It’s difficult to watch a beloved children’s store close, particularly an iconic brand such as Toys R Us. Many parents warmly remember tossing the ball inside the large expanse of the store, spending hours wandering the aisles as a child while interacting with many new toys and some traditional ones as well. Finally deciding upon the perfect choice, they’d head to the checkout with their parents where they were greeted by friendly, well-informed staff who made the in-store experience pleasant.
So, what happened? According to this article, it began with a large debt load, was aggravated by the prevalence of online shopping (i.e., Amazon) and was exacerbated by competition with other big box retailers, like Walmart. The end result was Toys R Us filing for bankruptcy in November 2017.
According to Tim Houlne, CEO of Humach, there are multiple factors in play in addition to the large debt. For example, Toys R Us did not keep up with the shift to online retail, which reflects a lack of understanding of how their customers want to shop. Additionally, they did not step up to the challenge of improving and updating policies and procedures to support the entire customer journey. Without a strong strategic focus on customer experience, Toys R Us could not make adjustments to improve their situation.
“When I think about where the executive team chose to focus, it appears there was little to no focus on the customer journey,” says Houlne. “Customers were asking for a more social, digital experience, yet the Toys R Us website is not mobile friendly. It’s as though they expected their consumers to remain the same as when the brand launched in 1957.”
Toys R Us accumulated billions in liabilities and they were experiencing revenue erosion. Competitors, such as Walmart, Target and Amazon, use toys as loss leaders during heavy shopping periods. This drives more people into their stores or online, where they can upsell other items. Basically, they simplified the shopping experience by making it easy to purchase multiple items in the method the consumer preferred..
“In my opinion, the only way Toys R Us could compete with those companies would be to dig deep into their customer journey, re-engineer processes and designs, and update the customer interface,” says Houlne. “Focusing on the customer experience creates loyalty. There is no reason that Amazon has significantly better tools other than focus on a consumer strategy that delivers.”
When the Chips Are Down, Don’t Delay CX
The challenges Toys R Us faced did not happen overnight. They did not go out of business because Amazon is so powerful or because they did not have opportunities to adjust. Just a quick review of their existing stores reflects a lack of growth or progress.
“While it may have been the debt load, I have not seen any new Toys R Us stores opening,” says Houlne. “That means that their consumer has changed with the aging of the geography surrounding existing stores.”
“It also means that the in-store experience has not changed, making it difficult for Toys R Us to compete against stores that offer a little bit of everything and provide easier delivery and pick up options.”
When you think of brands that have made adjustments to meet their consumers, IKEA comes to mind. The brand originally launched in 1943, and today they are a global retailer with the ability to do one thing all retailers desire – keep their customers in the store for hours.
“The experience in IKEA is unique. You go there and can make a day of it, including having a meal if you want,” says Houlne. “They knew how to cater to their target demographic, and it has paid off.”
Toys R Us had to shift to cater to parents and children, both of whom have rapidly and whole-heartedly adopted a digital experience.
“While the kids would enjoy going to the store to play, they also want that online experience. Where were the games and apps to keep them engaged with the brand? It’s back to understanding their target audience and then the interaction with the brand at every step,” says Houlne. “Customer journeys are living, breathing strategies that are constantly adjusting and changing based on environment, economy, technology and general consumer attitudes. It’s never one and done.”
Good Intentions Won’t Create CX Strategies
Toys R Us acquired the eToys domain in 2009, a move that makes one think they may have had desires to move toward a more digital experience.
“It would appear they saw the trend but did not react. They had almost ten years to do something, and had they been looking at the customer journey, uncovering a new, more efficient method of selling toys, and leveraging technology, they might not be in this situation,” says Houlne.
Other brands are taking advantage of the opportunities the Toys R Us bankruptcy might provide them. KB Toys, a toy retailer that filed for bankruptcy in 2009, is now planning a comeback by launching 1000 popup stores for Black Friday and the holiday season. Why? The belief that there is approximately half a million dollars’ worth of toys produced for Toys R Us that will sit in warehouses with no place to go. Additionally, Amazon may look to procure some of the retail sites for their own future stores.
“The opportunities for a solid focus on customer experience were there,” says Houlne. “Instead, the company continued to use old tactics, such as not having enough stock of the hottest toy or making people wait in long lines. Today’s consumer will not go for that, so it’s up to brands to engineer the customer journey accordingly. Give them a reason to return, whether online or in store.”
Toys R Us is not the only organization to struggle in keeping up with the pace of advancements in technology and processes required to deliver a great customer experience. The good news is that Humach delivers a way to overcome these challenges utilizing Humach Labs. Organizations can incubate ideas to get a solid feel for the impact to customers, agents, and the organization overall before they choose to deploy new customer experience strategies. The information our clients receive from these programs provide actionable insights to make the best decision without a major impact to the organization’s existing infrastructure or processed.
Contact Us today to learn what you should focus on to improve the customer experience strategy within your organization.