Toys “R” Us CEO shares keys to staying competitive over holidays, during economic storm

3 Comments | This entry was posted in eCommerce, Holidays, Retail Companies

For many families across the country, Christmas gifts and toy-buying in general means a trip to Toys”R”Us. One mention of the toy super brand is likely to get the same reaction from children everywhere as say, a trip to Disney World. Or at least it does in my family.

With the acquisition of other top toy brands like FAO Schwarz and KB Toys in 2009, and a multitude of pop-up stores popping up across the country in time for the holidays, Toys”R”Us has secured it’s place as America’s toy store in 2010. In our final holiday ’10 Q&A, I had the opportunity to ask Toys”R”Us Chairman and CEO Jerry Storch a few questions about the holiday season and the Toys”R”Us brand in general. Read on to find out how the retail giant created an “epic swarm” online and in reality, a few tips on flourishing during an economic downturn, and the new tactics Toys”R”Us stores will employ to accommodate last minute shoppers this season – all in time for Christmas Day.

As the economy begins to recover, shoppers seem to be including other factors like quality, selection and service into the equation when making buying decisions. Have you seen that trend unfold among your shoppers, and how are you leveraging a shift in consumer mentality to increase sales?

Consumers are constantly changing, and we need to adapt to those changes. There’s no doubt that recent economic conditions have caused some shifts in consumer behavior, and that the consumer is doing more research and comparison shopping – looking for the best value for their money. It’s an exciting time to be a consumer!

That being said, year after year we have seen that with toys, parents want value, yes, but they also want quality – a toy that will WOW their child and bring great play and skill-building value. Hot toys will always sell well. Most of the time, parents are looking for a specific toy for their child – and availability, rather than price, is a key factor.

Our stores receive daily shipments of this season’s hottest toys, like Sing-a-ma-jigs! and Disney Princess & Me dolls, so parents know they have their best chance of finding that special gift at Toys“R”Us.

Plus, customers come to Toys“R”Us because they know they can find items in our stores that our competitors simply don’t carry. Our merchants have spent the year shopping the world for our customers to bring them the best and hottest international products, including Tomica trains from Japan, that are not available at any other major retailer in the U.S. Plus, we’ve worked with our manufacturing partners throughout the year to create exclusive toy lines that cannot be found anywhere else, such as the Disney Princess & Me assortment of dolls, accessories and dress-up sets.

According to an NRF survey, more than one-fourth of Americans with a smartphone plan to use their mobile devices to research or make holiday purchases. How is Toys“R”Us capitalizing on the mobile trend?

We recognize that our customers are utilizing mobile phones more and more not only to shop, but to conduct research prior to making purchasing decisions, so this year we expanded our mobile offerings to enable our customers to have coupons scanned right from their mobile phones and provide them the opportunity to receive mobile messages about deals and promotions.

And, thousands of Black Friday shoppers who waited for our stores to open at 10pm on Thanksgiving took advantage of the opportunity to “check in” using Foursquare™ on their smartphones to receive an exclusive Friends and Family offer or a special Geoffrey the Giraffe badge to show off to their friends. In fact, my wife and I were at our Times Square store when it opened, and when she tried to check-in, she informed me that there was a “Epic Swarm” on Foursquare for the Times Square location – I couldn’t believe it!

The Toys“R”Us iPad app for the Great Big Christmas Book has had some great reviews. Talk about how and why this was developed and what else is in the pipeline in terms of new media apps or platforms for Toys“R”Us consumers.

Well, last year, our customers loved the iPhone and iTouch application we launched with our Great Big Christmas Book, and with the popularity of the iPad this year, we wanted to provide customers with a new, enhanced app that they could use throughout the season. We developed the iPad app, so iPad owners could utilize it with three of our biggest sales promotions of the season – The Great Big Christmas Book, which was released at the end of October; our Black Friday offerings; and the Biggest Christmas Sale Ever, which was released in December in a 64-page catalog. We’re always looking for unique ways to engage and add value for on-the-go shoppers – stay tuned for additional mobile offerings and apps from Toys“R”Us in the future!

You’ve been credited with the Toys“R”Us Express store concept. How crucial are these pop-up stores to the brand during the holiday season?

We heard from our customers, and know they want to buy their toys from Toys“R”Us. Toys“R”Us is a classic destination for Christmas shopping and customers have responded extremely well to the availability of additional locations nationwide. Establishing a presence in malls and other shopping centers, allows us to provide customers with the convenience of getting their Christmas shopping done in one location. Plus, it offers us substantial opportunity to drive sales and to take advantage of the seasonal foot traffic in mall and shopping centers.

During the 2009 holiday season, we opened approximately 90 Toys“R”Us Express stores, and about one-third remained open through 2010.

This year, building on the success we achieved with the 90 stores, we opened 600 Toys“R”Us Express locations across the country – more than six times the number of Express stores we opened last year. This doubles the number of Toys“R”Us locations nationwide and represents an additional 2.4 million square feet of toy-selling space in malls and other shopping centers nationwide.

