Business Sustainability – Convenience, Speed, and Choice

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In my house, we called it “Torture Us” as a synonym for Toys “R” Us!

Goodbye Toys “R” Us and Hello Your Sustainability

The name was our way of capturing the experience we had when we joined throngs of shoppers at Christmas looking for that understocked “must have” toy. Of course, there were those other experiences when the store served as a wonderland of possibilities. Since my children enjoyed the heyday of Toy “R” Us – they (like most adults of that era) were Toys “R” Us kids.

As such, seeing the store near my home emblazoned with “Store Closing” and “Everything Must Go” signage gave me pause to realize that the lifecycle of Toys “R” Us is a cautionary tale for the importance of customer experience relevance.

Brand Growth Factors

Let’s start our exploration with a review of the emergence of the Toys “R” Us brand.

From my vantage point, the foundational business disruption that led to Toys “R” Us’ success is seeded in the same elements that propelled its demise. Other than small local toy stores, the chain toy store environment at the time of Toys “R” Us’ growth marked by cramped in-mall brands.

Thanks to a store concept that Toys “R” Us had been evolving since 1948, the company built warehouse specialty stores (often freestanding buildings located near the malls) which offered such an abundance of choice and purchasing power that gave consumers a somewhat lower price. As such, brands like Lionel Playworld and KB Toys jettisoned to an early death throughout the 1970’s and 80’s.

Through catchy marketing tactics deployed across the strongest media channels of that period (mainly television, radio, and print), Toys “R” Us had children (and parents) signing their jingle, recognizing their mascot (Geoffrey the Giraffe) and waiting for the Christmas catalog to populate wish lists.

They were also building more and more warehouse stores and consuming a great deal of capital in the process. At the high water mark, Toys “R” Us had more than 800 stores in the US, 750 stores internationally, and 240 licensed stores spread across 37 countries. The companies employee count exceeded 64,000.

Overreach

Like many successful retailers, Toys “R” Us began stretching their brand into derivate concepts like Babies “R” Us, Kids “R” Us and even Barbies “R” Us.

Kids “R” Us, for example, proved to be more of a stretch than the elasticity of the brand could bear. In my town, the Babies “R” Us was a free-standing building just yards away from the main freestanding (near a mall) established Toys “R” Us.

So Toys “R” Us grew thanks to effective marketing, product selection, a pricing advantage, and presence. They conveniently assured you would find something that could be readily grabbed to accommodate a birthday gift (maybe not the most popular toy you came for – as inventory was always a function of effective demand forecasting).

Convenience, Speed, and Choice

Enter the new category killer Amazon, whose customer experience design value equation targets “convenience, speed, and choice.” Amazon’s toy selection and inventory are not limited by the confines of a building near a mall. They leverage not only their own massive warehouse grid but also the options and stock of toy manufacturers who drop ship directly to customers.

Amazon (while not a heavy marketer through traditional means like television) has effectively leveraged social media marketing and targeted campaigns aided by their insightful analysis of consumer’s online purchase behavior.

With a far more engaging website than Toys “R” Us ever crafted and same day or Prime two-day shipping, Amazon has reduced pain points associated with product acquisition. From a convenience perspective, Amazon has averted the need to experience the chaos, tantrums, and “I want that too” exhortations of in-store big-box toy shopping.

To Survive as a Toy Retailer (or Any Retailer for that Matter) in the Age of Amazon

Despite Amazon’s dominance, I suspect there will be “brick and mortar” toy stores in the future, and they will succeed by emulation certain aspects of Amazon (e.g., effective social media marketing, driving convenience into the in-store experience, and maximizing choice where possible).

At the same time, I believe those successful stores will differentiate from Amazon by creating an engaging, personalized, caring, community place where parents, children, and grandparents will want to bring their children to explore the wonderful world of toys.

Neil Saunders, managing director of GlobalData Retail, noted in a recent email analysis of the Toys “R” Us demise, “The liquidation of Toys R Us is the unfortunate but inevitable conclusion of a retailer that lost its way…Even during recent store closeouts, Toys R Us failed to create any sense of excitement. The brand lost relevance, customers and ultimately sales.”

