Toonz Retail opts for offline route to capture the Rs 30,000 crore kids market

When you think of brands for babies in India, different names come to mind for different needs. That is also perhaps the opportunity that many startups like Pre-cared, BabyOye, Little1 among others have spotted and made a beeline for.

While all the names mentioned above are in the online space, Toonz Retail is also betting on the same opportunity, albeit in the brick and mortar world. Toonz Retail has a large network of over 50 stores spread over 1200-2000 sq ft mostly based in South India that sells everything from clothes to crayons, prams to puzzles, walkers to rockers, blocks to board games, rattles to remotes cars and diapers to dolls.

Toonz is promoted by Ankur Aggarwal of Crystal Group of companies, while Sharad Venkta, MD, Toonz Retail, is responsible for managing the daily show. Before taking over the reins at Toonz, Sharad spent a substantial time with Pantaloons and Future Retail, and is applying many learnings from that side of the fence to this business.

Toonz started operations in 2010, and the initial focus for the venture was merchandise retail, made up of cartoon character merchandising. However, being in the niche space meant limited reach. “Cartoon merchandise was a good idea, but it didn’t make much sense because these cartoon characters license were non-exclusive in nature, which had two disadvantages. If the cartoon character was successful, then many people would copy you, but if it was not successful, then you would be sitting on too much inventory,” explains Sharad.Once they had identified the challenge with their existing model, the next step was to launch its own brands, and that happened two years ago in 2012 – also the time when Sharad came in to look after the affairs. Toonz launched two brands targeted at two different age groups. ‘WowMom,’ that offers products including clothing, accessories and nursery products for children upto 3 years. While ‘SuperYoung’ is targeted at 4-12 age group and has all products that children in that age group would need.

Toonz Retail has also taken a different route to market, and instead of big metros, Toonz has chosen to follow the Tier 2-3 route of expansion. As a result, the main markets they have focused on are Kerala, Tamil Nadu, Andhra Pradesh and Karnataka in South India, and Haryana in the North. Toonz sells through franchisees in these markets and Sharad claims they have created a model where the company breakeven and franchise breakeven happens at the same time. “There is a large opportunity in the kids markets. The space would be anywhere in the region of Rs 30,000 – 80,000 crore and there are still no big names here,” says Sharad about the opportunity.

While their strength lies in offline retail, Toonz has also tied up with online retailers like Flipkart, Jabong, Snapdeal and Amazon to sell WowMom and SuperYoung brands. Sharad claims to be doing about 1,000 transactions per month online, which is not much compared to their offline sales. But he is convinced about the potential of the online space and says these partnerships will continue. “Online business is very small right now, we are still learning our way around. The product speaks for itself, but to reach that stage, it has to come up in your browsing preferences. We will focus more on online this year. We want to consolidate our offline presence, and are looking at doubling our online reach much more,” says Sharad. Quiz him if they have plans to start their own e-commerce store and Sharad denies it, because offline is their strength and they understand offline retail better, he says.

Toonz is not averse to entering big markets. However, Sharad has rightly identified the difficulty in making the presence felt there. “There are two challenges to open stores in bigger cities. Bigger cities come with its own culture and costs, so it makes traditional retail slightly less viable and the gestation period for breakeven is longer,” he says.

Toonz had a turnover of Rs 30 crore this year and is looking to touch Rs 100 crore turnover by 2016-17. Making quality products available to parents at an affordable price, says Sharad, is the key to greatness in the kids market currently. The large size of the baby care market makes it important to address the need at hand and take a bottom-up approach, he thinks.

While the journey so far has been full of bumps and bushes, the biggest challenge that Sharad continues to face is the need to create a pool of likeminded people, who believe in the broad strategy that Toonz has taken. Therefore, be it employees, franchisees or partners, the need to onboard like-minded people is a touch challenge.

The second big challenge is to create a large set of supplier base who can supply consistently, as well as a large enough market that will continue needing Toonz products; and in both these areas Sharad is putting to use his lessons from his earlier corporate stint.

So how much ownership does Sharad feel for Toonz? “I find myself more accountable, because I handle the finances, sign the cheques and have to deliver the returns. I have complete ownership and presently we are waiting for the baby to take the right shape now,” he clarifies.