How a poor digital strategy helped bankrupt Toys R Us

As the iconic toy retailer falters in the online-shopping age, here are key lessons to draw from its lagging omnichannel presence.

How does a big-name retail chain—with an endless stream of new consumers—end up on the brink of bankruptcy?

In the case of Toys R Us, the blame lies largely with a sluggish transition to e-commerce.

The chain is set to file for bankruptcy as early as this week. It will continue to operate, keeping stores open during its reorganization.

Experts say the company’s failure to focus on its online presence led to its downfall.

“Toys R Us has lost out in the digital space,” says Neil Saunders, managing director of GlobalData Retail. “Although recent digital investments have been made, the website and general e-commerce proposition are still below par.”

What can digital marketing pros take away from this steady decline? Here are lessons from the retailer’s mistakes:

You must always mind the competition. Brands such as Amazon, Walmart and Target all have a robust e-commerce presence and have made their sites easy for toy shoppers to navigate. By the time Toys R Us had updated its site this summer, those major competitors had left it in the dust.

“Some organizations recognize faster than others there are shifts in the ways customers want to be communicated with and the way customers want to purchase products,” said Toys R Us CEO David Brandon. “It probably took us a while.”

Even a new CMO can’t always fix it. The chain has struggled in recent years, including laying off 250 people at its New Jersey headquarters last February. Around that time, it also brought in a new CMO, Carla Hassan.

“I expect to see her immediate positive impact on our marketing programs and ability to connect with today’s consumers and drive traffic into our bricks and mortar stores and our web store,” Brandon said in late January.

Changes in strategy and direction take time. Damage sustained over several years can’t be undone within months.

An omnichannel strategy wins the day. Toys R Us has been widely criticized for placing too much focus on its brick-and-mortar presence.

“The biggest asset we have is the magic of the experience,” Hassan said.

That may be, but when it’s more convenient for moms and dads to shop from the comfort of their living room, data suggest that’s where marketers should focus their efforts. Having an omnichannel digital strategy reaches consumers wherever they might be buying.

Your target customers deserve your attention. If your target audience is moms, identify and analyze how they shop.

“The biggest challenge right now is continuing to figure out how we connect with kids and with moms in a world that is ever changing for them, as they are moving so quickly, as they are transacting,” Hassan said.

Toys R Us focused as much on its brick-and-mortar locations as on its digital presence. Research says one-quarter of U.S. millennial moms do half or more of their shopping online.

Moms want a seamless, integrated shopping experience, whether they chose to shop online, in a store or some combination thereof, according to a report by BabyCenter.

Data collection matters. The chain’s e-commerce challenges—arising in part because it had partnered with an outside entity on its e-commerce operations—hampered the collecting of consumer data and skewed marketing metrics.

What have you learned from watching Toys R Us go into a tailspin, PR Daily readers? How could you help your clients or organization suffer a similar fate? Please offer your thoughts in the comments section.

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