Toys “R” Us, a fallen star
Once the shining star of the toy world, Toys “R” Us has suddenly fallen from the sky. The original category killer, Toys “R” Us at the height of its success had 25% of the US toy market. Today, Toys “R” Us has a mere 15% of the toy market, compared to Wal-Mart which has 25%, and has publicly announced it was considering exiting the toy business.
What happened? Did Wal-Mart do something last week that instantly eroded 10 market share points? Surely not. They have been creeping up on Toys “R” Us for years. It was six years ago, in 1998 that Wal-Mart surpassed Toys “R” Us and became the No. 1 toy retailer.
What has Toys “R” Us been doing since then? Not much. They had to focus a lot of time and energy on the line extensions they created: Kids “R” Us and Babies “R” Us. Kids “R” Us is now out of business. But Babies “R” Us is going great.
What should Toys “R” Us have done? It is clear that not enough attention was paid to the core brand. They could never hope to beat Wal-Mart on price so the only option would be to focus the brand on the toy experience. Target has done exceptionally well against Wal-Mart with just this idea. Target is a much cooler and more fun place to shop.
Toys “R” Us needed that cool factor. A place where kids had to go. A place which had exclusive toys. A place with happening events and activities. They should put in playgrounds (like McDonald’s), they should have held special events (with personal appearances by toy personalities), they should have struck exclusive deals with hot toy manufacturers.
In essence they what they did to become successful in the first place: focus relentlessly on toys. Don’t fight Wal-Mart on price, do the opposite and focus on the toy experience. Something that Wal-Mart can never capture.
Babies “R” Us is an excellent concept. It’s just too bad it has a line extension name. They would have been much better off giving it its own name and identity. Instead it is now linked to the ailing Toys “R” Us brand and the defunct Kids “R” Us brand.
This best strategy would have been to do what Gap did with Old Navy and Toyota did with Lexus. Launch a second brand with a whole new name and identity.
No one can predict the future, but your best shot for success is a narrowly focused brand that stands for something in the mind. You confuse consumers and weaken your brand when you hang too many things on it.
Hang too much on a star and it will fall from the sky.