Toys R Us; Does it Need a New Business Model?


Headerf
P5720152nmEveryone in the toy industry, and I mean everyone, is a
stakeholder in Toys R Us.
  They are the
biggest pure toy and play retailer in the world and all of our fortunes
are inextricably locked together with theirs. 

That is why the decision by Toys R Us to withdraw its IPO
coupled with its continuing leadership uncertainty creates queasiness in many play
industry members.
  The company, it seems, is still looking for
how best to operate in a 21st century economy that just won’t stand
still.
  But, how do you know what to do next
when all the parts of our once familiar economic models seemed to be floating? 

One writer, Carol Roth, has some ideas on what
the company needs to change in order to resume a strong growth trend.  In a CNBC article, “Toys R Us Needs a
Business Model Makeover
,” Roth points out how entertaining it used to be to
walk the aisles of a Toys R Us.  There
were so many toys that it was a real trip (in both senses of the word) to just
visit the store.


Toysrus-geoffrey1That’s all changed because, as she puts
it:  “Toys R Us has lost its relevance.
While it used to be entertainment to shop the store, now with so many other
sources of entertainment, there is no critical pull into the Toys R Us store.”

She suggests that if toys statically placed
on shelves don’t entertain any more than why not actually entertain.  Here are her suggestions:

Create an area for “interactive
experiences. 
She sites American Girl stores
as a model for this approach. 

Create a place for in-store birthday party
events.
  This is a great idea and one
that Toys R Us actually executed about ten years ago in its experimental
Geoffrey stores.  I remember


visiting one
in North Carolina and being impressed with how much pride the store manager
took in that innovation. 

She also suggests that Toys R Us take the entertainment
approach to their website
by highlighting “… exclusive products or
characters and create a reason for kids and their parents to interact with the
site. Although parents are ultimately making the purchases, having the kids
becoming engaged with Toys R Us as a brand is critical to its success.”

Here is what I think:


ImagesThough I largely agree with Ms. Roth, I do diverge from
her outlook when it comes to the question of product on the shelf as
entertainment in and of itself
.  Yes,
Toys R Us does have competition but many years ago it did have a far more
entertaining product mix.

Toys R Us at that time had the reputation of having just
about every toy there was.  They did not
worry about brands or company size; they knew that it was the excitement of the
new, different and unexpected that ultimately drew customers.

At some point, Toys R Us went from being the “World’s
Greatest Toy Store” to becoming the “World’s Greatest Toy Department.”  Believe me; you will never beat Wal-Mart at
the latter.

If Toys R Us really wants to make a difference it needs
empower its buyers to give consumers the experience of being surprised and delighted by finding
the totally unexpected.  I would like to
see them dramatically increase their product mix by nurturing smaller and
foreign companies.
It would be good for them and the industry.

A great toy store is curated item by item.  It is not a series of brands, licenses and
televisions promoted products.
  Simply
put, when it comes to merchandising toys, the whole is greater than the sum of
its parts…far greater.

2 thoughts

  1. Simple solution, but not so simple right? More SKU’s are great for the consumer, but from a business perspective, you still need to pay the bills…without buying mass quantities, the small, low quantity SKUs will surely become “showroomed.” I’m guilty of that.
    Maybe a stronger e-commerce model to complement their big box “showrooms?”

  2. Hi Richard,
    Take a walk through any successful specialty retailer and what stands out to me immediately as an observant toy person is the curated merchandise, knowledgable staff and they are typically funky… meaning – crowded, twisty, warm lighting, wood floors, non-standard shelving, narrow display areas… I could go on and on. I love to walk through TRU rwith regularity, but I adore walking through a great specialty retailer… there is a feeling of true discovery, like walking through a great fleamarket… yet you can get in and get out if you want to… or ask a shopkeeper what’s new and exciting for a ____ year old that likes ____… and like a great book store, get personal service. This might be impossible for TRU, but they can take elements to make the stores more personal and “curated” as you mention. This would be a threat to the way things are done in the industry and manufacturers (Hey, I put in my time at Mattel and other to know)… but could be a renaissance for retailers and manufacturers packaging teams alike… time to shake things up.

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