5 Lessons for Offline Retailers to Learn From the Downfall of Toys “R” Us

5 Lessons for Offline Retailers to Learn From the Downfall of Toys “R” Us
Nov 2019 , by , in Interviews

Authored by Andre Oentoro, Founder Breadnbeyond, USA

Toys “R” Us has been resurrected from the grave一 the once retail giant is reported to open two new stores in the U.S this November and is planning to have 10 stores opened by 2020. If it’s true, it’ll be another twist in the plot for the dying brand. Toys “R” Us, with its mascot Geoffrey the Giraffe, was an iconic brand known for selling toys, video games, and baby products. At its heyday, Toys “R” Us had over 800 stores in the U.S and 150 stores in the U.K.

However, the inability to pay off its debts and overwhelming competition from other retailers, along with other factors have led the toy company to file for bankruptcy in 2018 and closed all of its stores. In this article, we’ll take a look at five valuable lessons to learn from the downfall of Toys “R” Us for brick-and-mortar store owners.

 

Manage Your Cashflow Neatly

One of the major reasons for Toys “R” Us’ demise was the huge amount of debt it couldn’t afford to pay. Before filing for bankruptcy in 2018, they had around $5 billion in liabilities. It was worsened by a rapid decline in its revenue due to stiff competition from Amazon and Walmart.

 

The key takeaway here for business owners is to always closely monitor the financial condition of your company. Review your monthly cash flow to find out whether you’re overspending the budget, which cost you can cut off and whether your cash flow is healthy in regards to your revenue. You can use finance apps to help you with that. Also, don’t bite more than you can chew. Don’t get into debt to open your next branch when you’re not financially and resourcefully ready yet.

 

Sell Experiences, Not Products 

The next fatal blunder of Toys “R” Us was its decision to close down its Times Square store in 2015. That particular store was more than a mere toy store, it was a tourist attraction. People would come and take pictures of its giant Ferris wheel as well as famous monuments and buildings made of LEGO.

Closing down this attraction without opening it elsewhere was a big mistake because it removed that extra experience people had when visiting Toys “R” Us store.

The world has changed. If you only sell products, you have no chance of beating online retailers like Amazon in terms of convenience, product variety, and lower price tag. So, you need to add physical experiences in your store to attract consumers to come.

 

Have a Trademark Product

In all honesty, this one is more about a business model than a mistake, but Toys “R” Us didn’t have its own distinct product. Instead, they resold products from big factories. The problem with this model is that those same products are available on Amazon at lower prices.

Reselling is a dangerous business, because your competitors sell the exact same kind of products as you do, with the price being the only difference. Bigger companies have access to bigger funds. They can buy products in a higher quantity and they can sell them off at a lower price. If you can’t compete with that, it’s better to create your own trademark product that can’t be found anywhere else.

 

Strengthen Your Online Presence 

Throughout this article, it’s implied that Amazon is the one responsible for driving Toys “R” Us out of business. While it’s not 100% true, online retailers indeed are one of the few reasons traditional retailers like Toys “R” Us lost a significant chunk of their market.

To avoid the same fate as Toys “R” Us, you need to strengthen your online marketing campaign. We’re in the digital era where people spend 24 hours every weekon the internet. Your target customers are on the internet, so if they can’t find you online, they’ll turn to other brands that they can find.

 

Keep Innovating 

The most common mistake big brands do is that they become too comfortable in their own ways, they don’t see the need to grow. Toys “R” Us was no exception. Ever since it was founded in the 50s, Toys “R” Us had been doing the same thing, without notable innovations, up until their bankruptcy in 2018. They open a store, stock them with toys, clothing, baby products, and video games and then repeat.

If you want to survive in the highly competitive retail industry, you have to keep innovating and finding unique ways to attract customers into your store. Innovation is important to keep your brand stay relevant to the current trends.

 

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