Challenges Performance And Recommendations

Current Issues facing Toys ‘R’ Us

Over the past few years, Toys R Us have been undergoing difficult times, which led to a declaration of bankruptcy in 2017, followed by liquidation in March 2018. The once giant retailer had to shut down all its branches as its debt kept piling up and thus, they felt that declaring bankruptcy would save them from collapsing. The company has been battling huge debts in the UK, which saw 3000 staff being laid off while their sales decreased sharply, eventually leading to its closure (Cohen and Dahlhoff, 2018). While the giant retailer has been in the market for such a long time, it couldn’t weather itself from the inevitable storm, due to mismanagement. 2017 was the most terrible year for the retail store, as it finally crumbled, closing all of its 100 branches in the UK (Butler, 2018). Prior to the liquidation, no buyer was willing to come forth and take over the retailer and has now fully gone under water.

The Organization’s Competitive Environment

Initially, Toys R Us was every parent’s stopover for their kid’s toys needs, before convenience stores that retailed everything came into picture. Such retailers like Walmart, Target and Amazon made it easier for shoppers, as they had everything under one roof. In 2000, Toys R Us entered into a sales partnership with Amazon where it had to pay the online retailer $50 million per annum plus commission for exclusive sales of their toys (Cohen and Dahlhoff, 2018). When the business started to thrive, Amazon expanded to selling toys from rival companies, which was against their agreement with the former. The former sued the latter and although Toys R Us was awarded, Amazon had grown its online presence by far. While Toys R Us have sunk into liquidation, Amazon has continued to dominate the world as one of the largest online retailers (Hanbury, 2018). Their success is hugely because many people are opting to shop online, and have their deliveries made at their doorsteps. While Amazon, Walmart and Target remain the biggest competitors of Toys R Us, they succeeded in cutting down prices and having better customer service strategies, which have made them remain relevant in the competitive market industry.

Walmart has taken the position of the largest toy retailer in UK. In 2017, it added 1,000 exclusive toys during the holidays at competitive prices, which Toys R Us could not match (Hanbury, 2018). This affected their holiday sales and in the long run, it has totally crippled their market operations. Target on the other hand reported more sales and traffic during the 2017 holidays, surpassing their expectations. It also enjoys a strong online presence, which has become the winning position for most businesses in this modern era. While Toys R Us were unable to command a huge online presence and to embrace technology, their business has gone down while their competitors are thriving.

Reasons for Toys R Us Downfall

Toys R Us could be analyzed using Porter’s five forces and the SWOT analysis. Its downfall came mainly from being unable to face their competitors who had gone digital, while their weakness came as a result of lacking creativity on their products. suffered a big blow from the Brexit, joining a list of other retail shops that had closed down. Brexit talks affected UK’s economy in a big way, which left the company with a 15-million-pound value added tax liability (Casiraghi & Chambers, 2018). Its woes were heightened by the death of their parent company in the US, which was equally battling with huge debts and subsequently announcing bankruptcy. Besides Brexit which had caused the weakening of the pound, the company was being priced out by their major competitors who were online retailers such as Walmart, Target and Amazon. In 2017, they reported severe losses, as they sold less than half the $600 million they sell per annum (Hanbury, 2018). The online markets have fiercely outdone offline and in order to survive, companies ought to look for strategies to get online. While internet shopping became popular, companies such as Woolworths and Hawkins Bazaar suffered severely and it seems Toys R Us did not learn from them. therefore, selling one line of products largely contributed to their downfall.

Toys R Us major weakness was threat of substitutes from their competitors, while their own products lacked creativity. For instance, while millennial children were different, they did not seek to fulfil their wants and instead, went on with selling the old toys. While kids’ toys are supposed to be enticing, happy and with some buzz, they stuck to some out of date cartoons. For instance, their company’s logo still had a picture of Geoffrey the giraffe, a cartoon from the 1990s, which did not seem to excite the millennials (BBC, 2018). They failed to keep up with the changing trends, thereby signing their own death warrant. Old fashioned cartoons and toys tend to pass the message of tiredness and in many cases, they do not excite customers anymore. Being creative would have helped them survive the storm of the then upcoming retail stores such as Amazon, especially in the early 2000.

