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Toys ‘R’ Us returning to Australia with online focus and small-format stores

Toys ‘R’ Us and Babies ‘R’ Us are returning to the Australian market through an exclusive licensing agreement with Hobby Warehouse.

The agreement allows Hobby Warehouse to sell through the Toys ‘R’ Us and Babies ‘R’ Us websites in Australia and New Zealand, including private label products owned by parent company Tru Kids Brands – such as Fastlane, Imaginarium, Koala Baby, and Koala Kids. This is the first time Toys ‘R’ Us and Babies ‘R’ Us have had a presence in the New Zealand market.

Launching on June 12, the offering will initially be online-only, but Hobby Warehouse plans to launch smaller-format ‘experience centres’ for Toys ‘R’ Us and Babies ‘R’ Us beginning in 2020.

“We are delighted to bring the much-loved brands of Toys ‘R’ Us and Babies ‘R’ Us back to Australia and introduce them to New Zealand,” Hobby Warehouse chief executive and Toys ‘R’ Us Australia director Louis Mittoni said.

“Our mission is to encourage children to engage with as many forms of play as we possibly can. Hobby Warehouse is a digital native with a keen understanding of how to accelerate and match the requirements of the modern shopper.”

Tru Kids executive vice president of global licensing and general counsel James Young said that Mittoni and his team have a strong digital vision, and understand the heritage of the Tru Kids brands, as well as how to evolve this heritage for the modern consumer.

“This is an exciting milestone for our company as we continue to grow Toys ‘R’ Us and Babies ‘R’ Us around the world,” Young said.

The Toys ‘R’ Us Australia management team. Left to right: Toys ‘R’ Us marking manager Tristan McLindon, Toys ‘R’ Us Australia director Louis Mittoni, Mittoni Pty Ltd general manager Lian Yu and Toys ‘R’ Us Australia chairman Kevin Moore

Prior to its demise, Toys ‘R’ Us was the largest toy retailer in the country with a market share of over 20 per cent, according to IBISWorld senior industry analyst Kim Do.

The retailer will be returning to a very different market, however, with its collapse changing the way consumers shop for toys.

“The company’s decline… accelerated the rate at which department stores and online-only retailers have captured market share, as consumers have shifted their spending away from industry retailers,” Do said.

The shift away from physical retail, and towards a more online-centric offer, should make the retailers re-entry smoother.

“Previously, the Toys ‘R’ Us and Babies ‘R’ Us business model in Australia was focused primarily on large physical retail stores which had high fixed costs and extended periods of relatively low sales due to seasonal factors,” said commercial advisor Kevin Moore, who helped negotiate the agreement.

“Going forward, the business model for Australia and New Zealand will be online focused, with smaller and fewer physical ‘experience centres’ that allow children and their families and friends to see and touch our products.”

According to IBISWorld data, the toy and game retailing industry is expected to see a revenue drop of almost 16 per cent over 2019, with the market expecting to generate around $740 million – down from the $880.2 million seen in the prior year.

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