Toys "R" Us Inc., founded by Charles Lazarus in 1948, is one of the leading retailers of toys, games, electronics, sporting goods, baby products, children's apparel and juvenile furniture. With its headquarters in Wayne, New Jersey, and over 1600 stores worldwide, Toys 'R" Us has been the favorite destination for children and adults alike. The company has 873 stores across the United States, and has more than 600 Express locations.
Not only is Toys "R" Us one of the leading toy distributors, but also considered "the authority" when it comes to finding the perfect toy. The competent staff members at the stores strive to maintain this reputation, and help people find the toys ideal for their children.
Toys and other merchandise are also sold through other chains or businesses owned by Toys "R" Us: KB toys, Kids "R" Us, Babies "R" Us, FAO Schwarz, Geoffrey's Toys "R" Us, Toys "R" Us Express and Imaginarium. The company's e-commerce is carried out through sites like eToys.com, ePregnancy.com and BabyUniverse.com.
The company's marketing strategy revolves around a portfolio of new toys, old favorites and exclusives, all under one roof. In 2009, it also came up with the idea of smaller stores, to attract more customers. 90 "Holiday Express" stores were started across the United States to cater to the demand created during the holiday shopping season. The success of some of these stores prompted the company to keep them stores open, under their new name: Toys "R" Us Express.
However, competition caught up with this toy giant in no time. Toys "R" Us, which was the number one toy distributor in the 90s, gradually relinquished its position to the looming behemoth: Wal-Mart. Target, Best Buy, Hasbro Inc., Mattel Inc., and GameStop Corporation added further momentum to the competition by introducing discount offers on toys similar to the ones offered by Toys "R" Us. Despite the tough competition, Toys "R" Us USA managed a sales increase of 2% in Q4 of 2010. However, the net earnings dropped to $330 million from $387 million of Q4 in 2009. With total earnings of $13,568 million, Toys "R" Us recorded a growth rate of -1.10% in 2010.
In order to recoup falling sales, the Chairman and CEO of the company, Gerald Storch, has been implementing various strategies. The objective of these strategies is to counter competition, and regain the number one position in the toy market. His strategy involves shifting the focus from the price to the service and product selection. Apart from opening over 80 temporary toy stores across the U.S, Storch also purchased F.A.O Schwarz, KB Toys and other well-known toy chains and websites to augment the company presence. The company also organized the "Great Trade-in" event in 2009, where people could trade their old and potentially unsafe baby products, for discounts on the new ones.
This turned out to be a great success as people traded in thousands of used cribs, infant car seats, etc. that were potentially unsafe to be resold, or reused. These efforts and strategies, targeted at minimizing the loss of the company, have done nothing to salvage the damage done by the company's non-compliance to the 1998 FTC order. The FTC (Federal Trade Commission) charged Toys "R" Us of having abused its dominant position as toy distributor in the 90s, with the consequence that Toys "R" us Inc. has agreed to pay a penalty of $1.3 million to settle the charges.
Despite the competition, and the damage done to the brand name, there remains a silver lining for Toys "R" Us. It can consider strengthening its ties with one of its associates: Amazon.com. Such a step would provide the company with multiple opportunities owing to Amazon's strong online presence. Also the assistance provided by Toys "R" Us and Babies "R" Us in helping hurricane victims in Louisiana in 2005 will go a long way in sustaining the brand name with the customers.
On the flip side, strong competition from Wal-Mart, KB Toys, and Target have threatened the survival of this toy giant. Competition in pricing, attractive packages, low cost toys imported from China, the company disputes getting prominent coverage in the media are some of the problems the company has to be wary of. Along with this, the label of unreliability stuck to the company due to the closure of 87 stores in 2006, leading to massive employee layoffs, has worsened the situation.
With all this,
- Will Storch's strategies help Toys "R" Us beat the other discount retailers in the U.S, without losing the bottom line profit?
- Will it be able to reclaim the position of the number one toy distributor in the U.S?
[...] ➢ http://www.datamonitor.com/ ➢ www.reuters.com ➢ www.euromonitor.com ➢ www.assocham.org ➢ www.interbrand.com ➢ www.globaldata.com ➢ www.forbes.com ➢ www.dmnews.com/toys-r-us-to-launch-integrated-holiday-campaign ➢ www.mobilecommercedaily.com ➢ www.ibisworld.com ➢ https://www.npd.com ➢ www.retailtechnologyreview.com Comparable stores are facilities those has been refurbished or relocated and have expanded into square feet at current location. [...]
[...] The company operates 1,703 retail outlets worldwide; with licenses stores accounting for of total portfolio in 2013. Its flagship merchandising private label brands include “Babies JOurney Girls, Imgainarium, Fast Lane, You & Me, Just Like Home, True Heroes, Totally Me , Dream Dazzlers and Fao Schwarz”; along with 4,000 vendor partnership agreements. In United States, California is the core marketspace for Toys “R” US Inc; contributing of total domestic outlet portfolio (February 2013). Japan is the leading international market for the enterprise; with 163 outlets. [...]
[...] ➢ Low employee retention and higher labour disputes will hamper competitive advantage. In February 2013, laid off 1,000 employees in United States attributed to integration of store formats under single brand umbrella “SBS”. Further, non retention of critical knowledge capital in competitive toys & games marketspace will hamper sustainability in core and non-core markets. ➢ Higher foreign exchange currency fluctuation will hamper EBIT margins. ➢ Steep competitive pressures from unorganized label brands in emerging and fast moving market such as India, China and CEE nations will hamper net margins on long-term basis. [...]
[...] Breach of partnership and alliances will hamper brand positioning. ➢ Changing consumer perception and purchasing behaviour: Toys “R” US Inc has horizontally and vertically diversified toys and games portfolio. Shift of consumer preference towards action games with majority of Toys “R” US Inc retail outlets providing learning and dolls will hamper operating margins. Proper market due diligence on continuous basis is essential. ➢ Product recall will hamper brand positioning: Higher consumer lawsuits will hamper brand image and value. In 2013, the company recalled eighteen items worldwide i.e. [...]
[...] Majority of Toys “R” US Inc stores in domestic market had opening hours from 0600 hours as compared to Walmart (0600 hours) and Best Buy (0800 hours). Risks, challenges and Limitations Toys “R” US Inc faces steep macro and micro risks due to its operations across 36 countries worldwide. The core risks are as follows (GlobalData, 2013): ➢ Stringent regulatory framework in emerging markets: The company plans to aggressively expand its store and customer service centres in China in next 12-18 months. [...]
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