If you are a child of the 80’s or 90’s, you can probably hum along or perhaps even sing along to their theme song. Perhaps you remember that theme song accompanying commercials featuring child stars promoting Toys’R’Us as a toy superstore. Yet the store is going bankrupt, closing down all or selling all of its American stores and abandoning the field. A company that was once a behemoth and even a cultural icon is now going completely under, and likely to be forgotten and obscure to those children growing up now and in the future who will sing different catchy jingles about different companies, no doubt. What happened? The short answer is that Amazon happened, but the answer is somewhat longer than that, and I would like to explore that today as we face a world without Toys’R’Us and yet another ominous look at the future of business that are being caught in the middle between rising customer expectations (and knowledge) and the convenience and price benefits that competitors provide that some companies simply can’t keep up with.
Let us begin with a story about a game called Oregon Trail . Like many children of the 80’s and 90’s, I played Oregon Trail at school while being taught basic computers, and although the game was fiendishly difficult, I managed to beat it courtesy of a dramatic trip down the Colombia River through the Cascade Rapids. My love of the Oregon Trail has extended to even touring a museum as well as trail markings in Eastern Oregon, which was quite an enjoyable occurrence, I must say. Yet although this game was a massively nostalgic memory for my generation of adults, when the board game for the Oregon Trail came out, it was not to be found at Toys’R’Us, but rather at Target, a place that appeals to professional adults and their hobbies to a greater degree than Toys’R’Us. This was a mistake. Given that the children of the 80’s and 90’s were at least once greatly interested in Toys’R’Us and were its loyal customer base, it seems rather short-sighted that the store would not seek to capitalize on retaining their interest through games that would be of interest to adults as well as children. After all, it is the money of adults that allows children to have the toys that a toy store sells, after all. Where does one think that most children get their allowances or other spending money from, after all?
This blunder was a microcosm of a larger problem. In the wake of a long string of failures of once-successful large business whose models have been crushed by the competition of behemoths like Wal-Mart and Amazon, a business has to ask itself what it provides of value to its customers. If a customer wants low prices for toys, it is not hard to look up Legos or other products on Amazon.com and have them sent to one’s house. I do this for books and music on a regular basis. These are not products I need to see in person before I buy, not least because most toys come in boxes and packaging and one cannot see them up close anyway even in a store. The greater overhead that brick and mortar stores have as opposed to online businesses is a major disadvantage if customers are highly price conscious and if the store does not provide in its in-person experience anything that cannot be gained from sitting in front of one’s computer and purchasing online. Obviously, Toys’R’Us didn’t provide enough that was worth bringing customers in and once one could get thousands of toys to play with online, its raison d’etre no longer held. Once that was the case, the company went under.
Is there a way that stores can survive the onslaught of Amazon and superstores like Wal-Mart whose price levels can remain low because of their massive economies of scale and their shrewd use of inventory management? Yes, but they will have to compete on different grounds. Obviously, one cannot expect to compete on price with commonly available products in the massive superstores when one is a small to moderate-sized business. But there are plenty of other grounds that one can compete on by providing good service and access to a community. Likewise, there are also niche products that one would want to buy in person. For example, let us assume that there exists in a city or town a small business that offers board games and miniatures for a passionate niche audience. Such a business will be staffed by someone who is truly knowledgeable about such obscure products and can provide a great deal of help to someone who wants to buy an Avalon Hill game or miniatures for their table top RPG experience. There may even be times where that business or a neighboring one offers a chance for people to connect with others in their local area who share the same passionate interests, like a face-to-face Diplomacy game or a Pathfinder or Dungeons & Dragons group, for instance. Such a business does not need to compete on price points, because it offers a level of community that encourages customer loyalty over the long haul. Likewise, a used book store that offers first edition or other high-end book products provides a customer a chance to check out the book in person for oneself before making an expensive purchase, where it is difficult to fully trust what one is purchasing online. In these cases it makes sense to have a brick & mortar business because it provides a benefit to customers for a face-to-face connection as well as the building of trust and loyalty. If a business can do that, it can survive the crush of online businesses and massive superstores. If it cannot, there is a major risk of going out of business.
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