The Brick-and-Mortar Retail Gone Bust? Lessons to Learn from the Toys “R” Us Closure

Posted on April 25, 2018

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Many generations grew up knowing Geoffrey the Giraffe quite well. The cartoon giraffe was not from a Saturday morning cartoon nor sugary cereal commercial but the mascot for Toys “R” Us, an American-based toy store where, for decades, children would beg their parents to take them. But with the announcement that this once mighty retail space will be shuttering its doors for good, many are worried that this is yet another brick-and-mortar domino to fall thanks to the prodding finger of online retail. After all, online retail more than doubled in mindshare from 7% in 2011 to 15% in 2016, a trend we’ve only seen continue to grow.
The truth, however, is much more nuanced than you may think. 

Why Did Toys R Us Fail?

Though Amazon is the easy scapegoat for the recent failure of Toys “R” Us, I personally believe the toy store giant’s problems started before Amazon was ever a factor. One report from Fung Global Retail & Technology seems to substantiate my claim, showing that 87.8% of parents have experience purchasing children’s toys online but 59% of parents purchase less than half of their children’s toys online. The salient factor in the downfall of Toys “R” Us was actually the slow but steady sea change that most parents who raised children in the 1990s and early 2000s saw firsthand -- kids simply began playing differently. With the invent and proliferation of video game consoles, portable gaming, iPads, and smartphones, a toy chest in many homes was largely replaced by one or two touchpad-based devices. 
Without delving into the debate on the social negative or positive effects of this trend, it is logical that the action figures, board games, and hula hoops of old may have drawn less demand with playtime going digital. Note that Toys “R” Us did evolve with the times, selling both video games and video game consoles. However, when a parent can instantly purchase and download a game on their iPad or gaming console, it simply wasn’t enough.
Add to this the fact that toys are a commodity that simply do not need to be purchased at a category-specific big box. When a parent could simply go to a one-stop mega discount chain and pick up groceries, clothing, pharmaceuticals and their kid’s new action figure, why bother making an extra stop at a toy story? 

Secret to Success

Though there’s no single formula for success for brick-and-mortar retail businesses, there are some common traits we see in the companies that continue to thrive in this modern age of same-day deliveries. 
  • Flexible and Adaptable: It is the tree that bends in the wind that survives the hurricane. If a business is not willing to be flexible and adapt with the changing times, it is doomed to the fate of Toys “R” Us. 
  • Focused on Customer Experience: With online shopping such a simple solution, brick-and-mortar retail has to be deeply focused on ensuring their customer experience is worth logging off for. If a customer receives lackluster service or finds the retail space lacking, chances are, they will move on to an online alternative next time.
  • Creating and Maintaining a Brand Personality: Brick-and-mortar retail branding should create a cohesive vision of exactly what their brand is and what it values. Doing so establishes an identifiable personality and sets customer expectations before they ever enter a store.
  • Loyalty: Brick-and-mortar businesses should be focused on instilling loyalty through competitive pricing, high quality and an eclectic selection.  
Though Toys “R” Us was the most recent failure in the ever-changing market, there are a few other stores I would urge to follow the above advice, namely bookstores, furniture and office supply stores, general merchandise, and big-box retailers that focus primarily on fashion sales. 

The Marketplace After Toys “R” Us

Though it may be the end for Toys “R” Us, their loss is an opportunity for other retailers to move in. From entertainment to multifamily housing, to multi-use developments, fitness centers, offices and more, where these toy stores once stood could live on as a multitude of  commercial real estate opportunities. Remember, many of these stores were located in strong submarkets within dense retail areas, which is a real bonus for the incoming businesses.
Despite the arguably justifiable fear from many brick-and-mortar retailers, online shopping will likely never fully replace in-store experiences. As human beings, we are social creatures who enjoy shared experiences, and shopping with others is still something we like to do . 
Finally, landlords need ensure they are creating additional reasons to frequent shopping centers by incorporating amenities like dining, entertainment and fitness into the experience. In the future, we may see them even begin to incorporate amphitheaters, parks and education to create diverse marketplace center. 
Though it may be difficult for some of us to say goodbye to Geoffrey the Giraffe, Toys “R” Us is far from the end of brick-and-mortar retail. In fact, it may be the beginning of new and exciting opportunities to come.
Written by Susan McGuire