“We’re very excited about the project, and naturally, we’re holding some of our cards close to the chest […] but we expect several aspects of the facility to be very unique to Australian retail, and particularly to the toy and baby industry.”
Besides the Toys ‘R’ Us experience centre, the hub in Clayton will also house separate experience centres for Babies ‘R’ Us and Hobby Warehouse, which are all part of Toys ‘R’ Us ANZ Limited, previously known as Funtastic.
Funtastic acquired Hobby Warehouse last year, including its licence agreement with Toys ‘R’ Us global owner Tru Kids Brands to operate the Toys ‘R’ Us and Babies ‘R’ Us businesses in Australia and New Zealand.
Hobby Warehouse relaunched Toys ‘R’ Us as an online-only business in 2019. Babies ‘R’ Us is set to relaunch online in the coming days.
The long-term plan is to open additional co-located Toys ‘R’ Us, Babies ‘R’ Us and Hobby Warehouse experience centres in other states in Australia in future.
State-of-the-art logistics hub
A return to physical retail has long been part of Mittoni’s plan to revamp the Toys ‘R’ Us business in Australia, even as the retailer continues to gain traction online.
According to a presentation to shareholders last month, Toys ‘R’ Us and Hobby Warehouse’s combined e-commerce sales revenue, excluding third-party marketplaces, was $9.5 million in the first half of FY21, which includes the key holiday trading period, up from $3.1 million in the second half of FY19.
The number of online orders increased from 15,000 to 88,000 over the same period.
“Online has been growing quite exponentially, and it has accelerated in the last 18 months,” Mittoni said.
This is despite limited investment in marketing and customer acquisition in the period due to logistics constraints. The new 20,000-square-metre state-of-the-art logistics hub will address these constraints when it opens next year.
“We want to be able to meet the demand — not only the increased [sales volume] that the company has, but the efficiency of meeting the expectations of our customers,” Mittoni said.
“What this facility will enable us to do is stock a much larger range of toy, baby and hobby products,” he said.
“Already, we have a larger range than many of our peers within the industry […] and our goal is to continue to increase that range.”
Together with robot and automation technology, this larger range will enable the company to offer same-day or next-day delivery to online shoppers, depending on their location.
Eventually, Toys ‘R’ Us will close all other facilities it operates across Victoria and New South Wales and consolidate its logistics operations in the Clayton hub, helping reduce the cost of doing business.
$140 million business
Besides the experience centre and logistics space, the hub will also serve as the company’s new headquarters, and expanding the Toys ‘R’ Us team is a top priority, according to Mittoni.
“We’ve undertaken a very diligent procedure […] to build a formidable company with a very strong foundation over the next several years, and that requires an investment ahead of that growth, and that’s exactly what we’re doing,” he said.
In its presentation to shareholders last month, the company revealed its goal is for Toys ‘R’ Us to take 5 per cent of the $2.8 billion toy market and for Babies ‘R’ Us to take 5 per cent of the $2.5 billion baby market. This would see the two businesses represent $140 million and $125 million, respectively.
The company aims to have Hobby Warehouse take 3-4 per cent of the $1 billion hobby market.
“We’re still just a number of months into rebuilding the Toys ‘R’ Us company,” Mittoni said.
With the upcoming relaunch of Babies ‘R’ Us and the key holiday trading period still to ahead, he expects to see “strong growth through the tail end of this calendar year”. He is also confident the company will avoid the stock shortages and freight delays it experienced in 2020.
“Much of our supply is pre-planned well in advance through very well-planned businesses, such as Lego, Mattel, Hasbro, Spin Master, MGA and so on,” Mittoni said.
“We’re not experiencing delays in our supply chain, and many of the freight issues haven’t impacted our business because of that as well.”
And while the ongoing Covid lockdowns in Australia have dampened discretionary spending, Mittoni believes shoppers will continue to buy toys and hobby supplies.
“In testing times such as now, we all look to how we can improve our lives. Many of the ways that we do that are through playing games together, entertaining children with toys and activities and engaging in hobbies that we may not have engaged with for many years as adults,” he said.