South Africa’s retail sector, at the higher end, remains hugely reliant on effective distribution networks. For many of the major retail giants, import continues to play an essential role, none more so than in South Africa’s toy industry.
The Toys R Us brand is recognised the world over. For many years in South Africa, the company relied on local suppliers such as Chris Larsen and Mo Mia, who worked closely with the Reggies and Toys R Us side of the business, on issues like brand licensing, sourcing and logistics.
The first Reggies store was opened in 1971 and the family-owned business Redgwoods grew operations to include the Toys R Us license. Larsen and Mia were owners of Redgwoods’ largest supplier of baby and toy product as well as supplying various key retailers in the country. After years of a close working relationship they acquired Redgwoods in December 2012 under the company Amic Trading (Pty) Ltd. With a strong logistics, sourcing and brand licensing background as well as a strategic approach to the retail brands, unprecedented growth for the brands is expected.
“After building and sustaining our distribution company into a large-scale successful enterprise it was a natural progression to move into the challenge of the retail environment,” comments Larsen. “Bringing a strong logistics knowledge to an already powerful retail chain was the perfect fit for the growth possibilities for Toys R Us and Reggies.
“With the global trend of retail expansion into Africa and the entry of Walmart into South Africa, Toys R Us and Reggies needed to put in place long-term planning and a fresh force to push the chain to new heights,” he continues.
“In order to maintain market share as well as to pre-empt the increasing competition, the challenge to grow the business as well as a personal growth opportunity presented itself to Christian and I,” adds Mia.
Amic Trading became the license holders for Toys R Us as well as the owners of the Reggies brand on 1 December 2012. The new company is South Africa’s largest and most reputable toy retailer with a national footprint of 66 stores under 2 retail brands, Toys R Us (inclusive of Babies R Us) and Reggies. As exclusive license holders of the international retail chain, Toys R Us, there are 25 Toys R Us stores strategically positioned in all major metropolises in South Africa. These form part of the nearly 1,500 Toys R Us stores internationally.
Complimenting this network are 41 Reggies stores, easily accessible in malls and centres nationwide and a brand that brings 45 years of heritage. The location of stores forms an important part of Amic’s strategy, as Larsen explains:
“As owners of two separate toy retailers we strategically place our stores to prevent cannibalization of our own sales. Not only are there geographical considerations in finding relevant store locations but also the mall environment is considered and of course the community and reach the location serves.
“Toys R Us stores are destination stores of 1,000-2,300 square metres and will be found in all destination malls in the major cities of South Africa. Reggies stores tend to be a little smaller, typically covering 500 square metres and servicing localized areas and suburbs as well as outlying areas outside of the main urban districts. The Reggies store is your “neighbourhood” go-to vs the destination super-mart that is Toys R Us.”
Storage space is inevitably a challenge, as Mia explains: “On a short-term operational basis our largest challenge is managing and locating our retail space and rentals. In a landscape where retail is king – landlords are emperors. It is a continuous challenge to account and forecast for lease increases as well as implement business objectives in conflict with landlord requirements.
“We carry approximately 25,000 SKUs throughout the year, with toys making up the largest category and accounting for around 55 per cent of that figure. To an extent there is a seasonal element to the SKUs but generally our offering remains stable throughout the year. Naturally our volume is increased across relevant SKUs over the Christmas period. The SKUS themselves vary throughout the year but the total SKU count remains the same.”
Amic’s range of specialist toy, baby gear (including prams, highchairs, strollers), nursery furniture (cots, gates etc.), outdoor fun (such as pool accessories), games and electronic entertainment make them the leaders in both the toy and baby categories in South Africa. Amic is the only specialist retailers in the category providing a “hybrid” offering to shoppers through an unprecedented one-stop shopping experience in both toy and baby categories.
Marketing primarily targets parents and specifically mums, with trends indicating that female shoppers far outweigh male shoppers, particularly when it comes to childcare product spend.
