Toys “R” Us Went Bankrupt, and They Deserved It.
Last week, Toys “R” Us, undoubtedly the greatest toy store chain in the world, and one of the magical places that charmed me as a child began the process of filing for chapter 11 bankruptcy. Although this is a nostalgic bummer, I don’t feel bad for Toys “R” Us in the slightest.
To add to my lack of remorse, I’ll also opine to the fact that Toys “R” Us went bankrupt is not Amazon or “technologies” fault either. It’s because the Toys “R” Us got lazy.
Over the past decade, we’ve seen the meteoric rise of online commerce, free shipping, and next-day delivery. Some have been quick to suspect that this evolution of commerce is to blame for Toys “R” Us struggles and inevitable failure. I beg to differ. Many brick-and-mortar companies have found ways to survive and some even thrive in our new online-first environment which has given rise to a new click-and-mortar business model.
In my opinion, Toys “R” Us went bankrupt because of two main points:
Lack of Innovation: Toys “R” Us, like Radio Shack, Blockbuster, or Blackberry let innovation speed right by them. This isn’t just technological innovations, but also business model innovations. Companies like Target, Best Buy, and Costco have struggled in their own way but ultimately put the investments towards innovating how they do business with their target customer. Innovation isn’t just technology, and it’s also not done once and forgotten. Innovation is an ongoing study of what’s next and how to be ready to welcome it when it arrives.
Toys “R” Us was taken private in 2005 by a set of private equity firms, who drowned it in debt. Investments went towards inventory rather than downsizing, remodeling their stores and investing in a new business model.
Forgetting the Customer: In its heyday, one could argue that Toys “R” Us had the perfect customer relationship. They knew their customer, the child, inside and out– what inspired them, how to engage them, and how to sell to them. Toys “R” Us sold to children's imaginations and made it easy for parents to engage with the brand. Over time, children “got older quicker” - meaning they played with fewer toys and spent more time on tablets and video games rather than dolls and action figures.
Toys “R” Us, between their lack of in-store investments and in-depth understanding of how children engage with brands, lost touch with their target customer. Stores lacked the proper upkeep, their online strategy left customers wanting more, and in turn for forgetting the customer, Toys “R” Us was forgotten.
Did Amazon have a hand in the destruction of Toys “R” Us? Maybe a bit, but you can’t blame a company doing the right things (Amazon) for the reason a company doing the wrong things went bankrupt (Toys “R” Us).
Toys “R” Us will stand as an example of excellence turned failure for decades to come. If you forget about your customers, they will forget about you.
To keep in touch, follow me on Twitter @hasskhalife
This article first appeared on www.thinkhelium.com/toys-r-us
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Helium is a digital strategy and execution company focused on working with brands to create elevated experiences.