Unsolicited Business Advice: Toys R Us ~ Redefining your mission when the old one isn’t working.

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When I was growing up in the 1970s, Toys R Us was the “world’s greatest toy store”, bar none.  I can’t think of a place that my adolescent self would have rather spent time.  The stores were packed with every toy and kids entertainment product imaginable and there was nothing that even came close.   It was a pure treat to walk up and down each long warehouse style aisle to view items from bicycles to dolls to crafts and building sets.  In fact, back then- before the proliferation of video games, cable television and the like- going to Toys R Us was entertainment.

In addition to competing for kids’ attention, today Toys R Us has another problem- it is called Wal-Mart.  Wal-Mart uses toys as what is called a “loss leader”- they sell these products at little to no profit, or even take a loss on them, in order to entice people into their stores to purchase other higher-margin items.  This strategy has worked famously, as Wal-Mart has become a leading retailer of toys and kids entertainment products.

Toys R Us, in the process, has lost its relevance.  While it used to be entertainment to shop the store, now with so many other sources of entertainment, there is no need for and no critical pull into the Toys R Us store.  While any kid would still love to go there (kids are greedy monsters, they will go anywhere they can score a toy), busy parents don’t want to have to make an extra stop to purchase toys and prefer the one-stop-shopping appeal of Wal-Mart, Target and other mass retailers where they can kill many birds with one stone.

Toys R Us needs to give kids and their parents a reason to need to go to the store, above and beyond the draw of its current offerings.  I have two fairly simple suggestions to accomplish this.  The first is implementing an on-site birthday party program.  Every kid in America has a birthday each year and a large percentage of those kids have birthday parties, each inviting a few to dozens of kids to attend their party.  What kid wouldn’t want a birthday party in a toy mecca?  By carving out square footage in the back of the store for a party room and implementing toy and entertainment-themed parties based various age groups (I have specific ideas, but I don’t give away all of my advice away for free) Toys R Us can boost traffic at each location.  Having parents walk their children through the store to attend a party is a sure fire way to get additional sales.

Also, Toys R Us can cater to attending parents’ busy schedules by offering a birthday gift service.  The parent can call up the store and choose a gift in their desired price range for the birthday girl or boy.  Toys R Us can wrap the gift and the parent would be able to pick it up on-site the day of the party or have it delivered directly to the party room, allowing the parent to avoid a separate shopping trip (and the general annoyance of wrapping presents).   This would ensure that TRU captures a large percentage of the birthday purchases instead of having them go to competitors and generate incremental revenue from upselling gift-wrapping services.

The second suggestion (which is not mutually exclusive with the first) is to create a proprietary on-site entertainment option that is only available at TRU stores.  Again, carve out some square footage that is underutilized (there is a whole lot to choose from at TRU) for an amazing in-store interactive toy/entertainment experience.  American Girl has created an entire (and very profitable) business out of this.  FAO Schwarz has seen its Muppet What-Not workshop become a top attraction.  TRU needs that type of draw.  Again, I have specific ideas for installing entertainment attractions that would again make TRU relevant (but those specifics are what I get paid for).  It’s much easier for TRU to make sales of their core toy products when there are people actually inside the confines of their stores.

The bottom line, TRU, is that times have changed and so has the toy business.  You need to create an entertainment draw for your units in order for the concept to be competitive vis-à-vis all the other options competing for kids and parents time these days.

Author: Carol Roth    Carol Roth is a business strategist, deal maker and author of the New York Times bestselling book, The Entrepreneur Equation. She has helped her clients, ranging from solopreneurs to multinational corporations, raise more than $1 billion in capital, complete hundreds of millions of dollars in M&A transactions, secure high-profile licensing and partnership deals, create brand loyalty programs and more. Carol is a frequent radio, television and print media contributor on the topics of business and entrepreneurship, having appeared on Fox News, MSNBC, Fox Business, WGN TV Chicago and more. Additionally, Carol’s Unsolicited Business Advice blog at CarolRoth.com was recently named as one of the Top 10 small business blogs online. Twitter: @CarolJSRoth
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