The Demise of Toys R Us
By: Jeff Wissink, Navint Managing Director
Toys R Us, an early category-killing pioneer in the toy retailing space, announced on Wednesday that it would be closing its U.S. stores after nearly 70 years in business. Another one bites the dust.
As consumers, we’re now almost used to these kinds of stories. As business people, we know that retailers that are investing in the modernization of a holistic customer experience are surviving the onslaught of online competition. And those that aren’t, well…aren’t.
There is no doubt that pressure from eCommerce-first companies such as Amazon.com, macrotrends such as mobile devices taking up more “play time,” and other factors didn’t help Toys R Us. However, what ultimately did the company in was the need to service a multibillion-dollar debt; a debt so large that it inhibited the company from making requisite investments in store upkeep and modernization of their customer experience. Even nostalgic parents that were once “Toys R Us Kids” that dared to brave the retail store during the last holiday season had a shopping experience that was anything but jolly.
The need to service a heavy debt had another nefarious impact on the company’s operations: the inability to invest in the modernization of their business model, specifically around consumer subscriptions. In bankruptcy filings, the company stated that its Babies R Us chain lost customers to Amazon’s subscription service, which let parents subscribe to receive replenishable, high-margin products such as diapers and baby formula. Toys R Us attributed its “old technology” for not offering its own subscriptions.
But of course, we know it’s not just the technology. As we’ve said, attempting to apply transactional business models to subscription business simply does not work. A holistic and thoughtful approach around processes, organization design, and technology is required to service Continuous Customers™.
The Toys R Us story is a sad one; the end of an era. It’s also a warning on the Ides of March: invest in the customer experience or perish!