Hamleys has been a landmark on London’s Regent Street for more than a century and the retailer is now focused on taking its unique offer overseas.

Hamleys, Regent Street

The Hamleys brand is synonymous with London’s Regent Street, which has been home to the iconic store since 1881.

Its seven-floor toy box in the heart of London’s West End has attracted droves of excited children for decades. The unique theatre created by in-store demonstrations, puppet shows, hundreds of toys and a shop designed around a child’s viewpoint is responsible for making magic a reality for many and the brand is recognised the world over.

But behind all this fairy tale wonder is a business with plenty more opportunity, and Hamleys is pursuing it overseas.

Hamleys chief executive Gudjon Reynisson says: “Families and children all over the world are the same - they want toys to be fun, which makes us well placed to take our unique retail proposition to international markets.”

Hamleys has been leveraging its brand awareness by expanding internationally. Over the past five years it has been rapidly extending its international store reach, opening shops designed to delight children on almost every continent.

Hamleys head of international development Helen Barnish says the retailer’s proposition is unique.

“Everyone knows Hamleys and people always have a memory of visiting the store so it has emotion attached to it, it’s not just a store on the street.

“They remember going in with their children or going in as a child themselves, so people have a very magical experience and memory and feel it’s a very special store,” she says.

The franchise model has been such a success since the retailer took its first international steps in 2008 - it
doubled its franchise stores in 2012 and has almost doubled them again this year - that Hamleys aims to open more than 200 overseas stores in the next five years.

The latest plans come a year after French toy retailer Groupe Ludendo bought Hamleys for an undisclosed sum.

It is an ambitious target for a retailer that has 33 international stores at present and nine in the UK. But the expansion trail is already well trodden.

Hamleys now has a presence in Jordan, Dubai, India, Cyprus, Denmark, Saudi Arabia, Russia and Sweden, and it is preparing to open in the Malaysian capital Kuala Lumpur.

Changing strategy

It seems that the charms of the retailer’s magical world are working. Hamleys revealed this week that unaudited results for the 12 months to December 2012 showed EBITDA surged 12% to £7.2m. Global sales soared 18%
to £94.1m. Meanwhile, like-for-like sales across its franchise business soared 61%.

“People are moving away from the feeling that Hamleys is just a store on Regent Street,” marketing director Mark Drummond explains. “All of the stores we open now are effectively compact or regional, not a flagship Regent Street format.

“For a business that has traded for 253 years, it’s going to have to change its focus as it goes through the strategy that we’re going through now.”

The last five years have been transformational for the business. In 2007, with its single Regent Street store and a handful of shops at UK travel hubs, Hamleys posted losses before tax of £2.4m. In 2008 the economy plunged into recession as consumers tightened purse strings. Hamleys had to look at strengthening the business.

The retailer began testing different locations in the UK and Ireland. It opened its first regional store outside London in Dublin in 2008, then in 2010 it launched Glasgow and last year it added a Cardiff branch to its estate.

It has proven to be a successful strategy because these stores alone have contributed more than £10m to Hamleys’ domestic sales.

They have also provided the blueprint for the overseas stores. In 2008, Hamleys tested the waters in Jordan and Dubai, where there is a well-established appetite for British brands. Despite the economic conditions, Hamleys didn’t view it as a risk.

“The Middle East has always been a good market to go into in terms of the opportunity for international retailers,” says Barnish.

“You can’t open there yourself, you have to go through a franchise partner in the Middle East,” she adds. Meanwhile, the tax-free benefits out there are also a draw, making the decision less risky.

Since 2008 franchising has been Hamleys’ chosen model for overseas expansion.

Reynisson says: “Franchising is a model that has proved successful for many retailers and has been used successfully to grow international businesses.”

Hamleys now has three store formats that it exports, enabling it to roll out shops to different countries with

The three models are the flagship, which is 10,000 sq ft to 25,000 sq ft, the compact store, which takes up 5,000 sq ft to 8,000 sq ft, and the airport stores, which are about 1,000 sq ft.

