What we can learn from the failure of Toys R Us

Toys R Us is going out of business, as is UK electronics retailer Maplin. What did these companies do wrong? They were too late in transforming digitally, says Gavin Masters at Maginus, an Episerver partner in the UK. Learn how you can avoid the same mistake.

Following another flurry of high-profile casualties in the High Street, the dangers of intransigence and the lack of a clear digital strategy are once again under the spotlight. To some, it seems impossible to imagine that there are still multi-million pound retailers struggling to transform their business to capitalise on the ever changing landscape online and offline, but the reality is that there are countless instances like Maplin and Toys R Us which will come to light over coming months and years – brands who seemed to be leading the way 10 years ago simply not adjusting to the dangers of new competition and the demands of the evolving consumer.

It’s impossible to predict the future, and there will always be unforeseen challenges, but it is absolutely possible to be prepared for change, and to accept change as a positive opportunity to improve your business and the experience of your clients.

Spending just ten minutes on the current Toy R Us site lays bare the state of digital strategy within the organisation – the site feels a decade out of date, and is missing even the simplest of personalisation tools (or, if they are there, they’re woefully misconfigured) and other standard features the average buyer has come to expect on eCommerce sites. As a father who bought from their “Babies R Us” brand many years ago, and has shopped sporadically with them since, I have never received targeted emails, despite my behaviour with them creating some huge and obvious indicators of areas of interest – my son loves Lego, and Star Wars, and my daughter loves craft kits and her Nintendo… These should have allowed Toys R Us to be sending me specialised messaging over the Christmas period (and beyond) and to understand what my kids next obsessions might be as they grow older. As it is, I have received a handful of very generic marketing messages containing random toys for ages 0-17, which haven’t engaged me in the slightest.

However, this is digressing somewhat from the key point – it’s easy to accept that Maplin, Toys R Us and pretty much every other retailer could not have predicted the course of online retail from their position as market leaders 10 years ago, but it is harder to accept that doing nothing was a better strategy than some kind of change.

Back in the early 2000’s I worked for Play.com who were, at the time, seen as plucky upstarts and the indie alternative to Amazon’s impending market dominance. We were an agile business before “Agile” was a widely lauded approach, and we knew we were punching well above our weight. We also believed that we were living on borrowed time. We were doing so well, it was hard to believe that we weren’t going to get snapped up by one of the big High Street retailers looking to secure their position for the next 10 years. Several times, we’d get into work on a Monday morning and rumours of a takeover would be running round the office, but it never materialised. One by one, Our Price, Andy’s Records and (some years later) Zavvi went under, fuelling even more speculation that we were going to succumb to the inevitable and HMV would buy us as a ready-made online channel. However, what seemed obvious to us, was completely alien to the senior management at HMV who once famously said, “downloadable music is just a fad, and people will always want the atmosphere and experience of a music store rather than online shopping”. That was 15 years ago, and some retailers are still thinking their businesses aren’t under threat from digital start-ups and more agile competitors. Insane.

Technology for Change

So, how does a business who may be entrenched in 50+ years of bricks & mortar even begin to consider implementing a digital strategy? Well, my first response to that would be – how does it not? How does a company justify to its owners, directors, customers or shareholders its inability to change in a rapidly changing market?

The most successful businesses (when it comes to change and transformation) understand the importance of technology, and a number of retailers, especially in the Pure Play sector, actually consider themselves an IT company first & foremost with their retail operation being an offshoot of this IT function. This approach has a number of key benefits over an approach where IT is led by the wider business:

  • Standardisation of processes and operations, based on best practise and “out-of-the-box” functionality.
  • Better visibility of the IT hardware and software landscape, making costs more manageable.
  • More formal relationships between software vendors and the business allowing for better utilisation of the software & support.
  • IT becomes a central player within business and systems decision making.

There are countless different approaches to IT architecture – a subject far too broad to go into detail here - but it is certainly true to say that there isn’t a single approach which is suitable for every business. Understanding the opportunities and threats to your specific situation (and strategy) is an important factor in any business transformation project, and a key influence on the ultimate direction you take the technology within the company. The key is to ensure your technology stack allows you to react quickly when required, yet remain reliable and cost-effective in day-to-day operations. Technology is the single biggest difference in retail, B2B and wholesale businesses today compared to 30 years ago and it’s why so many start-up businesses can succeed and grow where monolithic “traditional” businesses struggle.

The Millennial Customer

Looking outside the retailer, the other huge change is the consumer themselves. A lot has been said about changes in customer loyalty (it’s deador is it?), buying behaviours (anywhere, anytime) and the rise of the millennial consumer who has never known a retail world without the internet, but how many retailers actually understand the real implications of any of these statistics?

It’s easy to become swamped with information in the Big Data age - over-analysis is a real danger when starting to dig into consumer insight & behavioural information, but it is important to understand how your customer has evolved over the last 5 to 10 years and how your competitive landscape may have changed to accommodate this. Having visibility of the newest challengers in your vertical is one thing (and imperative when understanding where your threats may lie), but just as important is seeing where your next opportunity may arise – going back to Maplin & Toys R Us, are their biggest competitors geared up to capitalise on the fall of their competition, and are they prepared to learn from their failings? The demand for product is still there (I’ve seen my son’s birthday list…) and there is huge scope for innovation in every area of retail, so the same truth is there for the likes of Smyth’s Toys and Toymaster as were there for HMV all those years ago – grasp the nettle before someone else does, and don’t assume your consumer wants the same thing now as they did 10 years ago.

An Opportunity

In summary, we are repeating the same messages we (as consultants, and online evangelists) have for several years now, only more urgently – the internet isn’t going away, but many retail brands who don’t embrace it will. It is bordering on gross negligence to be leading a business without a clear digital strategy, and if your argument is “no-one in our sector is doing it” or “no-one is doing it well”, then this should be a call to arms as opposed to an excuse or reference point. Digital transformation is a key driver for success online, as well as a wider growth of any modern business, and Maginus can help you find the right tools to expedite this process.

The bottom line is simple, transform or die.

Gavin Masters

Guest blogger: Gavin Masters

eCommerce Industry Principal at Maginus