Toys Were Us: Once-thriving brand fights for relevance
In April, Toys R Us announced that it had lost $36 million last year. That was the good news.
The year before, the giant toy retailer lost $130 million, which, on $12 billion in sales, is not the end of the world. But it gets worse. Sales in 2016 were down 1.4 percent in a toy market that grew by 5 percent. On Sept. 18 of this year, Toys R Us filed for Chapter 11 bankruptcy protection and put the long-term viability of the brand into serious question.
To paraphrase Kermit the Frog, it isn’t easy making green.
The first Toys R Us opened in Rockville, Md., in 1957, based on a similar business owned by the founder called Children’s Supermart. The new specialty brand became the hammer in its category, offering a wide selection of toys and children’s items while driving smaller toy stores out of business. The new concept easily overmatched the typical department store selection and grew rapidly through the 1980s and 1990s. It launched spin-off brands Kids R Us and Babies R Us. But, in the early 2000s, the company’s growth began to slow and profits stagnated. Kids R Us closed in 2003.
Toys R Us succeeded as a category specialist, but its brand was not about great service as much as it was great selection. And that once-solid position ultimately proved to be vulnerable. Two big sharks and any number of smaller fish began to eat away at its profits. As Amazon grew from a bookstore to a more broad-based retail giant, it quickly outpaced the ability of Toy R Us to sell online. Walmart did what it does to so many retail competitors and cherry-picked the most successful products and sold them at a lower cost. Smaller online operations used the efficiency of their virtual retail space to chip away, as well.
So, 60 years later, the once-mighty Toy R Us has become the nail, getting pounded by bigger retail brands and accumulating more and more debt as it struggles to compete. Service has deteriorated, the company is often undercut on price, and its online presence is outdated. Online video games have completely bypassed all retailers and now take up a big share of the toy budget for many parents. Of course, Toy R Us is hardly the only retailer hurt by the likes of Amazon and Walmart. K-mart, Sears, and JCPenney are all wobbling like Weebles that may actually fall down.
If there’s a way to save Toys R Us from joining brands like Circuit City and Blockbuster in the attic, it could be to revamp its retail service experience and make it part of the value of going to the store. This might include parent and child in-store events, online clubs and special promotions for grandparents or other niche audiences. There has to be a reason to skip Amazon Prime and say, “Let’s head over to the store today.”
Unfortunately, it is far more likely that Toys R Us is on the same Slip ’N Slide that Radio Shack has been riding for years. They are on a race to the bottom of a hill that may be impossible to climb back up.
David Taylor is president of Lancaster-based Taylor Brand Group, which specializes in brand development and marketing technology. Contact him via www.taylorbrandgroup.com.