Institution Enterprises-Leadership and the Toys ‘R’ Us Fail
Retail Outlets Need the Leadership to Adapt or DIE in Today’s Market
The Short Version:
Toys ‘R’ Us, the Goliath toy retailer announced that it is closing its doors, 6 months after declaring bankruptcy. Like many retail stores, the niche store struggled to keep up with the competitive pricing and convenience of online retailers, like Amazon, and growing lifestyle brands, like Target. Ultimately, Toys ‘R’ Us lacked the leadership to foster innovation in change, instead closing its doors with a stale, dated whimper.
How did this once Goliath of a toy retailer find itself with its doors closed? The easy answer is to blame price and convenience of online behemoth Amazon. While this certainly holds merit, the truth is the Toys ‘R’ Us fail can be attributed to a lack of leadership and vision to adapt to a changing market. That is why they are gone the way of the dinosaur.
What Could They Do?
Amazon has certainly put a dent in traditional “brick and mortar” outlets. They control distribution. They appeal to the “on-demand” mentality of today’s digital shopper. And they have awesome price power. But that doesn’t mean there is no room for real store fronts. Problem with Toy ‘R’ Us is that their leadership was still operating in the 80’s, not the now. They could have leveraged their brand power to create a new user experience that not even Amazon would be able to touch.
Don’t Join Them, Beat Them
A retailer like Toys ‘R’ Us wasn’t going to retroactively beat Amazon at their own game. They sort of tried, by offering online shopping through their website, but delivery was still a hassle. Prices were still not as competitive. And in-store pick up was a drag.
Instead of trying to “out-Amazon” Amazon, Toys ‘R’ Us should have done something Amazon could not. Create an in-store experience that would attract kids and families.
Where a Kid Can be a Kid
Remember when Toys ‘R’ Us used to be the place “a kid can be a kid”? If you have walked into a Toys ‘R’ Us anytime in the last decade, I think you would agree, that is no place for a kid. Bright florescent lighting. White tile floors. Tall racks and shelves. It resembled a dirty, cold hospital more than a place for kids.
A place for kids should be colorful, fun, energetic, and most importantly-a place where kids can interact with the stuff you are trying to get them to buy!!! That is something Amazon can’t do: provide a tangible experience. Tactile. Touch. Feel. That is what kids want when they pick out a toy. Yes, adults do the buying, and adults want to buy it quick and easy without inconvenience. But imagine a toy store where kids can cut loose, play, interact with the latest and greatest toys, while parents relax in a lounge, sipping a coffee. Think IKEA, but opposite. IKEA has a play area for parents to check their kids into while they shop. Toys ‘R’ Us should have done the same thing, except create a lounge for parents to check into while their kids play.
Imagine Toys ‘R’ Us hosting the annual Lego Building Nationals, where kids can compete to build new lego sets, or build the biggest and baddest replicas.
Imagine them hosting a Minecraft build-off, or a Madden tournament, or a NERF battle. People would be lining up at their local Toys ‘R’ Us to get involved. More bodies in the store, more hands on the toys, more experience, means more opportunity to make money.
Sell memberships. Sell food. Sell experiences that Amazon can’t provide.
The Real Problem Was Leadership
It doesn’t really matter though. The powers that be for Toys ‘R’ Us lacked the vision, ambition, or incentive to change. Why would they? Just after declaring bankruptcy, while they were supposed to be restructuring debt and trying to find a way to keep the doors open, the Executive Team paid themselves millions in bonuses. This excerpt should turn your stomach:
It’s worth noting that the toy retailer won approval to pay $16 million in bonuses to 17 top executives, with the only condition being that it hit certain financial targets during the holiday shopping season.
Five of the top Toys ‘R’ Us executives received $8.2 million in retention bonuses five days before the bankruptcy filing in September. Brandon received a $2.8 million retention bonus and asked for court approval of up to another $12 million in incentive bonuses.
The new bonuses were in addition to the millions more that execs received prior to the Chapter 11 filing.
Since when did bankruptcy deserve bonuses? Maybe I am naive. Maybe I am idealistic. But shame on them for paying themselves out, while over 30,000 people are losing jobs, and 700 store fronts are closing their doors.
Would a Strategic Change Make a Difference?
Chime in with your thoughts about what Toys ‘R’ Us could have done to prevent this catastrophic failure. To succeed today, you have to be outside the box. As always, Institution Enterprises is here to help. Want to talk about this more? Shoot us an email. Want help making sure your website is up to Google’s speed standards? We can provide a site audit for you! Need help refining your messaging on an upcoming campaign? Reach out. Our motto is “with you, not for you”, because we believe the best way to help you is by helping you learn how to do it yourself (like training wheels, we help make sure you do it right).
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