The key for future toy stores will be their ability to stay nimble and relevant to changing consumer needs in a way Toys “R” Us may have gotten too big, too conservative, or too in debt to do.

Back to You

How are you positioning yourself against potential category-killers in your sector or adjacent sectors?

How are you matching the Amazon’s of the world and differentiating yourself in relevant and nimble ways?

Nostalgically, I am sorry to see Toys “R” Us go, but I trust we can learn from the Toys “R” Us journey which will help us adapt and thrive!

7 COMMENTS

  1. Hi Joseph: I don’t think Toys R Us over-reached. While their Kids R Us brand extension wasn’t wildly successful, Babies R Us was a hit. Hindsight is 20/20, but I don’t think you’ll find many critics about the efficacy of Toys R Us piggybacking off an inarguably powerful brand.

    The Toys R Us chronology will provide rich material for business case studies, but I think ultimately what killed the company was being on the wrong side of demographic trends coupled with absorbing heavy debt. It doesn’t take a Harvard MBA to see the impending train wreck . . . Babies and young children are not a growth market. For that reason, I strongly doubt we’ll see another attempt to fill the “just toys” void.

    Amazon doesn’t have the same risk exposure. Along with diapers and high chairs, it sells catheters and canes. And everything in between. Compared to Toys R Us, Amazon has done a much better job of mitigating demographic risks.

  2. Andrew, point well taken about Monday morning quarterbacking the brand elasticity issue. We are on the the same page with regard to risk exposure based on their debt load (partly in service to a sprawling retail warehouse store environment).

  3. I feel that for any retailer to remain viable in today’s world and tomorrow’s world as well, is to keep fresh, keep current, and keep asking “What if…?”.
    If one keeps fresh ideas percolating, you get new takes on what is interesting to youths and children – often from employees who have children of their own. By having ones eyes and ears open and receptive, you can keep current as to new and interesting trends and make changes accordingly. As for asking “what if…”, one only needs to look at The Disney Company as a prime example of what can happen if one stretches their imagination a bit!

  4. I’m in general agreement with Neil Saunders, but my belief – based on earlier “one-trick pony” retailer shutdowns of chains like Bradlee’s, Caldor, Filene’s Basement, Loehmann’s, Circuit City and others (perhaps soon to be joined by Macy’s and Sears) – is that a lack of shopper excitement, or at least engagement, is truly where their problems began. The chain offered no differentiated destination experience value to customers. Examples of where a bricks and mortar retail destination experience is distinctive include The Container Store, Wegmans, IKEA, and Trader Joe’s. This is do-able, but not without leadership, customer awareness, discipline, imagination, and focus.

    Toys are supposed to be fun. Shopping at Toys ‘R’ Us wasn’t fun or engaging, ever.

  5. The stores you mentioned, Michael, as being “customer destinations” are out to “WOW” their customers – not only with new and different items and deals, but also with great customer service. Whenever I visited a Toys R Us, I always felt as if things were very chaotic and employees were more concerned with other things – rushing around like the proverbial “chicken with its head cut off” – instead of their customer base. After all, who is the store in place for? New gewgaws are NOT going to bring the customers into the store if there is no reputation for attentiveness to their customers. As for Babies R Us, Andrew, I tend to agree that this was actually the stronger brand, simply because babies are inarguably CUTE and there were so many cute and NEEDED items for babies that this brand carried. Too bad Toys R Us realized too late that they needed to translate this passion for great products and great service from Babies R Us to their toys brand. Unfortunately, no-one will be a “Toys R Us Kid” in the future – and the brand started out so promising, too.

  6. Lisa Yetman I live in the world of “what if” with my clients….”What if” everything went right for your ideal customer? “What if” current trends accelerate? “What if” a quality competitor opened next door? All of which are exercises in expanding ideation and tightening operations. Thanks for the fabulous contribution!

  7. Michael Lowenstein as always you raise the bar. I learned long ago the importance of creating a “fun destination” thanks to Johnny Yokohama the co-author of our book “When Fish Fly” about his business the Pike Place Fish Market in Seattle. As you note, stores that are product playgrounds (e.g. Ikea) are thriving!

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