If you have started a new job recently and it hasn’t quite gone according to plan, perhaps you can console yourself by comparing your experience with that of our new Prime Minister and Chancellor. Whatever may have happened to you, it couldn’t come close to the damage the blundering duo has done to the UK economy – crashing the pound, wrecking the mortgage market and almost destroying several major pension funds in the process. It is hard to think of a more disastrous start to anyone’s tenure, and our only hope is that someone decides to take the same approach as the owners of Watford Football Club and remove them before they can wreak further havoc.
Whichever way you look at it, the quids aren’t alright – I suggested in last week’s Blog that if the pound fell below $1.10 it would cause major issues, and when it sank to $1.03 at one stage this week, I can only imagine the sense of panic that would have taken hold at many suppliers and retailers. Sterling may have ‘rallied’ to $1.08, but that is still not a great base from which to be operating. Goods coming into the UK – which in toy terms means pretty much all stock – are going to be appreciably more expensive unless there is a hasty reversal in currency fluctuations…which looks unlikely, given the reluctance of the government to admit they got the mini-budget so painfully wrong.
Still, I spoke to one person this week who has found an upside in sterling’s weakness (apart from all of Kami-Kwasi’s hedge fund mates) – the man behind the return of Toys R Us to the UK, Louis Mittoni. Having committed to significant investment in infrastructure and building the new UK team, the collapse of sterling has actually helped to mitigate the overall cost of setting up the new business. Every cloud, eh? More importantly, it is good to see the new Toys R Us operation finally up and running – a few months later than initially planned, but well timed for the festive season. The new website had its soft launch this week, with full launch expected within the next few weeks.
Indeed, after our story ran online on Tuesday, several other media outlets picked up the news, resulting in a healthy surge of visitors to the site, apparently almost crashing the server on a couple of occasions. I gather that around 84% of traffic has been from mobile devices, and the interest generated certainly seems to reinforce Louis’ belief that the emotional connection between the brand and UK consumers is going to be a key factor in the fortunes of the new operation. As Louis told us: “Loyalty is going to be key – we need more than just a transactional advantage.” He even suggested that not only is brand awareness higher here than in Australia, but it may even be higher than in the US.
The new site looks engaging: it features some 4500 toy products from around 100 suppliers (including a healthy sprinkling of smaller companies), plus an additional 1300 baby products from approximately 40 suppliers. Offering free next day delivery on orders over £20 is a bold step; Louis did admit that this may not be a permanent arrangement, but apparently the UK’s logistics network is far more advanced and significantly cheaper than Australia’s, which has given Toys R Us the confidence to launch with a generous free delivery offer, as well as the promise of next day delivery if orders are placed by 6pm.
Of course, the precarious nature of both the pound and ensuing consumer confidence issues may well lead to some volatile pricing fluctuations in the toy retail channel over the next few months: Louis claims that Toys R Us will “react where appropriate”, and that the goal is for the new operation to break even or make a profit at some stage next year.
There has been plenty of other retail activity over the past week: we’ve seen the launch of both the new Smyths and Toymaster catalogues, while Hamleys was the latest retailer to unveil its predictions for this year’s top-selling festive toys. It certainly feels like retailers have decided to start making a noise nice and early this time round, presumably hoping to encourage consumers to make festive purchases sooner rather than later.
Elsewhere this week, registration opened for the London Toy Fair, which promises to be an even more important event than usual next year, given other moves in the international trade show market. I will no doubt return to this subject in weeks to come, but despite the welcome news that quarantine restrictions have finally been lifted in Hong Kong this week, I am not sensing the enthusiasm that I thought this news might be greeted with in the global toy community. Rightly or wrongly, some people seem to have made their mind up that the future of toy previews lies in LA rather than Hong Kong, and moves are already afoot to address some of the problems that might accompany such a move – specifically, the sprawling nature of the current set-up, which is said to be costing visitors a small fortune in car rental or Uber costs. Attempts at creating a new permanent toy building – like the set-up in Tsim Tsa Tsui or even New York back in the 90s – are underway, and while there is a very long way to go to make that dream a reality, the ball is certainly rolling.
For what it’s worth, I still believe that there will be a strong toy presence in Hong Kong in January, driven by visitors from across Asia and the Middle East – maybe there will be fewer Americans and Europeans than usual, but there is life beyond both regions. If you are planning to go, a sobering thought for anyone like me who has been visiting Hong Kong for many years; pre-Brexit, you would have got 13.5 HK dollars for your pound. This week, you would receive a paltry 8.5 dollars for the same pound. That’s going to mean some mightily expensive rounds in Lan Kwai Fong this time round. Thanks a bunch Liz and Kwasi.