Hamleys retail and brand director Ralph Cunningham observes: “We have found that the compact store works particularly well for Scandinavia, whereas Dubai malls will have a flagship.”

Reynisson says: “Every country has its own unique situation and challenges, but we have a strong team with a lot of experience and work closely with our franchise partners to ensure we deliver the Hamleys magical experience.”

Hamleys has had to expand its teams to support the franchise growth and holds annual conferences so that franchise partners can share best practice.

Barnish says Hamleys is closely involved in the opening process, choosing the right properties with the franchisees and ensuring they use the correct store formats.

Selective partnerships

The retailer says any potential franchise partner has to adhere to strict criteria after being recommended or approaching the parent company directly. Hamleys is viewed as a big footfall driver and many like to use it as an anchor. Partners are always experts in retail that already have another Western retailer on their books, to ensure they understand the expectations and process.

Cunningham explains: “We’re not looking for partners who are new to retail. For example, our partner in India, Reliance Brands, has a stable of brands including Superdry, Diesel and Thomas Pink, so they understand what retail is all about and what international retailing is all about.

“It’s not as though we have to reinvent the wheel.”

The cultivation of franchise relationships has meant that some partners have been able to work more independently from the UK business.

Barnish says: “Our more mature franchise partners are becoming very skilled in the support that we’ve previously offered them in terms of store launches, staff training and demonstrations.

“Our single point of difference is the theatre that we create in Hamleys stores and we’ve now found that through investing in our partners we’ve managed to replicate it.

“They are now becoming more mature and training their own staff internally.”

It is this turning point that is driving Hamleys’ ambition to expand its international footprint six-fold.

Local expertise

Reynisson insists that even before being taken under Ludendo’s wing, Hamleys had “ambitious plans in place”.

The retailer aims to open 40 stores a year from next year, stretching across the globe, with the exception of North America where the toy market is much more crowded than elsewhere.

Barnish explains: “We’re developing existing markets with our existing partners. Some markets will take more stores than others, such as big cities like Moscow where we know we can operate quite a large number of stores. But there will be other cities where we will have one store.”

She says Hamleys will work with its partners to build a development plan, as well as with landlords to ensure sites are available at the right time, such as where a new mall is operating.

She adds: “At the same time we do have a global expansion plan. So we’re actively working on new markets to open either with new partners or existing partners that may go into additional territories. So for example, our partner in Malaysia will also open stores in Singapore for us.”

Despite the varied trading locations it is key to ensure the brand is aligned across all stores.

Barnish says that whether in Indonesia or Moscow, Hamleys will be traded the same way using the same marketing campaign and the same point of sale - in short, everything is directed by the Regent Street store.

Hamleys has ensured that each store retains the experiential theatre, such as toy demonstrations and colourful store designs that are so key to the Regent Street flagship.

Hamleys will open five more stores overseas before the end of the year. In the last fortnight it opened in Stockholm, while in October it makes its debut in Malaysia and it will soon have a store in Africa.

Cunningham says: “When you get critical mass the growth has natural momentum. When we have the international exposure more of our potential franchisees are seeing the brand and they want a piece of the action.”

Hamleys’ bosses hope to make their plans for international growth seem like child’s play.

Cultural differences - No bears in the Middle East

As a toy retailer, Hamleys’ offer tends to be generally the same the world over.

But it has had to adapt to markets where local differences mean that some toys are more in demand than others.

Hamleys head of international development Helen Barnish says: “Walking into Hamleys in the Middle East, customers don’t really like plush bears and animals for religious reasons and because it’s so hot in that market [and the fur gets sticky], so there will be less of those products there. But in another market they will be huge, such as India, which is ex-Empire and bears are a huge part of their culture.”

She adds: “Scandinavian customers generally have higher average spend on wooden toys or traditional toys.

“But in Arabic markets they see them as artisan [handmade] and that they could make it at home, so they prefer plastic and shiny toys.

“We don’t just do a shop in a box.”