The 3 Big Lessons from the Collapse of Toys 'R' Us
"I don't want to grow up, I'm a Toys 'R' Us Kid "
Remembering the first few bars of that catchy jingle brings me back to the dreamlike wonder of exploring what seemed liked endless aisles of enchanting toys. As kids, we were transported to a magical place, filled with possibility. It didn't matter if you felt beaten down by teachers, bullied by peers, or anxious about homework, one step into this fairyland melted away all angst to reveal the sensation of utopia.
Yet after 70 years of making our hearts race, the store is closing forever. How could the dominant leader in a giant market category fall so far? Why did this iconic brand meet its demise? The answer is more complicated than simply getting toppled by Amazon. Three big and avoidable traps led to the great fall of this once great company:
1) They bit off too much. In a series of complicated financial maneuvers, the company became saddled with an unmanageable debt load, which now sits at $5 billion. Over the last decade, $400 million each year has been drained from the coffers to pay the banks. That same capital could have been spent reimagining stores, innovating, paying higher wages, and investing in the future. It's been said that more companies die of indigestion than starvation, and that adage holds true in this case. They took on too much, which cut their ability to grow and adapt.
2) They ignored Darwin. Famously, Charles Darwin proclaimed, "It's not the strongest that survive, but rather those most adaptable to change." Toys 'R' Us missed trend after trend in merchandising, technology, customer experiences, and employee engagement. It's as if they kept running yesterday's playbook as the world continued to change at an unprecedented rate. Eventually, competitors raced past. Simply put, complacency and stagnation is not a winning strategy.
3) They got beat at their own game. The one undeniable asset Toys 'R' Us had was that magical experience that kids craved. Instead of doubling down on this strength, they failed to invest in the retail experience, opting instead for cost savings. The once delightful stores became tired and worn, eventually becoming just another generic big box environment. Competitive advantage faded into flat out failure.
We can all learn from the toy giant's tragedy by fully understanding their downfall and steering clear of these deadly traps. Despite rapid changes over the years, Toys 'R' Us could have remained relevant and profitable if they focused more on innovation, cultivating the hearts of their customers, and doubling down on their unique strengths. Let's make sure that the Toys 'R' Us tombstone becomes our successful salvation. Let's ensure we don't mortgage our futures for a fast buck today.
I'll always be a Toys 'R' Us kid, but let's ensure we don't end up as Toys 'R' Us adults. Embrace change. Innovate. Create uplifting customer experiences. Stand out rather than blend in. Care for employees. Invest in the future. While far less catchy, this is the new jingle of success.
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