• Basya Benshushan

Toys "R" Us Files Bankruptcy - What Can We Learn

It’s no secret that in 2017 retailers are facing an increasingly challenging marketplace. The logistical obstacle of getting your company online is a factor for many businesses, but companies both big and small, in 2017, are figuring out the hard way if being online is an essential part of their business. How consumers want to shop – in addition to how much they want to spend – are strategic questions with no cookie cutter answers.

Toys "R" Us, the iconic American toy retailer, filed for Chapter 11 bankruptcy protection as a part of a plan to restructure roughly $400 million in debt due by 2018. Toys "R" Us, once an industry giant synonymous with the uber-profitable toy industry, succumbed to several key mistakes that ultimately killed its business.

When it came to understanding and reacting to marketing shifts, it could be argued that Toys "R" Us was ultimately doomed by complacency. While they invested heavily in brick and mortar availability, they completely ignored an opportunity to produce an interactive engaging customer experience. The endless aisles, once a hallmark of the in-store experience, found itself catering to customers who had become accustomed to the one-click experience and more favorable pricing found at Amazon, Walmart, and Target. It's an important note for businesses no matter their track record for success - if the in-store experience isn’t providing value along the lines of competitive price points or a worthwhile engaging experience, consumers lose interest and opt out of spending time walking down the aisles.

With 1,694 stores operated globally, the possibilities to engage and interact with customers were endless. Imagine a space where parents could bring their kids to play and test the latest toys, Lego competitions for all ages, local YouTube influencer’s “unboxing” live in store, celebrity game offs - heck, I would pay to watch Jay Z and Beyonce tackle an old school game of chess! Ultimately they could have dominated the art of play and purchase from within their mega toyland.

The total U.S. market size for the total toy industry in 2016 was $26.5 billion. 44 million consumers in the U.S. shopped for toys or games online. The velocity with which technology, competitors, markets and customers shift requires companies to invest in change. They lacked serious leadership in directing the crucial shift to match the market head-on. In 2000, Toys "R" Us passed the responsibility to service e-shoppers to e-commerce titan Amazon. They signed a 10-year agreement that would make Toys "R" Us the exclusive vendor of toys, but ultimately exited the agreement early due to issues regarding Toys “R” Us’s inability to meet Amazon’s notorious speed when it came to providing top trend stock in a timely fashion. Up until 2006, redirected all traffic away from their own website to Amazon’s digital spaces, representing the beginning of an unfortunate pattern of missed opportunity. This trend continued until 2016, when the company decided to make the necessary technology hires to bring their e-commerce development and day-to-day operations in house. Toys “R” Us’s reluctance ended up being one of the major characteristics of this toy conglomerate’s collapse. By never fully embracing their customer’s digital experience, falling behind other retailers who took the time to figure out the world of e-commerce, and ultimately refusing to own their identity in these digital spaces.

The velocity with which technology, competitors, markets and customers shift requires companies to invest in change.

To thrive (and in this case survive) market shifts we have to be willing to take a hard look at old business models. To succeed today, leaders need to invest more in understanding customer experience, or their companies will lose relevancy and end up like Toys "R" Us, Radio Shack, Circuit City, Aeropostale, Payless Shoes, Borders Books, and Blockbuster.

Today a transaction can happen anywhere, at any time. From lying in bed to waiting for a bus, consumers have the power to browse, compare costs, and order from thousands of retailers competing for their attention. The attraction of endless aisles has been superseded by the thrill of instant gratification. Today physical locations need to suit up to do something more. How does your organization show up to meet today’s market head on?

© 2017 PinkCilantro. All rights reserved.
  • Facebook - White Circle
  • Twitter - White Circle
  • IG
  • LinkedIn - White Circle