After 70 years in business and over 30 years operating in the UK, the toy giant Toys“R”Us announced in April that it is closing all stores in the US and UK. With nearly 1,800 stores worldwide and 105 in the UK alone, poor sales and massive debt became too much for the company to overcome. After no buyer came forward, all stores will be closing leaving 3,200 people in search of a new job.
You Can’t Just Blame Amazon
While some may blame the emergence of Amazon and other ecommerce businesses, Toys“R”Us’s biggest obstacle was an over-leveraged balance sheet that made it impossible to fund change. With a lack of investment for innovation and new strategies to reflect the changing interests of its customers, the former category-killer lacked a niche in a market where customers can find desired products elsewhere at lower prices or get better shopping experiences at competitors. Their target market also lost interest in traditional toys and wanted more high-tech gadgets, something the retailer added with little fanfare. Toys“R”Us simply could afford the initiatives it needed to differentiate itself and appeal to the modern customer in a crowded toy market. When discussing how the once leader in the toy market collapsed, Professor of Marketing at Columbia University Business School, Mark Cohen, stated that: “Toys”R”Us has never been able to wrap their arms around the changes necessary, and this is the inevitable outcome.”
While the recent struggles of operating in retail recently is no secret to anyone, some stores have been able to thrive. The Entertainer, the UK’s largest independent toy retailer, has seen growth in nine consecutive years, including a 37% increase in pre-tax profits in the past fiscal year. Co-founder and Managing Director Gary Grant, who founded the business with his wife Catherine in 1981 when he was only 23 years old, put it in perspective when he said that, “considering the well-documented challenges that the high street and the toy industry faced in the last year, we are delighted with these results.”
The Entertainer’s success stems from an emphasis on creating a pleasant, fun, and unique experience for their customers in-store as well as an online presence. Recently, they launched a “Quiet Hour” where from 9-10 AM on Saturday’s, an hour before the store opens to the public, families with special needs children can come in to a quiet store to ensure an enjoyable shopping trip and help minimise stress. This innovation could provide a pleasant experience for the upwards of 700,000 UK adults and children on the autism spectrum. In addition, their flagship store in Westfield, London relaunched with animated window screens, interactive floor projections, augmented reality mirrors and ‘The Launch Pad’ Tech Tables to appeal to the changing interests of today’s children.
The Entertainer has also been able to combine their online and retail presence well, as seen in their “Click and Collect” delivery service. If the item a customer orders is in-stock at their local store, the customer has the option to pick up the item in as little as 30 minutes at no additional cost. If the item is not in stock, the item will be delivered to their desired store in 1-3 working days for pickup again at no additional cost. This system combines the convenience of seeing merchandise in an online setting with the ability to get the item instantly at the retail location.
While the demise of Toys“R”Us would have been seen as improbable a decade ago, they are not the first toy retailer to fall on hard times recently. In 2011, retailer Hawkin’s Bazaar went into administration before bringing in their current CEO David Mordecai. Mordecai, who had 25 years of experience in retail from creating Modelzone, saw the stores biggest problem… no online presence. All their marketing was done offline, which was both expensive, ineffective, and not the way the modern retail customer shops, Mordecai himself said, “habits have moved on from picking Christmas presents out from a catalogue.”
Instead of seeing online retailers as a threat, Mordecai saw it as an opportunity. He increased their online presence and updated their inventory with more modern toys such as, drones and VR technology. These decisions have brought Hawkin’s back from the brink. Since Mordecai came on board, the retailer has rebounded well, currently having 29 stores all across the UK and went from a turnover of £8 million in 2012 to £14.1 million in 2015.
Shopping is a Dynamic Experience
If the fall of Toys“R”Us can tell the retail market anything, it’s that you mustn’t over-leverage and you cannot overstate the importance of the customer experience. A standard bricks and mortar store will never be able to do what Amazon does. The convenience and pricing strategy is too difficult to compete with directly. Instead, stores should focus on providing a great experience for the customer in-store on top of an online presence. The shopping experience has become dynamic and selling is no longer limited to when the customer walks in the door. As Steve Dennis, President of SageBerry Consulting and Forbes contributor put it, “the stores that are swimming in a sea of sameness — mediocre service, over-distributed and uninspiring merchandise, one-size-fits-all marketing, look-alike sales promotions and relentlessly dull store environments — are getting crushed.” The Entertainer and Hawkin’s Bazaar have shown that with innovation, traditional retailers can not only survive, but thrive.