How to avoid a demise like Toys “R” Us

by Ana Lopez

Opinions of contributing entrepreneurs are their own.

Toys “R” Us was once a household name, thanks to several innovative practices, including supplying iconic toy brands, using major celebrities for promotional events, negotiating lucrative contracts with various toy manufacturing companies, and developing Geoffrey the Giraffe, who the face of the brand’s advertising campaigns for decades.

Despite all this, the company struggled with ever-changing consumer expectations and the rise of e-commerce platforms. In 2017, the company filed for bankruptcy. Now, with the five-year anniversary of the June store closures, what lessons can be learned from the once-loved brand’s fall from the spotlight?

The answer is a lesson in building a solid, modern and agile brand. Here are three ways in which Toys “R” Us could have not only survived, but maintained its iconic status to this day:

Related: 5 strategies you need to build your brand

1. Encourage people to experience and connect with your brand

The average size of a Toys “R” Us store was about 30,000 square feet. The company used this space to stock the shelves with the latest and greatest toys and activities for kids. In fact, the company often had too much stock, causing “significant inventory supplybetween Thanksgiving and Christmas to attract last-minute shoppers.

This type of big-box structure and approach turned the business into a store rather than a destination. To create a true brand experience, I would have carved out 10,000 to 15,000 square feet of each venue and turned it into a one-stop shop for birthday parties. Amenities included a bouncy castle, trampoline zone, learning stations, arcade, and more.

In this way, the store would have become a destination for customers. Rather than a place to “bump into,” creating a branded destination would have provided Toys “R” Us customers with an experience. And research shows that experience determines results. Found a Salesforce study that 80% of the customers believe that the experience a company provides is just as important as the products it sells.

In addition, the company could also have built a kitchen to serve food and sell drinks for birthday parties, which would in turn generate more revenue. If parents booked a party, one of the advantageous requirements would have been to fill out a birthday list for items to be sold in the store. This all-in-one business model would have separated the brand from its competitors.

Related: 4 things that make for unforgettable customer experiences

2. Understand your customer’s pain points

A changing retail landscape and an increasingly competitive landscape were some of the many reasons Toys “R” Us closed. But I would argue that Toys “R” Us ultimately failed because leadership failed to understand the changing needs of its customers.

As a destination for toys, the company missed the pain points of its primary target audience: the parent. Take birthday parties for example. a recent research found that 55% of parents being stressed out by the time it takes to plan a birthday party and how to keep it affordable. At its core, today’s consumers prioritize convenience – and by offering a seamless, one-stop-shop, party and gift program, the iconic retailer could have captured the attention of busy parents through the benefits of time, money and increase energy.

The creation of a robust online gift registry system where parents can create, track and purchase in-store gifts would have also addressed parental pain points. Then the gift is wrapped and placed at the birthday party when the guests arrive, again saving time and energy for a busy parent.

Providing convenience and peace of mind is essential to customer retention. In fact, our 2023 Subscription Commerce Industry Outlook Report Preview notes that the three main ways to retain customers are:

Related: How to identify the pain points that make customers decide what to buy

3. Foster a community

Ultimately, by creating the infrastructure necessary to make its shopping destinations, Toys “R” Us could have created a true community experience for both children and parents. On the days when parties were not held, a monthly membership system would allow for regular space involvement, exclusive access to the performance space, and food at discounted rates.

After all, building a recurring customer base of satisfied, long-term customers is essential for business growth within recurring revenue and membership models. In fact, research has shown that the best subscriptions are generated more than 20% of their turnover of existing subscribers.

The most successful brands will find ways to nurture engaged communities that feel a personal connection and brand affinity. As Expert DOJO’s Brian Mac Mahon says, “If you’re going to build a business, it has to be a vision that makes people quit and that lasts forever.”

As Babies “R” Us, the sister company of Toys “R” Us, attempts to make a comeback in the coming year, I hope they take these lessons to heart. Entrepreneurs should not be concerned with building a business, but rather a brand with deep loyalty and community involvement. As consumer habits continue to evolve, brands that build exclusive experiences for well-researched customer audiences will stay ahead of the competition.

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