The headline reads: “Toys’ R’ Us Just Foolishly Gave Amazon The Christmas Gift Of A Lifetime.” The article by Chris Walton ran in this week’s Forbes, was dubbed an “Editors’ Pick.”
In case you missed it, post bankruptcy Toys R Us ( Tru Kids) entered into an agreement with Target last year. Target was to handle the digital order fulfillment for the www.toysrus.com website. This week Toys R Us announced that it had ended its relationship with Target and would be using Amazon to provide digital services. Here is how author Chris Walton describes the decision in his article:
Forbes received confirmation that Amazon AMZN+0.7% will provide the digital capabilities and fulfillment services for the new Toys “R” Us brand going forward, which is quite possibly one of the worst ideas in the history of retail.
Wilson sees this as a golden opportunity for Amazon to learn, through Toys R Us, whether experiential bricks and mortar stores (Toys R Us currently has two) will work to drive online toy sales. In other words, Toys R Us, in his opinion, is paying Amazon to learn if Amazon should open their own experiential stores and bypass Toys R Us altogether.
He thinks the Amazon deal is so bad that:
“It’s like opening up Pandora’s box on a road to nowhere, or, better yet, giving Amazon a Christmas gift that will just keep on giving for decades to come.”
Mr. Wilson, who Forbes describes as “a leading expert and influencer in omnichannel retailing,” is of the firm opinion that Toys R Us could easily have handled the digital component themselves. I’m not so sure about that. It seems to me that Toys R Us, at heart a 20th-century bricks and mortar retail chain, never fully understood the digital side of the business.
In fact, you may recall that Toys R Us is famous for having unintentionally and essentially put Amazon in the online toy business. Two decades ago, Toys R Us was using Amazon for its digital fulfillment and ended the agreement once Amazon began selling toys through its own portals. Amazon is now a major toy retailer and Toys R Us is, well, not.
Toys R Us never fully recovered from that decision. It is considered to be one of the bigger nails in the company’s coffin. And here we are again.
Despite Mr. Wilson’s reasoning, it is not clear to me is why Target walked away and why Amazon walked in. It is also unclear whether Toys R Us had any alternative. What does seem clear is that Toys R Us still has a penchant for making the wrong kind of headlines.