Ecommerce & Logistics

How the World’s Biggest Toys Store Failed and Will Sadly Fail Again

Businesses fail all the time. In fact, the Small Businesses Association says that only 30% of new businesses fail during their first two years, 50% during the first five years and 66% during the first 10 years. Bringing the statistics a little closer to home, according to a Harvard Business School study by Shikhar Ghosh, the failure rate of all US companies after five years was over 50 percent, and more than 70 percent after 10 years.

The reason for a company’s failure depends on a number of reasons. These include lack of focus, lack of motivation, commitment and passion, ego, having the wrong advisors and mentors. Reasons also usually include lacking general and domain-specific business knowledge of the finance, operations, and marketing, raising too much money too soon and not willing to innovate and re-engineer. And it’s this last reason that I actually want to focus today’s podcast on.

You’re listening to TNS Connect and my name is Rabia Garib

Toys R Us has been the biggest toy brand in the world. It was huge. It’s been the go-to brand for family games and toys for 70 years. It’s founder Charles Lazarus had a simple idea: build a supermarket for toys. Other toy shops at this time were small and ‘cozy’ with display cases and decorative interiors. Toys ‘R’ Us showed up as a giant with concrete flooring and endless rows of toys in a layout similar to any grocery store.

And what toys did he have! But what is really incredible is how catalytic Toys R Us was in creating the toy hype across the global economy. One brand, not just innovating its own retail category, but resuscitating the creation of toys world wide.   .

At the time, Japan was rebuilding its economy and had just started to produce inexpensive toys. Lazarus was able to negotiate bulk purchases of the simple tin robots, cars and stuffed animals so creatively, he was able to buy more toys for cheaper, essentially putting his competition out of business. Ultimately his target customer got hooked on being immersed into an entire world of toys. The experience. No other brand in the category stood a chance. The cute and dainty stores were forced out of business because they simply couldn’t captivate children with the promise that Toys ‘R’ Us’s large inventory stores were offering.

The US was recovering from the war and trying to revive their economy from all kinds of depression. Because of the frenzying demand that Toys R Us was creating, toys were no longer a seasonal trend – People needed to be able to buy toys all the time and department stores just couldn’t keep up. Toys R Us had not only created year-round demand for toys, they were also able to effectively serve it. They owned the supply chain and they ruled the category.

The strong American institution was tracking consumer buying trends as early as 1985. Each product they sold was tracked by computers to help them identify trending items long before anyone else could figure it out. They identified the demand, predicted the trends and made sure the supplies fulfilled orders to keep revenue growing.

But despite the fact that the institution was ahead of its time in using technology to pave its own future, it feels like it was this age of social technology, selfies and e-commerce that really smothered it. June 2018 wasn’t the first time Toys R Us filed for bankruptcy, but it certainly was the last. A few months later, the giant closed the 800 stores across the globe.

You have to take to pause and ask the question: what caused the demise of a brand whose audience is literally, born in the millions, each day? It certainly wasn’t the lack of customers. It was the fact that the customer behavior had been disrupted and they were hooked onto another kind of immersive experience: the click-done kind. The kind that looks for reviews online, stares into unboxing videos for endless hours and wants to pinch printed catalogs because they should zoom in with a gesture that is so second nature to them. Oh yes, kids know how to 3D scroll, pinch and navigate through apps before they can speak; do you really think they will be able to get that kind of instant satisfaction at a physical store that isn’t tech savvy? But that behavior is talk for another episode.

The fate of Toys R Us was sealed with efficient and lean supply chain models enabling every online store and it’s Facebook page into a threat for the giant. The plug and play economy makes the world a much smaller place and more than the in-store immersive experience, consumers wanted a simple UI and UX. The battles may be won in physical retail, but the war is definitely being fought online. E-Commerce is just cheaper and more convenient. The unboxing videos and peer reviews make up for the experience. The lifestyle in the urban centers was transforming so rapidly, taking the time to coordinate calendars and go to a physical store is just not going to happen any more. It’s tedious and time consuming to get into a store.

It’s not like the toy big box giant didn’t try and collaborate. In 2000 in fact, Toys R Us launched a 10-year partnership with Amazon where they paid the e-commerce giant $50 million a year plus a percentage of sales to be Amazon’s exclusive seller of toys and baby products. Amazon saw the success of the category and invested in building on it. Without its own online presence, the partnership was just one of the many nails in the coffin for physical retail chain. Amazon, Target, Walmart have all become major go-to spots for toy purchases, with hybrid models of online and in-store.

Last month, I spent some time in San Francisco and Detroit to check out the toy experience. It seems I spent the better part of 20 hours interacting with toys in the toy stores and in the retail stores. I spent 10 hours playing with what is now known as the specialty toy stores and 3 hours in the toy section at Walmart and Target. I know you’re thinking the math doesn’t add up, and that’s because Talea Zafar and I spent the remaining hours online on Target doing the research we needed. And even though I enjoyed the in-store experience at Jefferies Toys and the Disney Store in Downtown San Francisco, the online experience was just seamless. No hassle, no emotions. Just choose from the recommendations based on your online behavior.

Both Jefferies Toys and the Disney Store had the staff available to make you feel like you need to purchase everything in the store, while the aisles of Target and Walmart had nobody to coax and cajole you into the buying anything except for their suggestions online. But again, that’s just me. I really can spend hours in a toy store.

Now that the dust has settled with respect to Toys R Us and the 800 stores have closed, an interesting revelation has happened: The company formerly known as Toy R Us decided against selling off its assets. Instead, its controlling interests reorganized as Geoffrey, LLC has launched a new retail brand strategy: in-store pop-ups, called Geoffrey’s Toy Box. To encash on the holiday season, Geoffrey’s Toy Box will has rolled out a specific set of toys in the price range between $19.99 and $49.99 across 600 branches of the Kroger stores.

Again, it’s not the first time Toys R Us is being resurrected from the dead and while I am personally a huge fan of experiential retail and having innocent childlike fascination ooze from every orifice, is Geoffery’s Toy Box repeating its mistake of not having a strong online presence? With the void that Toys R Us has created, the big box retailers already have digital strategies to try and grab those sales. Even though Toys R Us has reinvented itself as Geoffery’s Toy Box, it hasn’t managed to reengineer itself. And that, will make all the difference.

What do you think will happen to the future of Geoffery’s Toy Box? Do you think purchasing toys is still dominated by experiential retail? There are a lot of examples of toy brands and even some toy stores that have grown up with the digital trends and as much as I love Toys R Us, I don’t think Geoffery’s has a very big future.

If you have a comment to add or feedback to share, please do! You can also like this podcast and if you like it, be sure and subscribe to The New Spaces and share the video with your networks.

This episode of TNS Connect was brought to you by The New Spaces. Until next time, this is Rabia Garib.

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