When one says kids, one of the first words that come to mind is their toys. Moreover, when someone says toys, one of the most recognizable brands in the world of toys is Hamleys. India based textile to telecom conglomerate Reliance acquired the 259 years old UK based toy company for around $620 crore.
What are toys?
The Oxford English Dictionary describes a Toy as an object for a child to play with, typically a model or miniature replica of something. Kids are known to play with toys, as they are enjoyable to them and through them, they learn many things about this world too.
What is Reliance?
Reliance Industries Limited describes itself as an Indian conglomerate holding company headquartered in Mumbai, Maharashtra, India. Reliance owns businesses across India engaged in energy, petrochemicals, textiles, natural resources, retail and telecommunications. They run the world’s largest single location oil refinery.
What is Hamleys?
Hamleys is the oldest and largest toyshop in the world. Their 259 years’ legacy continues to excite every kids’ imagination and that has made them one of the world’s most popular toy sellers. The company was founded by William Hamley as “Noahs Ark” in High Holborn, London, in 1760.
Why Hamleys for Reliance?
Reliance has been acquiring smaller companies for a long time now. However, this is the first time that the Indian giant has moved abroad with its acquisitions. With Hamleys, the company can now expand its already growing retail sector even faster.
Reliance has been eyeing the Indian e-commerce sector for some time now. The major players in the market Amazon and Walmart owned Flipkart along with smaller players such as Snapdeal and PaytmMall are wary of the situation. The reason for the existing players to be wary is that Reliance has deep pockets which will help the company to acquire a large portion of the market without thinking about profitable returns. They did it with the telecom industry when they run Jio at loss for the first two years and completely disrupted the Indian telecom sector.
The Indian toy market has been flooded with the incoming huge Chinese wave. As most of us already know that China is called the world’s factory due to the dirt cheap labour costs in the country and the easy availability of the natural resources required for manufacturing. However, the situation has slowly changed against the country’s manufacturing industry. The Chinese economy has been on a growth curve for the last 3 decades. This has resulted in the rise of the labour costs and also the costs of natural resources. The rise in costs has compelled most of the renowned companies to move their manufacturing bases from China to many South East Asian countries such as Vietnam and Thailand or to the emerging manufacturing hub India.
India is the second most populated country in the world after China. Moreover, the population growth rate of India is far greater than that of China and experts claim that in the next decade or two India will surpass the Chinese population numerically. This means that India has a lot more babies than any country in the world. This huge number of babies would need toys and here comes Reliance with their offering for the domestic market by acquiring a global brand, i.e. Hamleys.
Reliance will benefit from the acquisition of the toy company. They can capture the huge Indian kids market through their offline as well as their online platform, as the company is planning to enter the multi-billion dollar Indian e-commerce market very soon.
Suggestion for the company
Hamleys, although a globally recognizable brand will face some major hurdles in India. Hamleys was already present in India but it did not gain widespread popularity due to its high price as compared to the Chinese toys. Reliance would need to modify a few of Hamleys product line to make it suitable for the price-sensitive Indian market and then it could have a better future than its previous owners.