What Must Toys ‘R’ Us’ New CEO Do That Its Old One Didn’t?
Toys "R" Us finds itself looking for a new chief executive following the announcement that current CEO Gerald Storch is stepping down from that position. Mr. Storch will remain as chairman of the board.
The decision described as "mutual" in reports follows on the heels of a disappointing fourth quarter for the toy chain. Same-store sales for the chain fell nearly two percent in December and 3.5 percent overseas.
"I am incredibly proud of what we have accomplished together over the past seven years," said Mr. Storch in a statement. "The Toys ‘R’ Us brand is stronger than ever due to the hard work and dedication of our talented team around the world. Looking to the future, we will always ‘Play to Win’.’
The Toys "R" Us board praised Mr. Storch for "his efforts to develop best-in-class e-commerce and omnichannel capabilities and in significantly expanding the development of proprietary and differentiated products."
While Mr. Storch has been credited with helping the company achieve solid results since taking over as CEO in 2006, some believe the combination of tough competitors such as Target and Walmart and huge debt levels are perhaps too much to overcome.
"Clearly the company’s in a better position, by almost any metric," Sean McGowan, an analyst with Needham & Co., told The Record.
Toys "R" Us has "picked up share, improved margins, made the stores look better than ever," Mr. McGowan said, "but it just underscores that doing all that isn’t enough in a low-growth or perhaps declining business, where you have competitors that don’t need to be profitable in this category. It just goes to show you how tough it is."
Discussion Questions
What do you think are the growth prospects for Toys “R” Us? What must the new CEO do that Gerald Storch didn’t?
The toy category is one of several where the use of video as a product marketing communication medium through online and mobile customer touchpoints has proven to enhance sales conversions by 20-30%.
This educational/informational vehicle is a tremendous medium to help the toy shopper on their journey in this category. This journey leads to the physical experience in the store where Toys “R” Us has made many improvements.
A toy store should be an experiential destination. If not, the shopper has no reason to go there unless it’s just a warehouse with a loading dock to pick up a box.
This one is simple. Make their stores showrooms and playgrounds. After all, they are selling toys. And pair that with the best online shopping execution in retail.
Give on up the big box stores!!!
Expand the already successful pop-up strategy to more vertical niche and showrooming. Toys “R” Us’ biggest weapon was creating pop-up stores during the holiday shopping season which should expand.
Create pop-up stores in suburban neighborhoods that cater to young teens who have cell phones and can make mobile prepaid payments.
Create pop-up stores in the inner city that can cater to children’s clothing and Little Tikes and Fisher Price.
Leverage the successful ticketing system to include QR codes instead of barcodes to interact with mobile phones.
Toys “R” Us is in a big position if they are willing to ditch the outdated big box format and take on Walmart with a competitive advantage to pursue more niche pop-ups and showrooms and smaller, 1,500 sqare footprints with Site-to-Store integration with mobile.
TRU for the last couple of years has worked hard on their multichannel strategy, getting fulfillment and experience right. However, they are also largely impacted by showrooming and the “digitization” of toys.
For a longer-term profitability they need to think about how they can create unique TRU-only offerings which every kid will crave for, and provide a playground as Gene rightly mentioned for them to experience the same.
They need to make the stores smaller, remodel the out-of-date stores and create an environment where the kids run in and start playing with toys. Kids influence what parents buy and hands on is the best way to get childrens’ involvement. TRU stores are poorly staffed and have a disconnected feel to the consumer. A ‘fill your cart and we will ring you up’ mentality.
“The Toys ‘R’ Us brand is stronger than ever …” Ummm, sorry, but no…it isn’t (Just as it’s bad to start a relationship on a lie, it’s bad to end one on it, as well). I really can’t say how good a job Mr. Storch did on pushing the rock uphill, but his job was just that. I don’t think big-box toy stores have much of a future…it may be time for Geoffrey to go to the Old Giraffes Home.
Inventor/Manufacturer/Retailer. Develop and own proprietary toys. Use the extensive toy experience and contacts in the company to create new stuff. Be an inventor/manufacturer in addition to being a retailer. Advertise and sell exclusive, high-demand products.
Any weaknesses that may be attributed to TRU have to do with an occasional inability to sign contracts with innovative toy companies which are superior to contracts with other retailers. It’s a competitive business, perhaps as competitive and corporate-espionage prone as the defense industry.
Get out there and make some toys of your own. Then, take your toys, go home, and sell them.