WHEN THE MAGIC DIED - REFLECTIONS ON TOYS R US

'There's a magical place, we're on our way there...'

So went the opening line of the iconic jingle that used to resonate through my living room when I was a child in the 80s and early 90s. Growing up, I knew of Toys R Us as a toy-Nirvana - a place where every possible game and toy could be imagined and acquired. In a seasonal business where most sales were made in the last quarter of the year, you could be sure that an advert with Geoffrey the Giraffe and his helpers heralded the start of the Christmas season and that many of the items on every child's Christmas list to Santa were based on visits to Toys R Us or their big, colourful and powerful adverts.

For years, this company bestrode the toy retail industry, squeezing out smaller, independent toy companies, and riding the wave of the consumer's love for oversized, out of town retail developments. It would seem that Toys R Us was a brand too big to fail. Yet, finally last week, fail it did. Toys R Us in the current format will cease to be.

There are, and will be many articles that write about the larger corporate issues (debt, business structure, and the involvement of private equity), but for me there is something more fundamental, and this was brought home to me today as I visited a Toys R Us store.

Many people argue that the future for retailers looks bleak, that bricks and mortar retail operations cannot possibly compete with the online behemoth of Amazon; they point to increased volume of online transactions and falling footfall in traditional stores. It is true to say that there is a shift and that the convenience and comprehensive stock levels of such providers is attractive to many consumers, however these were two factors that made Toys R Us attractive 20 - 30 years ago, so it would be an unwise person who expects that today's models will be dominant in the future.

Also, whilst Toys R Us has struggled, other toy retailers have survived and thrived, proving that there is a way of making bricks and mortar retail work. What I experienced from my visit, and from the anecdotes of others who have visited their stores more regularly, there was no sense of 'magic'. Today I found a pile 'em high (and sell it relatively expensively) strategy - tall shelves full of a range of stock that suggests too much choice in store and too much cash sunk in to items that have taken too long to shift. Every possible square inch of the store is full, full of toys, books, prams, and board games - I saw every board game in four different locations along one shelf: this was not to cover gaps in the shelves, but simply because of the amount of stock they had that needed to be sold. As I walked around, I heard some saccharine pop songs interspersed with the classic theme tune that is now less iconic, and more ironic; and I wondered what had led to the business that I remembered from my childhood to fall in to the position it found itself in.

Toy retailers who do well remember that their target customer is not actually the paying parents, but the children themselves. The art of toy retailing is to get the child to want an item and persuade the person with the available cash to part with it; to do this a child needs to have an experience: to feel, to play, to enjoy, to be in awe. As I wandered the store I asked myself: 'Where is the fun? Where is the sense of enjoyment?' There were no areas for children to play, no items to try, no experiences to enjoy. It felt that I had entered a warehouse of toys, not a 'magical place'.

Successful retail requires a number of things to happen:

• More Leads (ie. more footfall)
• Better conversion (ie. those people coming in to the store not leaving until they have purchased)
• A high average ￡ sale (ie. people spending more and buying extra items in each purchase)
• An increased number of transactions (ie. getting people to come back more often)
• Strong margins (ie. controlled stock levels, tight control of costs)

It would seem that Toys R Us failed to focus on many of these, if they had, they would have realised that Customer Experience is what distinguishes successful bricks and mortar from the rest.

Competing with Amazon is always going to be tough, they have a dominant place in the online market, so my advice would be to focus on the one advantage that a bricks and mortar toy shop has: the ability to create a magical experience. A focus on creating a store that is an adventure, a place of wonder and excitement, where the performance is as important as the product; these are the competitive advantages that physical toy shops have. It is too late for Toys R Us, but it isn't too late for the rest.