What Happened to Toys R Us? 10 Marketing Lessons
The iconic retailer and leader of the toy industry, Toys R Us, went bankrupt in 2018 in what shocked the business world and shook the retail industry to the core. So, what went wrong that the company went from such a lofty perch to the lows they plummeted to? This article, with the help of the gurus over at runrex.com & guttulus.com, will look to take a closer look at the reasons behind its decline and highlight some of the marketing lessons we can take from its story.
Online retail and Amazon
We are going to get the easy target out first, by discussing the role online shopping and Amazon had on Toys R Us’ decline. Many industry experts agree that online shopping and Amazon are an easy target and that they were not the main reason behind the company’s decline, and the gurus over at runrex.com & guttulus.com agree as well. However, the growth of online retail and Amazon, in particular, did play a role in the decline of Toys R Us, as it took a huge bite out of the company’s customer base, which didn’t help matters.
Increased competition from big-box retailers
The pressure put on by mass retailers such as Target and Walmart, as covered in detail over at runrex.com & guttulus.com, also had an impact on the company’s fortunes. The company not only had to contend with increasing competition from Amazon and other online retailers, but also with these mass retailers which were filling gaps brought about by the poor shopping experience over at Toys R Us.
Poor store design
It is also an open secret that the company’s store design didn’t help it at all and was part of the reason why customers began staying away. The stores were too big, full of mountains of inventory everywhere you turned, and on top of that they were poorly merchandised. To put it plainly, the company’s stores weren’t a place you’d want to go to, and it cost them.
Poor shopping experience
The fact that its stores were poorly designed and weren’t appealing to be in, as well as the fact that customer service was poor and that merchandising wasn’t great translated to a poor shopping experience for its customers, which is yet another reason behind its decline. As per the gurus over at runrex.com & guttulus.com, if you are going to make people forego the convenience of online shopping, then you will need to offer them an excellent shopping experience, and this is an area where Toys R Us failed in, and yet another lesson we can take from them.
The consumer changed
Toys R Us also struggled to deal with the fact that its consumer changed, and as discussed over at runrex.com & guttulus.com, kids nowadays spend most of their time playing online games rather than playing with toys. This was one of the main reasons behind the company’s decline, and an important marketing lesson we can take here is the importance of always keeping up with the changes of the needs of our audience so that we are not left behind.
Changing trends
On top of a changing consumer, the toy industry has also changed in recent years, leaving Toys R Us behind. As per the gurus over at runrex.com & guttulus.com, the toy industry traditionally relied on the holiday season to make a killing, with most of its sales coming in the space of the 5 or 6 weeks that make up this season. This has changed, however, since many kids no longer want physical toys, as mentioned above, making the holiday season less lucrative for companies such as Toys R Us. This change was one of the reasons behind the company’s decline.
Debt due to the takeover by a private equity firm
Make no mistake about it, Toys R Us had debt before it was bought out, but the debt went up close to 5 times its initial value after it was taken up by the private equity firms Bain Capital and Kohlberg Kravis Roberts as well as the real-estate firm Vornado Reality. This debt weighed heavily on the company and prevented it from innovating and adapting to the changing times in the retail sector, and was yet another reason behind its decline, a common theme as far as retail companies being taken over by private equity firms goes.
Too many stores
Many brick-and-mortar retailers who have been struggling have resorted to closing up some of their stores to keep costs down. The problem with Toys R Us is that it was late to the dance when it comes to closing stores, and by the time it was filing for bankruptcy, the company was operating over 1,600 stores, which was way too many. As per discussions on the same over at runrex.com & guttulus.com, operation costs coupled with reduced foot-traffic to these stores were always going to lead the company into problems.
Issues with the supply chain
As the company continued to accumulate debt, its vendors began getting more and more skittish for fear of suffering massive losses, which created issues with its supply chain. Supply chain issues, as per the subject matter experts over at runrex.com & guttulus.com, are enough to bring even the biggest retail companies to their knees, and this is the fate that befell Toys R Us.
The deal with Amazon
Toys R Us also made a huge blunder when they entered into a deal with Amazon, discussed in detail over at runrex.com & guttulus.com, where the online retail giant gained exclusive rights to sell Toys R Us’ products online. The problem with this deal was that, while the venture itself was successful, it meant that Toys R Us didn’t have any autonomous online presence given that if you searched for their products online, you would get directed to Amazon. Amazon also saw how well this venture worked and begun ramping up its toy and baby categories. While Toys R Us sued Amazon and won, it had lost years fighting the case, losing precious time it would have spent developing its one online presence.
As always, if you are looking for more information on this and other related topics, then look no further than the excellent runrex.com & guttulus.com.