“On a secondary level we target kids with regard to in store experiences and brand activations through appropriate platforms such as kids magazines and social media. Toys R Us is a full toy experience and outside of our extensive toy offering we have in store brand activations where characters and brands come to life.
“In store activations are less compatible with our Reggies stores due to the smaller size of the stores therefore we target kids in our Reggies store through our Reggies Fun Club, a loyalty program that gives the child inside information to product launches, discounted specials on their birthday and a discount voucher on joining the club,” explains Larsen.
Many of the products have an educational element in mind, as Larsen continues: “Yes, we are proud to offer our shoppers a range of educational items throughout all product categories. In baby and toddler we offer a range of licensed toys that aid the development of fine motor skills as well as larger babygear accessories (such as walking rings) that aid gross motor skill development.
“We carry a large selection throughout the year through puzzles, books and board games which aid learning and literacy. From infant upwards we carry the range of Leapfrog tablets and educational aids – the 2012 educational toy of the year. The Leapfrog range focuses on the development of literacy and learning aids that encompasses a fully integrated system from product to online apps. We also have exclusive retail distribution in South Africa for the Oregon Scientific range of learning laptops and learning aids to highlight a few of our key educational items.”
Of course seasonal peaks such as Christmas put extra emphasis on supply chain management – and for Amic, 95 per cent of products are imported, as local manufacture is limited in the toy and baby sector, because of this Amic has a supply base of local suppliers who hold imported ranges.
The company’s core distribution centre is based in Durban, KwaZulu Natal adjoining the head office, which warehouses and distributes the large majority of products. Further distribution centres are located in Johannesburg and Cape Town, and have been enhanced by the recent investment in inventory management technology which has improved stock holding and assisted procurement decisions.
The implementation of this new retail IT system will synchronize and streamline warehouse functionality and buying processes and will enable the company to analyze data in real time and instantaneously make changes to immediately adapt to market. Further investment is currently taking place to modernize each store’s computerized systems for stock and point of sale, which will become integrated with the new software.
Quality management goes across the board at Amic Trading and includes an innovative way of training up the company’s 1,300 employees, as Mia outlines:
“To ensure quality service to our consumers Amic has invested in an in-house concept store equipped to replicate an actual store. The concept store is accompanied by a training facility where store staff are trained in best-in-class merchandising solutions, product insights as well as customer engagement.
“Our biggest investment has been in our staff – our team is central to aspects of our planned success. Employment equity and skills development are the cornerstones of our staff strategy. In line with this we have employed new key management in various functions of the business including Human Resources, Marketing, Warehouse Management, Information Technology and Buying to include specialist expertise in each category division.”
Of course maintaining a reliable, high quality supplier base is an ongoing commercial challenge. Larsen says that the company puts high value of its supply chain:
“We consider suppliers as partners in our business and key players in our growth. Locating and forging relationships with suppliers is a long-term decision for us and is not taken lightly. Sourcing and securing quality suppliers, specifically on the international supply base can be a difficult task.
“Another commercial challenge is finding the balance between imports and local supply and providing a fair price structure to our consumer. From a stock perspective – ensuring efficient processes and minimizing stock holding whilst still guaranteeing a full offering to the consumer is a constant balancing act.
“Inflation and instability in our Rand impact our consumers spend and a fluctuation in check-out basket size occurs. This, once again, makes planning and forecasting a challenge. Revenue is further jeopardized in this regard as rent expenses increase due to inflation and spending power decreases.”
It has been an interesting few months and with the “settling down” period progressing well, Larsen and Mia are excited by the future:
“The future? In a word – Africa. Africa is a key focus region globally and with our expertise in supply and retail to the local South African market we plan to aggressively expand our footprint into Africa. With our anchor in South Africa we envision propelling our presence north and being the number one toy and baby destination for Africa,” Larsen affirms.
“There are huge opportunities. The intention when purchasing the business was to utilize our current South African retail base as a springboard into Africa. Focusing first and foremost on Southern Africa and then moving up into Western Africa. We have already visited various sites in Africa where ground has been broken with regard to shopping malls,” Mia adds.