Toys R Us is plotting an explosive return to the UK after shuttering its entire British store estate three years ago – resulting in 3000 people losing their jobs.
Toys R Us ANZ, the company behind Toys R Us UK, agreed a long-term licence agreement last week, which will see it return to the UK next year.
The retailer’s estate of 100 stores in the UK closed back in 2018, with close to a quarter shut due to a CVA. The rest were impacted after the UK arm of the business entered administration.
Despite closing its stores in the UK, Toys R Us stores have remained open in countries across the world in Europe, Asia and the Middle East.
Toys R Us ANZ now has the licence agreement to run “digital and physical retail commerce” for the brand in the UK after signing a deal with brand acquisition firm WHP Global.
The companies involved did not give details of when shops would open here.
Toys R Us ANZ, previously called Funtastic, relaunched the chain in Australia in 2019.
Toys R Us ANZ chief executive, Louis Mittoni told Retail Gazette that “millions of fans are excited by this development”.
“Toys R Us and Babies R Us are much loved brands in the UK, and what our teams have described as ‘returning home’, not just a relaunch,” he said.
“The brands will return in what we refer to as ‘digital-first’ ecommerce, followed by a unique physical experiential offering.”
There is a plan for web sales to UK shoppers to start over the next several months.
“Our belief is that our ‘digital-first’ approach, which incorporates physical store elements in an exciting and immersive format – but with a strong ecommerce focus, is the right strategy for how toy and baby shoppers are and will be exploring and purchasing products for their families today and into the future,” Mittoni said.
“The UK, US and Australia all have high internet shopping rates.
“Our very wide range of items is best offered nationally online, and then in key areas in large format, destination experiential stores allowing kids to interact with toys before purchasing.”
Toys R Us currently has over 900 stores worldwide and ecommerce sites across 25+ countries, creating over $2 billion a year in sales.
It’s no surprise that Toys R Us is seeking to establish either technical or commercial relationships through a long-term licence agreement given that the UK has the largest toy market in Europe, worth £3.3 billion last year.
Retail expert Nelson Blackley said Toys R Us built up a very high level of awareness operating across the UK for over thirty years with 100 stores, and when it closed its stores, there was considerable consumer disappointment and a “sense of loss” was expressed.
He added that there has also been a huge and continued move online in recent times due to the Covid-19 pandemic, which means the single biggest beneficiary of the absence of Toys R Us from the UK market has undoubtedly been Amazon.
This is despite fellow toy retailer The Entertainer’s investment and growth in the past few years.
“Although specialist toy retailers like The Entertainer have all developed their toy range offer during the intervening three years, Toys R Us have never really been directly replaced,” Blackley argued.
“One of the reasons that Toys R Us went into administration in 2018 was that, burdened by huge long-term debt, they had failed to respond to the challenges presented by the dramatic changes in the toy market in the US and Europe,” he said.
“The problem Toys R Us had in 2018 was that it was carrying huge long-term debt on its balance sheet, which seriously weakened its ability to adapt to a changing retail climate.
“Presumably, if Toys R Us now reappear in the UK market they will structure the business in a way which will allow them to be much more flexible and responsive the consumers and to match competitors and so avoid making the same mistakes a second time.”
Mittoni told Retail Gazette that Toys R Us is now debt-free and has a “strong balance sheet” as well as supportive institutional and retail shareholders.
He added that Toys R Us ANZ UK is a publicly quoted ecommerce focused retailer.
“We respect the position of all other retailers who have a love of toys as much as we do and believe there’s a special place in the hearts of UK fascia for Toys R Us to provide a unique focus and experience with toys, and we look forward to providing an exciting alternative,” Mittoni said.
Liam Patterson, chief executive at marketing service Bidnamic, said Toys R Us’ success in the UK depends largely on how well the company will adapt to the significant shift in consumer behaviour towards digital commerce.
“Bricks-and-mortar stores are close to being a thing of the past, particularly for the toy category, where product consideration is low – most kids know exactly what they want – and the desire to find the best price for items often complained about for being expensive naturally favours ecommerce,” he said.
“Toys R Us has been able to relaunch in Australia so success in the UK isn’t out of the question and nostalgia alone may lure consumers back at the relaunch.”
However, chief executive and founder of retail agency Savvy, Catherine Shuttleworth argued that nostalgia will not be enough for the brand to reassert itself.
“Toys R Us will need a strong proposition, good commercial relationships and very strong pricing if it is going to be able to compete with online players and strong toy retailers in the shape of The Entertainer and Smyths,” she told Retail Gazette.
Shuttleworth added that Toys R Us should learn from what happened to Homebase under Australian ownership and know how to approach the UK consumer.
The toy market in the UK is undoubtedly large enough to accommodate a wide range of consumer demands.
Mittoni said he feels “confident” with Toys R Us’ digital-first and experiential retail model.
Indeed, relaunching as online-only as an initial offer to UK consumers may be a wiser option as it would allow Toys R Us to trial the market before investing in bricks-and-mortar – which proved a casualty in 2018.