Lessons from the Toys R Us Bankruptcy: Its Not Just Amazon


Rest in Peace Geoffrey the Giraffe

In a temporary departure from our usual Friday format, today’s article will not focus on a singular business, but trends that our Members should be aware of.

It’s no secret that the retail landscape is tough right now. Over the past few months we have seen venerable institutions like Sears slide through Bankruptcy into complete liquidation and many other retail outlets have been either closing locations, cutting pay or rolling back benefits to keep the doors open.

The latest victim is Toys R’ Us.

Like Sears, Toys R’ Us was a company that seemed like it had an untouchable license to print money in the 80s and 90s. Yet on Wednesday CEO David Brandon told employees and shareholders the company planned to liquidate all its stores in the United States, Australia, France, Portugal, Poland and Spain leaving tens of thousands of people out of work and millions in retail sq ft dark.

While there is still some hope that the online business as well as the Canadian, Japanese and Central European stores can be bundled and sold off there are a few important lessons that Chamber Members can take away from this experience.

The Most Shocking? You can’t just blame Amazon.

Yes, admittedly, there are those among us who have the discipline to do all their Christmas Shopping on Boxing Day the year before. And yes, there are those people are so laser-focused on getting a great deal that they will take their chances and hope that items they ordered from China are not a knock-off and do in fact arrive on time.

But, according to the Journal of Consumer Research, the vast majority of consumers either lack the discipline or are simply too consumed with the hectic nature of day-to-day life to plan in advance. And this is where local businesses have the chance to thrive.

Take this scenario: Your little one brings home an invitation to a friend’s birthday party two weeks from now. The study shows that most of us will leave it till the day before the event to purchase a gift or get a new outfit for our kid to wear to the party. And so, a choice must be made: do you go to the City to pick something up, or can you be convinced to stay local?

Here’s what we learned from the Toys R’ Us bankruptcy:

  • 1.      The inventory at Toys R’ Us was largely the same as what you might find at Wal-Mart or other big-box stores. Toys R’ Us used to be a destination for exclusive, authentic products that people could get excited about. But by selling the same mass-produced items as every other big box store, there was no reason to choose Toys R’ Us as a destination over other retailers.
  • 2.      They had over-leveraged themselves in terms of debt. As sales started to slump, spending on training employees and employee retention was reduced. At the end an employee at Toys R’ Us, once considered a specialty store with toy experts to help you select the perfect toy, had the same very basic product knowledge as employees at any other big box store. This also helped reinforce their place as just another retailer rather than a retail destination.
  • 3.      Their business model was not sustainable. One of the pundits on television Thursday asked a question most business owners could apply to their own business model: “Is there room for a toy store that is simply a toy store?” The panel agreed: the answer, categorically, was no.

So, what are the takeaways from the latest – but certainly not the last – liquidation of a retail giant?

Understand human nature: Most people leave purchases until the last minute. When they turn up at your store, have something unique, authentic and exciting to sell them.

Give them a reason to shop at your store. If you sell the same things as other local stores (and big box stores!) there will be no reason for your shop to be a destination of choice.

Make sure you and your sales associates know, love, and use your brands! Coupling a high level of customer service with an exceptional knowledge of your product means that you can connect your customer with the item they need. It also means that they will keep coming back to you as experts in the field.

Diversify your business. Putting all your eggs in one basket is a risky proposition.

And finally, the Chamber would like to remind you that there are several amazing Chamber Members who you can turn to now that Toys R Us is gone. Brooks Stationers carries their exclusive line of Moose Moose Toys and Games. CoCo and Kabri has a great selection of toys, books and Aaron’s putty that my niece loves. And larger Members like Shoppers Drug Mart and Canadian Tire also carry seasonally appropriate children’s toys.



Posted on:
Friday, March 16, 2018