Toys R Us pays the price for reading the map too late
The rapid technological development on the one hand and the slow reaction of the toy giant on the other led to its collapse, even though this is a brand whose products are found in almost every home.
It was sad to read the announcement about of Toys R Us’ collapse as one of the leading brands in almost every household. Now, unfortunately, they are joining other giants whose management were late in their map reading. This has cause a late response and was too late to adjust its business model to the today’s reality.
Only a few years ago, we encountered a similiar situation with the Kodak and Blockbuster cases. The introduction of digital cameras to the market years ago interfered with the old model of selling films to cameras, which was the main breadwinner of companies such as Kodak, and the introduction of technology to interactive film libraries changed the lending habits of stores and automatic machines, which were Blockbuster’s main business model.
What these giant companies have in common is that they did not identify models of disruptions – models that change the business map and consumer habits, leading to their disappearance from the world. And it seems that not everyone has internalized the moral and the message.
What actually happened here?
The existence of several trends at the same time, with their origins in rapid technological development on the one hand, and the slow reactions of the old model on the other:
The first trend – technology allows us things that were not possible in the past, and the result is the ability to provide a service that was previously provided only by people, this time using the technology itself.
The second trend – technology produces another level of communication. One that brings the consumer very close to the source of information and develops independence in the user’s decision-making.
Third trend – technology exposes a lot more people to innovation and produces more ideas and more entrepreneurs.
The fourth trend – technology accelerates the pace. In everything.
These four trends combined, create an unprecedented acceleration. More people are involved, more innovations appear at every point in time and organizations have to create quick mechanisms that will enable them to understand what is really happening in their environment, react and adopt changes accordingly and quickly.
What happened to Toys R Us?
The source of the entanglement is the development of online shopping, but this is not the full picture. Online shopping began years ago. In this case, a number of factors were also involved. This is all about Amazon’s growth as a major retailer, its introduction into a range of areas it has not offered in the past, the strengthening of consumer confidence in the online model and increase in purchases.
Not only was the model already in the market, but the trend was clear – strengthening of the model and strengthening of consumer confidence in the model.
In fact, consumer confidence passed the point of no return in their preference for using the Internet as a supplier over a store purchase process.
So right, Toys R Us has a website, but what does it allow? First, it is the site of a toy company only, while customers today prefer to enter one place, which allows them to make purchases of a variety of products, rather than a single product necessarily.
Second, Toys R Us model is a store model, meaning we can find the product online and order it or find in which store the product is located and purchase it there. This is a complementary method to the method we actually purchase at one of the chain’s stores.
Today we prefer a different shopping experience – the purchase is being made more and more on the Internet while visiting the store is a complementary experience, and unlike the past, does not manage the buying process.
Toys R Us was built of a layout of stores, a model that had been very successful in previous decades. But did the company’s management act to become an Internet model as a leading sales model? Probably not, since such a model would have forced it to transform its business center of operations into collaborations with leading websites over stores with an internet site. Did Toys R Us adopt organizational thinking processes that allow flexibility and adaptation to change? According to the actual result, it seems not.
It is very important to remember – technology is strategic and a strategy must be technological.
Adopting change as a way of life, organizational and structural flexibility, developing mechanisms to locate new tools and models to deal with them correctly and perhaps adopt some of them (if you can not beat them – join them) are necessary. Otherwise, this is another sad story about a giant brand that is plummeting, and all that is left to hope is that someone will buy it and put it back in a new business model.