Evolve Or Die: What Franchisors Can Learn From Toys R Us

Originally posted on 17/03/2018. Updated on 29/04/2019.

Even the most established, iconic franchise brands can struggle to keep up with emerging trends and customer demands. It is paramount that businesses evolve to give the consumer what they want in order to avoid closure. Unfortunately, one huge toy retailer that failed to do exactly that is Toys R Us.

In its prime, the brand had 105 stores in the UK, all of which had closed by April 24th 2018, resulting in the loss of 3,000 jobs. Franchises can learn from the demise of Toys R Us and how it reflects the value of having a business plan that is constantly being reworked. If Toys R Us had dedicated more attention to developing with the times, it might still be a magical place that children couldn’t wait to visit, instead of a brand stuck in the past.

The Story of Toys R Us

The British high street giant opened its doors in 1985. It was the place of children’s dreams. With brightly coloured TV adverts, a memorable jingle and massive warehouses packed full to the brim with thousands of toys, it’s no surprise parents were dragged there on special occasions.

At the brand’s peak, the fact that it was out of town pleased parents. You could find outlets in large retail parks. A trip to Toys R Us usually turned into a day out enjoyed by the whole family.

However, it did end up going down-hill for the famous franchise due to a myriad of confounding factors, the most fundamental being the decline in sales and a £15 million tax bill. But exactly how did the UK’s biggest toy retailer end up facing bankruptcy?

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Toys R Us - How did it go so wrong?

It was common knowledge that Toys R Us was facing declining sales and mounting debt for many years. Take a look below at five of the principal reasons for its failure.

• ‘Too little, too late’ with its approach to new technologies. The brand lacked innovation when it came to incorporating new technologies into its product range. In a world where children can download a mobile app to do almost anything - such as distorting their face to make them into an astronaut - Toys R Us responded by creating a new aisle. Instead of adapting and focusing on technological advancements, it just presented them as part of its standard offering. Compare this to Build-A-Bear, where you could take your bear online and give it a bath in a virtual tub. This level of online interaction demonstrates one way to adapt to changing times. Be sure to regularly update your business model to keep on top of trends. This way, you can capitalise on the latest fad through your offering.

• Outdated location. As mentioned earlier, at one stage, its out-of-town location was a plus point for families seeking a day out, with extensive free parking making life a whole lot easier. But in this day and age, with the ease and accessibility of buying online and brands like Argos being prevalent on high streets and supermarkets, out-of-town can be out-of-mind, with competitors being more convenient. We live incredibly busy lives, so parents are far more likely to pick the latest toy up when their doing their weekly shop than drive far out. So, carefully consider whether your chosen location is visible, accessible and unique to the local competition.

• No USP. In the digital age that we live in now, internet shopping is often preferred to traditional shopping due to its ease, convenience and large and diverse offering. Toys R Us was incapable of competing in price and convenience. For any franchise brand without a USP, it is hard to continue to thrive when the world around you is changing. In general, the British public started to perceive Toys R Us in a nostalgic way. Being sentimental wasn’t enough to make consumers go there, what with so many other forward-thinking businesses that offer the same - plus more.

• Children's preferences are changing. Children are starting to seek experiences over material possessions. A trip to Toys R Us started to compete with a trip to laser quest, trampolining parks, sky diving, go-karting etc. Again, it’s vital that retailers identify trends and capitalise on them and offer something new and exciting to compete with day experiences.

• Lack of drama and imagination. What once felt like a magical haven for children turned into a dull and tired space. If you can’t compete on price with other retailers, such as WHSmith and The Entertainer, at least compete with an exceptional experience. Stores like Lego are interactive, and it’s the huge benches of Lego to play with that draws the children in, or the staff interacting with children in Hamleys, not a huge pile of products. For many, a trip to Toys R Us began to feel mundane and uninspiring. Retail analyst Nick Bubb attributes this to being too big and unwelcoming. Geoffrey the giraffe has been around since the 1990s and should have been updated long ago - anything to update its brand image. New franchise ideas should be incorporated into your network to ensure that you can uphold a fresh and dynamic customer experience. Franchisees interact with customers on a day-to-day basis, so are more than capable of advising what they need - and want. Empower your toy store franchisees by promoting the value of sharing ideas regularly.

Conclusion

Change is inevitable and unstoppable. All franchises can do is embrace it and work with it. Make an effort to respond to trends, attend regular meetings with franchisees to discuss market conditions and keep up to date with the latest technologies that will impact your industry. If you have more awareness of the changes that are to come, then you can share ideas and prepare your strategy before your competition.

It is also important to encourage customer feedback - and act on it! Ultimately, working out what your customer wants is the key to success, whether that be though questionnaires or focus groups. Embrace change for longevity.