Toys R Us' failure was blamed on competition from online retailers, changing consumer spending habits as a result of inflation and increases in business rates.
Nevertheless, competing toy retailer The Entertainer announced sales growth of 6.8% and an increase in pre-tax profits of 37% last week. It does not show signs of succumbing to the pressures that led to the failure of Toys R Us.
How could retailers of similar goods, operating in the same market conditions have had such disparate experiences?
Why did it happen?
One answer is that Toys R Us did not provide a customer experience.
Toys R Us operated in large, out-of-town retail premises, where products were stacked from floor to ceiling in an environment which offered little in the way of "hands on" opportunities for children and their parents to try the toys on offer.
Toys R Us' branding and its online presence were outdated: They did little to engage on a personal level with their target market and its website failed to compete in a world of omnichannel retailing (combining multiple online, mobile and offline platforms, to offer consumers a unified personal and practical buying experience before, during and after their purchase).
In contrast, The Entertainer focuses on store ambience, customer service and advice. Its stores are in town centres with high footfall. Children who visit the stores are encouraged to play with the toys on offer. It recently announced an investment of £600k into the refurbishment of its Westfield store, which will include the installation of new interactive displays.
While The Entertainer admits it does not compete with the likes of Amazon on price, the company has realised that good value is about giving customers an experience they want, which doesn't necessarily mean offering the lowest price. For example, its website offers next day delivery and a 30 minute "click and collect" service and, crucially, it is starting to build an omnichannel retail experience for its customers.
What lesson can retailers learn?
When The Entertainer announced its sales and profit growth this week, it also announced it was investing in a new web platform (even though its ecommerce revenue increase by 30% in the last year).
Retailers should consider their business can adopt omnichannel retail. For example:
- Be everywhere: True omnichannel retailing means consumers can browse, interact with (see "augmented reality" below) and buy products in bricks-and-mortar locations, via mobile browsing, ecommerce marketplaces, social media and other storefronts (e.g. Amazon). The same media should enable consumers to switch from one purchasing platform another (e.g. from mobile browsing to a bricks-and-mortar store) and continue their transaction seamlessly. A great example of how this should be done is Disney;
- Personalise: Too much choice can be dissuasive. Customer data can be used to gain a granular understanding of individual consumers (e.g. what platforms they use and what they are interested in), so you can provide curated and relevant information to a consumer, which caters to their specific needs. Amazon's "recommendations for you" is a simple example of this.
- Augmented reality: AR is changing the way retailers create, showcase and retail products. Apps that allow consumers to "test" products out-of-store before they buy them are becoming more common (e.g. testing whether a new pair of jeans will suit them, whether a particular sofa will suit their home, or whether a particular shade of make-up works with their skin tone).
- Give consumers an experience: for bricks-and-mortar retail to succeed, customers need a reason to visit a store, beyond viewing and buying products. Consumers need experiences which immerse them in the retailer's brand and their products. For example, John Lewis' new Westfield store includes a sofa studio (where customers can design their own sofa), a demo kitchen (where customers can try kitchenware and take cookery masterlcasses) and a fully immersive smart home experience.
- Automate: By investing in tech that facilitates the selling process, staff can focus on tailoring their service to the individual. Tech can't offer advice and opinions with the same personalised touch as human interaction, but it can give on-the-spot product/stock information and complete purchases without the need for a till. Apple's retail stores have implemented this well.
Ultimately, Toys R Us failure was the result of its inability to invest in its own future. The Entertainer shows that, while the retail sector continues to face challenging times, tech holds some of the answers to engaging with customers in new ways and keeping them in touch with your brands and products.