has worked well.

Q. How much of the Hamleys collection is local and how much is global?
The model works in such a way that the local partner sources from the local distributor. The main reason for that is the way these companies are set up—they have their regional offices that supply to local retailers. We have seen that it is better for the retailers to have these relationships at the local level. Twenty-five percent of the products sold in India are sourced by us globally and then sold in local markets as Hamleys’ branded. The rest are sourced locally (for instance, Lego, Mattel, Hashbro, etc).

Q. A lot of toy buying is now done online? How are you thinking about the online space?
I have to give you a slightly long answer here. It is a fact that ecommerce is growing at an astronomical pace in some markets. It is mostly powerful in areas where you know exactly what you want. But the one thing that the internet has not replaced is the power to create the experience of a Hamleys store. Besides, ecommerce for a toy retailer has one disadvantage: Children do not have credit cards.

Having said that, ecommerce will always be a big part of the overall volume of sales. That also means that some retailers who focus only on price will have trouble surviving. For a brand like Hamelys, this happens to be a fantastic opportunity [as ecommerce can root out competition].

Besides, the internet can deal well with the transactional need to buy and you can reach a market where there are no stores. But the store experience we offer is special and online options can’t touch that. At this stage, I do not see ecommerce as the major driver of profitability or growth.

Q. Given that the brand has internationalised aggressively, how much more could it expand globally in the next five years?
Sitting here today I would wager one of the 10 pound notes in my pocket that we would have 500 stores in the next five years. At the end of 2016, we will have 100 stores. So that is a five-time jump. The big focus for us will be in entering the US, which will be a fantastic market for us. The growth in India will also be very important for us: It took the Indian operations six years to get to 26 stores. It should take less than two years to double that. The growth in China is showing signs of even more opportunities than what we have dreamt of. We will also grow in markets like Russia, South Africa, the Middle East and Europe.