Karl McKeever Column - October 2017

Toying with transformation

When America’s oldest toy store FAO Schwarz said goodbye to its spiritual home on New York’s Fifth Avenue in 2015, the decision by parent company Toys R Us sent shock waves through the industry. Immortalised by Tom Hanks in cult 1980s’ film Big, the store itself may have been a wonderland of fun, but while kids went into the store and had a great time, their enjoyment did not translate into revenue. Now Toys R Us itself is in trouble.

As we head into the busiest toy-buying season of the year, the world’s largest toy retailer has filed for bankruptcy in the US and Canada, loaded with a staggering £3.7bn worth of debt. For Toys R Us fun has come at a price. No one is safe. The future of its 110 UK stores are said to be secure, for now, while in North America it has filed for Chapter 11 protection. But in truth, there is no hiding place for its failings. As recent examples have gone to show, survival in the current volatility requires not just resilience but the vision to successfully land transformational change. The retailer’s statement that its stores will ‘continue to operate as usual’ is clearly a statement designed to provide comfort in turbulent times (for investors, store teams and shoppers), though in reality what it must do is anything but the ‘usual’ – and fast.

The way in which people shop for toys has drastically changed, thanks in the main to the rise of Amazon. At the heart of the challenge for Toys R Us is the company’s fundamental cultural belief in the ‘pile it high’ big box approach. In the UK, this way of thinking went the way of the dinosaurs sometime ago for all but the likes of B&M and The Range, who are happy to pursue the ‘sell it cheap’ half of the famed phrase.

According to media reports, it is the rise in online shopping that has pushed Toys R Us to the brink. Not so.

The toy story success of The Entertainer goes to show that there is still profit to be made. Owned by self-proclaimed 'charismatic evangelical' Christian Gary Grant, the retailer defies many modern retail conventions. It does not open on Sundays, and has taken a conscious decision not to stock even the biggest selling merchandise ranges if they are deemed to have a connection to the occult. Not only does it illustrate that a retailer can be both principled and profitable but that meticulous attention to detail instore matters. With a clear ‘thinking like a customer’ approach to its stores, small touches – such as steps by the till that enable children to pay for toys themselves at eye level – help to make a big difference and create a 'special' shopping experience.  

Toys R Us chief executive Dave Brandon has been quoted as saying that bankruptcy protection will provide greater financial flexibility to 'continue to improve the customer experience in physical stores... in an increasingly challenging and rapidly changing retail marketplace.'

In truth, a large part of the woes of Toys R Us are about its vast physical scale, and the immense distribution centre like spaces that it calls stores. While Toys R Us has experimented with smaller format shopping centre locations, such as its Highcross Leicester store that opened earlier this year, the one thing that most Toys R Us stores do still have going for them is space – lots of it. Should they have jumped on the back of the boom in child’s play centres and incorporated them into big box toy stores: surely the missed opportunity of the last decade within the sector? The sight of a child speeding down the aisle in a go-kart may bring health & safety professionals out in hives, but the sheer joy that it brings to their face is priceless, as is the large dose of 'pester power' that it provides.

Anyone who has visited a Hamleys or LEGO store recently knows that kids love of play and toys is still strong – even if their iPhone or iPod is never far from reach. Yet with physical stores focusing on delivering satisfying experiences as a means of differentiation and viability, Toys R Us proceeded to close two of New York City's most 'experiential' stores — its flagship store in Times Square also closed in 2015.

Clearly design has a huge role to play – Imaginarium’s adult and child sized dual store entrance and LEGO’s use of augmented reality to bring the contents of its box products to life instore, both great examples. For me though, this is not how you make the real magic happen instore.

Despite the aircraft-hangar-sized rooms filled with enough toys for a thousand Christmases, and putting retail design considerations aside for a moment, most Toys R Us stores are soulless places, far removed from the word fun – and for far more fundamental reasons. Hardworking and diligent they may be, but few would describe Toys R Us stores staff as being filled with childlike enthusiasm, or demonstrating a love for the brand that is engaging and infectious – in contrast to, say, Hamleys. Little wonder the result is a lifeless brand experience that has failed to capture the imagination of children for so long now.

By all means invest in new store concepts. They remain vitally important for testing new ideas, motivating employees, ruffling competitor feathers, and wooing would-be investors. Delivering truly sustainable transformation, however, will demand not only investment in the physical store environment, but also investment in those ultimately responsible for making change happen. I fear though that this will all come too late to ‘save’ Toys R Us in its current form. Shrinking this goliath business to a more realistic and useful scale that reflects shoppers needs of today, whilst painful, could in truth be the antidote it needs. This though, will be hard on everyone involved.

To seize the advantage in a highly competitive marketplace store employees don’t just need to ‘get’ the message but ‘live’ it. To take stores from the everyday to the exceptional requires more than simply attitude and efficiency. It requires a love-what-you-do, do-it better mentality. It requires store teams who are not just fully engaged with objectives, but have a genuine desire to do more than just process transactions – algorithms and websites already make that look like child’s play. Make no mistake: the challenge ahead for the retailer is huge. But with the right approach, Toys R Us could emerge more colourfully and compactly packaged, like the products it sells.

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