Analyst: Toys ‘R’ Us revival unlikely in Australia

Bankrupt retailer Toys ‘R’ Us’s new owners, Solus Alternative Asset Management, are considering a relaunch of the brand in the US next year.

The plan would include bricks-and-mortar locations, following an effort to raise capital, sources familiar with the matter told Bloomberg.

Although the report doesn’t mention an Australian revival of the brand, IBISWorld senior industry analyst Hayley Munro-Smith said that doing so would be difficult in the current economic climate.

“Department stores and online retailers remain a key threat to the relaunch of Toys ‘R’ Us in Australia,” Munro-Smith told Inside Retail.

“Children’s toy specialists have faced growing competition from the well-established and widely recognised discount department stores – Kmart, Target and Big W… [which have] earned a reputation for dependable service and reasonable pricing among Australian consumers.”

Assuming a relaunch sees Toys ‘R’ Us returned to its former glory, it would need to establish a strong enough market position to challenge these retailers as well as the online market, according to Munro-Smith.

It is far more likely, Munro-Smith said, that the brand could reinvent itself as a smaller, niche retailer, or operate entirely online.

“This would involve a considerably smaller store footprint (if any) and a product range that capitalises on current, short-term trends or fills gaps in competitor stock,” Munro-Smith said, noting that Toys ‘R’ Us’s decades of experience in the Australian market would not go to waste here.

However, the ultimate decider of a relaunch in Australia would be consumer appetite, with consumer spending already limited by rising mortgage repayments, fuel prices and electricity rates.

“At this point in time there is only so much spending that customers are capable of and limited savings that they have available. This will undoubtedly be at the forefront of any decision to relaunch Toys ‘R’ Us in Australia,” Munro-Smith said.

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