Toys R Us faced poor internal organization, which is essential in helping a company identifying their strengths. After the 2005 leveraged buyout, former employees said that the company continued to underinvest, therefore making their downfall bed (Unglesbee, 2018). For instance, they could not keep up with maintaining the stores as cleaning services had to be cut off. Many staff workers were laid off and the little number that remained was burdened with loads of work. They also lacked customer satisfaction, as the huge debt on their back continued to press them to a corner. Their systems failed and their experienced and knowledgeable staff were let go, therefore leaving the retailer at the hands of employees with little knowledge for a lesser stipend. While the company sought to reorganize itself and have a comeback into the market, they declared bankruptcy but their strategies were too late to work in their favor.

As the new millennium ushered in, technology became a strong force for businesses but Toys R Us failed to keep up with the trends. While other organization were going online, the company retained their old systems. This pushed away investors, which is why when they announced that they were closing business, nobody was willing to purchase the giant retail chain (Unglesbee, 2018). This eventually landed them into huge debts and no amount of strategies was able to take them back to their feet. By the time of the 2005 buyout, thousands of employees had been fired while some key managers were eliminated. The company ended up with huge workloads that were unmanageable and this severely destroyed their customer relations too. From a once profitable organization that Toys R Us once was, it now remains a shadow of its former glory as all of its branches have been shut down.

Recommendations

Although Toys R Us has completely gone down, it still stands a chance of making a comeback in the market. Using the SWOT analysis, it is easy to recognize that its major strength lies on its existence for over half a century and its good reputation. They could use this for marketing or also, it could rebrand and start all over again, by being a toy store with exciting products and offers (Kline, 2018). At the time of shutting down, they had their loyal customers, who could support them in their comeback journey. As the millennials are no longer interested in some old toys, they could come up with new video games that would attract customers and bring them profit. They could also come with an App, which are fast becoming popular and easy to download on phones.

Conclusion

Toys R Us is responsible for its downfall because it made poor market decisions from the word go, especially regarding marketing and dealing with competitors. The Brexit talks only accelerated the fall, as it only added salt to an already wounded company. In order to survive the competitive market, a new model would have worked for the retailer, which would be more interactive with clients, both online and offline. However, while their fall came at a time when they were struggling with a huge debt and in order to realize new and better strategies, they required to have a huge amount of money. Even in their downfall, they still stand a chance for comeback if they adopt the market changes and trends for better customer service.

References

• BBC (2018). Five reasons Toys R Us failed. [online] BBC News. Available at:
• Butler, S. (2018). Toys R Us to shut all UK stores, resulting in 3,000 job losses. [online]. The guardian. Available at:
• ng-in-3000-job-losses#img-1 [Accessed 22 Feb. 2019] Casiraghi, L. and Chambers, S. (2018). Amazon and Brexit Take Toll as Toys ‘R’ Us UK., Maplin Fail. [online] Bloomberg. Available at
• Dahlhoff, W. and Cohen, M. (2018). The Demise of Toys R Us: What Went Wrong. [online] Knowledge@Wharton. Available at:
• 2019]. Hanbury, M. (2018). These companies will be the biggest winners when Toys R Us closes its stores. Business Insider. [online] Available at:
• ners-when-toys-r-us-closes-its-stores/23387866/ [Accessed 20 Feb. 2019]. Kline, D. (2018). How a Revived Toys R Us Can Take Back the Toy Market -- The Motley Fool. [online] The Motley Fool. Available at:
• oy-mark.aspx [Accessed 20 Feb. 2019]. Unglesbee, B. (2018). Inside the 20-year decline of Toys R Us. [online] Retail Dive. Available at:

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