7 Retail Management Lessons You Can Learn from Toys “R” Us


In Brief:
Managing retail isn’t an easy task when trying to keep up with dynamic consumption patterns. Refusing change, however, could nip the bud of solvency, altogether.


        The​ reason the American poster shop finally faced the music was, obviously, insolvency. Amidst massive potential demonstrated by Amazon, however, the inescapable reality behind the demise was Toys “R” Us’s own inability to redefine the business and ineffective management that sunk the ship. Kris Hiiemaa explains underlying factors as follow:


1. Closing of the flagship Times Square store.

Back in 2015, the branch was not just a shop. It was a major tourist attraction with a huge Empire State Building LEGO® and even a heaven swing that was photographed regularly as a social media souvenir. The cause of the closure for the branch has been reported recently to be due to the inability to pay the next rent. The problem is twofold. 1. the closed branch was the most popular. 2. it was closed permanently with no replacement in the strategic area. Nearby branches in Brooklyn, Queens, and Union Square that were expected to pick up the slack did not work the magic. The first take home message: have a contingency plan before closing a box office establishment.


2. Stores were turned into warehouses instead of creating joyful experiences for children; the main target group.

On the other hand, the reason the Times Square branch received so much love by tourists was because it catered memorable experiences that made the journey worthwhile. Visitors come in not only to shop but to take photos and engage in fun activities together. This is very important for branding.

A great example is Disney’s stores located in different locations around the US. Beyond shopping, they also serve as a playground for children. It be in the theatre zone where kids can sit and watch Disney movies together while the parents go about their business, the dressing zones, along with other attractions, all of which conduce recreation. Engagement with a variety of activities in the store make children stay longer and spend more time with more products. Ultimately, it leads to more purchases, of course, as the parents are cajoled to spend more time there, too. Taking the highest profile box office off the map has proven to be a dire mistake.


3. Inferior logistics in the context of Amazon.

In turning your shop into a warehouse, you must be able to compete with the logistics leader like Amazon.com on each and every front. Whether Toys “R” Us’ logistics failure is worth untangling or not, Amazon changed consumption behavior for good. Staying in business, thus, is nearly impossible if it cannot compete online with products, fast delivery and cheap price.


For many businesses, the problem isn’t so much stockpile but more so about having supply in the right place at the right time. Managing multiple warehouses and product SKUs (Stock Keeping Unit) would be a feasible task with a POS (Point of Sales) system that tracks every SKU. With it, you will be able to notify your customers with accurate inventory status and delivery time, as well as predict their needs.


4. Poor store layout and shelf management leads to poor customer service.

Any customer that has been to Toys “R” Us will say that they feel crammed up in the store as a result of poor layout-shelf management where disarranged products lead to not only an unwelcoming feeling but diminished customer service as well. A floor filled with products in disarray, let alone conducive layouts, is as confusing to customers as it is to the staff who want to help but can’t seem to find the odds and ends themselves. This is one of the most important take home message from Toys “R” Us’ story. Sometimes, limiting the amount of products in the store as a trade off for conducive layouts can attract more shopping than putting everything up in a bundle. It also helps staff cater better customer service.


5. Poor warehouse management.

Often times, customers complained about advertised items or new products being out of stock due to neglectful pipeline management. Thus, having no merchandise on display as customers enter the shop incontrovertibly translates to purchases taken elsewhere, be it Amazon or other online retail. Take home message for specialized retailing (i.e., toys): it’s a requirement to always have big ticket items on display. Knowing when and what the customer wants thus is adamant. Good inventory management comes from thorough planning and implementation according to plan. Out of Stock no-more, many programs are available today to help you learn and analyze consumer behavior to know what and when to sell.


6. Toys “R” Us didn’t have its own subsidiary product.

Another major factor behind the inability to compete with giants like Amazon and Walmart was that they did not offer their own line of toys. All products offered at Toys “R” Us, on the other hand, were widely available at major retailers at a cheaper price which made it more convenient for customers to buy the same product somewhere else without wasting a trip to Toys “R” Us that may or may not find goods from the maze. Take home message: make doubly sure that you know exactly why customers come to your store and not others. In an era of abundance quality, it is good customer service that caters memorable experiences or having a rare commodity that is only available at a store, it be a subsidiary product line of its own brand or someone else’s, that makes it stand out to customers from the rest of the pack and gets more coming back.


7. Lack of advanced programs to create customer engagement.

Finally, there was a lack of strategy to create engagement with customers. Customer engagement transpires maintaining good relationships to brand loyalty. Where customers nowadays expect to get involved with their favorite brands through online mediums such as loyalty programs with personified content, without it, to the opposite effect, not only does a brand become bondless, purchases get repeated less and less for turnover.


At present, businesses at all levels are focused on creating customer engagement with gradual development of good relationships to achieve sustainable brand loyalty; any organization’s key success factor, particularly small and medium businesses. A strong online presence and constant communication with customers both prior to and after sales will propel the business forward. But before building a relationship with customers we need to know the customer, first. That’s why we need to maintain customer information, namely, the name, date of birth, likely purchases and prefered media channels that are able to reach them, all of which aids our understanding and engage with customers more effectively. In addition, POS systems that collects customer information from each transaction will provide us with a good database to shape policy.


Compiled by BLOG.SCGLogistics

References and photos: supplychain247.com, statista.com, flickr.com


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