What's next after Toys R Us
I remember the years between 2014 and 2017 when a trip to Toys R Us was the most cherished treat for my kids who were below 5 years of age then. My kids would spend hours trying to select their toys while negotiating with us on how many they could buy. To them Toys R Us was like a dream world.
As parents our primary job was to ensure they bought age appropriate toys and, in the budget we had allocated. As someone who is always looking to identify consumer trends and the potential impact on businesses, I did wonder then the impact of eCommerce (read Amazon) on stores like Toys R Us.
My read at that point was that Toys R Us would be the last bastion to fall because of the three factors:
1) One never buys the same toy again so the “unknown” factor will make it less likely for people to buy toys online.
2) Kids are the prime users here, and evaluating toys online isn’t as much fun as being in a physical store.
3) Kids demand instant gratification, tell telling a kid he can have a toy he likes the next day, or worse, in a few days.
Its 2018 and I think we made one of our last trips to Toys R Us. A lot has changed, a few gift cards we had wouldn’t work, aisles were half empty and overall the mood was gloomy.
I wondered what went wrong and although its easier to comment in hindsight, I think three factors again come to my mind:
1) We must have made numerous trips to the Toy Store, but I don’t remember anyone in the store interacting with us or our kids, no one consulting us on what toys to buy or helping us select progressive more complex toys.
2) The toys sections seemed to be designed keeping the brands in mind, a Lego Section, a Transformer Section, rather than the kids in mind. One really had no help on the floor to select a kid.
3) Most communication I received from the stores was about discounts, nothing educational or nothing to deal with the complex parenting world.
Perhaps Toys R Us had other issues that led to its downfall, perhaps they would have failed even if they did the above-mentioned things, but the sad part is they didn’t even seem to have tried.
We are all wiser in hind sight, so I wish to now predict who could be the next victim of the relentless eCommerce juggernaut.
Costco has a reasonable share of my wallet, and probably well placed today as compared to other retailers who are facing an uphill battle with Amazon. There are three anecdotal factors which I think could make Costco susceptible soon.
1) My kids or for that matter my mother or mother in all show no interest in going to Costco anymore. Just a few years back it used to be a family outing of sorts.
2) My family refuses to buy clothes from Costco, because everyone in the neighborhood seems be wearing the same.
3) The sheer quantity of most food items sold at Costco, prohibits us from buy any perishables from Costco. If Costco does its analysis well, it would see that I have a limited set of items I buy from Costco and that competitors are moving in.
However, from a strategic perspective here is how I think Costco is repeating the Toys R Us's mistake:
1) As a membership driven retailer, they have a lot of data on my purchases. However, they still send me a generic promotion list which is more of an inventory moving/ pantry loading strategy than a customer-centric strategy.
2) The subscription model of Amazon is a direct attack on the categories I shop at Costco. If I had a smaller house, subscription model would be my preference.
3) Unlike Toys R Us, Costco does send me non-promotional communication like Costco connection, but it’s not personalized. I am waiting for a day when Costco will realize I buy all food Organic and will send a note on how they source organic spinach and that I am making a great choice.
4) I don’t see Costco promoting local produce, which I think is important as the world realizes the perils of distant sourcing.
I am currently evaluating if really need to have Prime membership as well as Costco membership. Prime membership will stay for sure, but I am actively considering downgrading my membership at Costco. I bet a lot of Costco customers are too. The question is if Costco is observing this shift. Perhaps they are, I really wish they do.
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6 年I think this is a good starting point for a potentially insightful comparison but it seems to fail because although the tactical execution of the two businesses appear similar, their value proposition and strategy are different.? I can't claim to know the overall strategy of the two businesses being discussed here, but can definitely comment on their value proposition to me, which may be like that of many others in their customer base.? So what is the value proposition to me of the two businesses? For me it is not the annual savings, because I probably don't even break even on membership fixed cost with the savings given my purchase volume. The value from Costco for me is in? 1) the quality control and buyer effort that goes into deciding what they put on the shelf. When I don't want to incur product search costs, I buy from there. A generous return policy helps add to that value proposition. However, ToysRus always felt like a dumping ground for low price low quality merchandise. So no comparison there. 2) reliably efficient and friendly staff at checkout and member services. I do not recall ToysRus having much of either, but I never shopped there much, so others may disagree. In any case you should not be comparing the shopping experience in a wholesale high-basket membership-based store with an retail low-basket open-access store. So while the point is valid that Costco does not engage customers in the aisles just like ToysRus did not, I might remind folks to look at execution through the lens of corporate strategy, not at execution in itself. Therefore what may have led to the demise of ToysRus may not lead to the end of Costco.
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6 年See what gamification in business was done to the little ones!.
Training General Manager @ Wawa, Inc. | Servant leader driving employee development.
6 年To the publisher of the post. Your perception of both companies are so off I leave it to the numbers.?? Costco 201.95 USD +4.29 (2.17%) Revenue 32.36B 12.13% Net income 750M 7.14% Diluted EPS 1.7 6.92% Net profit margin 2.32% 4.53% Operating income 1.07B 10.23% Net change in cash - - Cash on hand 5.88B 29.51% Cost of revenue 28.13B 12.66%
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6 年After reading article some point come in my mind as I am very much Business Oriented Man 1)Target customers who visit Toys R Us are mostly Upper Middle Class whose ratio is far less then Target Customers of Costco which is Middle Class and below. 2)Main Goods sold in Toys R Us chain are only toys and Baby products which target age group of 0-8yrs where as Costco Target products are day to day which cover all age groups that lead to people attracting to store like Toys R Us is less compared to Costco which at the end leads to closure and will be lesson learned for others Retail Chains and Management
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6 年I think the Millennial factor will also play a key role in the closure of some of these stores. You would hardly find that demographic in a Costco store as they can easily buy things online and maybe at a better price.