There has been a lot written about why Toys R Us went bankrupt and out of business…but perhaps there is one big lesson that seems to be missed by most analysts. While there are a lot of contributing factors, I believe there is also ONE BIG REASON why they couldn’t turn things around.
Analysis by The Atlantic of WHY they failed...
There was a good article written in the Atlantic about a year ago, “Who Bankrupted Toys R Us? Blame Private Equity and Millennial Parents,” that had some very specific and legitimate causes for their downfall. They first blamed the “online retailers” for taking their market share away with the boom in online shopping. It was much easier to sit at home in your pajamas and order your kids toys than to drive to the nearest store with kids in tow. And they would be right, it is easier…but is it a better experience for both the parents and the kids?
The second reason they blamed their demise on was “Private Equity” firms. Apparently, after their acquisition and taken private by KKR, Bain, and Vorando, they stacked up a lot of debt on top of the retailer. With this amount of debt (approximately $5B) and declining sales, the ability to repay this back and still keep the doors open started to collapse.
And the third reason they pointed out was the “Millennial Mindset” that has been established by kids and their parents. “Screens” are more prevalent and important than TV and other sources that Toys R Us used extensively for advertising and creating demand. As this dropped and they weren’t garnering the attention of the young audience, they weren’t top of mind for where to get toys.
I believe there is another key reason they couldn’t survive…their CUSTOMER EXPERIENCE
I had actually visited a couple of Toys R Us stores in my area during their last year in the brick and mortar business and I was appalled at the experience (or lack of) that they were delivering. There was nothing special about being in the store. The employees didn’t know where things were, and when they were telling you they didn’t, they weren’t friendly. They didn’t take time to find out or walk you over to an aisle, they just didn’t want to help. The experience sucked!
In both stores I visited I took the time to ask several people lots of questions to try and get someone that would help me and also treat me like a customer they were dying to have in their store. Instead, I felt like an annoyance to everyone, including the manager.
Given this was how they were treating me, a customer that took the time to drive in and actually shop in their store, is there any reason why I wouldn’t want to jump online and find the same (commodity) toy at the best price and have it delivered to my doorstep? Of course not. And after talking to several other people about their experience, mine was not an isolated case…they all felt this way.
How they could have "beat the odds" and WON
Sure, there were all the other factors that caused them to go away…but even with all this, the primary “catalyst” was declining sales. Could they have turned around their declining sales so that they could have been more competitive with the online stores? Could they have stopped the declining sales enough to still cover their debt structure? Could they have captured the attention of the Millennials and driven them to the stores to spend their money there instead of all of it online?
My resounding answer is YES…they could have turned this around if they would have rocked the customers world by offering an incredible, highly desirable customer experience.
What if they had made going into a store so much fun for the kids and the parents that they would have actually wanted to go to a store? What if they could have made it more like a Disneyland with characters and games and little village areas where the kids could play and explore? What if they had made it fun for the Millennial parents to actually visit their store because of the way they treated them and their kids? What if…
I can think of at least 10 ways they could have changed the CUSTOMER EXPERIENCE so that all the people I talked to would have loved to go to a Toys R Us store. There are so many things they could have done if they had been CUSTOMER OBSESSED. They would have thought of some of my ideas and probably many more that would have made the experience awesome. And if the experience was awesome, people would not only want to come into the store to experience it, they would have told all their other Millennial friends to join them. Sales would have gone up, not declined.
The Lessons Learned...
While there are several lessons to be learned here, the ones that jump off the page are all based around changing their mindset and strategy to being CUSTOMER OBSESSED. If they were thinking more about their customers and did some minimal brainstorming to create a strategy and specific plans to ROCK THE CUSTOMERS WORLD, they would have had a chance of survival.
The Opportunity...
If you answered yes to one or more of the questions above, you have an incredible opportunity to capitalize on your market and become a leader…both in stature and revenue/profitability. Your competitors are most likely not thinking this way (yet) so you have a chance to be the leader in your space and take over. If you become Customer Obsessed, I can guarantee you will see a marked difference in the way you are viewed and treated in your market.
And your customers will actually look forward to interacting with you, regardless of your size and your industry. You can create such a unique experience that it will be coveted by your customers and the envy of all your competitors. When this happens, you win…you avoid the Toys R Us debacle and you are playing “offense” in your market instead of “defense” to survive. Think about it…your customers already are!
What To Do Next...
If you ever have any questions about this or any other aspect of what it’s like to be Customer Obsessed, just ask and I’ll be happy to answer them. Or if you want to understand it in more detail and how you could move your company to becoming more Customer Obsessed, I’d be happy to meet with you (complimentary of course) to discuss it further for your own particular situation. And if you found this helpful and thinking of someone you know who could benefit from this post, please help them out as well and share this with them.
I hope you decide to take advantage of the massive opportunity that awaits you and become Customer Obsessed so you can be known as a company that is memorable, remarkable, incredibly helpful, delivers and unbelievable customer experience, and who keeps their promises 100% of the time. That would be awesome!!