The Express stores allow us to introduce new customers to the assortment and specialty services that Toys“R”Us has to offer, and last year, gift cards were among the best-selling items at the Express stores, leading customers back to our traditional stores after Christmas.

With the acquisition of eToys.com, KB Toys and FAO Schwarz in 2009, Toys“R”Us has positioned itself as the global leader in the toy market. What benefits will this bring for consumers?

We’re excited to have added FAO Schwarz, KB Toys and eToys.com to our growing portfolio of family-friendly brands, providing our customers more ways to shop with THE toy authority throughout the year. Each of the brands is unique and continues to be positioned as such. For example, when we acquired FAO Schwarz, we made a commitment to preserving its distinct heritage and taking it to even greater heights, and we’ve been doing just that ever since. This year, we opened approximately 10 FAO Schwarz pop-up stores around the country, introducing a whole new generation of kids to this beloved brand. We also unveiled a brand redesign to give it a fresh look, while maintaining the sense of tradition that has been treasured for generations, expanded the line of FAO Schwarz-branded products in time for Christmas and introduced dedicated FAO Schwarz boutiques in all Toys“R”Us stores nationwide.

And, eToys.com places a special focus on learning toys. As for KB Toys, we are in the process of determining how that brand will strategically fit into our growing portfolio.

Having these brands enables us to extend our authority position in the industry and capture more toy-buying dollars. When customers are deciding where to shop for toys – at Toys“R”Us, eToys.com or FAO Schwarz – that should be our biggest worry!

In what way has the economy impacted the Toys“R”Us brand? What changes, if any, have you made to business strategy to stay competitive?

Despite challenging economic conditions in 2008 and 2009, we were pleased with the sales momentum we achieved by focusing on our core strengths as a specialty retailer and by continuing to innovate in our product offerings.

We have been aggressive in examining our business and making the appropriate adjustments to buffer the company against economic challenges. Our efforts have focused on taking steps to protect margin, reduce capital spending and rigorously control expenses.

At the same time, we have been making strategic investments to increase market share and advance our specialist position in the toy and baby products categories. A major area of focus for us is new store growth and making improvements to our store infrastructure. This includes opening new “R” Superstores throughout the country and converting existing stores to the Side-by-Side format.

We have been aggressive in pursuing opportunities that allow us to capture additional toy-buying dollars. This includes our Express store initiative, which has grown exponentially from last year, and the growth of our e-commerce portfolio to generate more online toy sales and dominate top web search results for toys. And, we opened a Sourcing Office in Shenzhen, China to grow our private label business.

For the first time ever, Toys“R”Us opened at 10 p.m. on Thanksgiving this year. What was your rationale behind this and what were the results?

That’s right – the 10pm openings were earlier than ever, and we decided to open earlier after we received such great feedback from our customers after opening at midnight last year. They wanted to come out even earlier to start their Black Friday shopping! We received many reports from all over the country of lines more than one thousand deep of customers eager to get an early start on their holiday shopping. At our Times Square store, where I was at 10pm, the line to get in the store spanned several blocks, and when customers entered the store, they were just so excited! It was great to see the joy on people’s faces.

We continued to see the same great momentum for our 5am doorbusters, and crowds continued to build throughout the day.

NRF has released its survey of top holiday toys. What hot products have we missed?

Well, I think the biggest difference in our lists is that one of the requirements for the Toys“R”Us Hot Holiday Toy List is that the toys be new for the current year.  We have a global team of merchants in 34 countries around the world that spends the year testing and tracking new product introductions and forecasts trends from around the world to identify the best-of-the-best items to include on our annual list, and we’ve seen a lot of hot toys emerge this year! Some examples include Sing-a-ma-jigs!, Lalaloopsy dolls, Dance Star Mickey and Disney Princess & Me dolls.

With many Americans leaving their holiday shopping to the last-minute, what does Toys“R”Us do to help these consumers out, and are you a holiday procrastinator?

Just last week, we announced that for the first time ever, our Toys“R”Us stores nationwide will remain open for 24-hours per day – or 88 consecutive hours – beginning at 6am this coming Tuesday through 10pm on Christmas Eve to accommodate those who want to shop until the very end of the season! And, for the night owls who visit our stores overnight, we’re going to offer special “Midnight Madness” deals valid from midnight through 6am each day, beginning at midnight December 22. These offers will be sent to customers each day via e-mail. And, we’ll still have plenty of fantastic deals for those who shop with us earlier in the day. On Tuesday, December 21 and Wednesday, December 22, we’ll hold our final two-day sale of the season, with savings of 50% or more on many items.

As for me, I’ve been working non-stop since Black Friday, so I haven’t done any shopping yet. My wife and I usually wait until we get through the weekend before Christmas, and then we’ll start thinking about it!

Which retailers or other companies do you look to for inspiration?

Apple. For their design and innovation, as well as their focus on their customers.

What was your favorite toy as a child?

My favorite was Cecil the Sea Serpent. I also really enjoyed playing with the Carrom Game Board.

Posted in: eCommerce | Holidays | Retail Companies and tagged
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One Comment

  1. Posted December 29, 2010 at 12:50 pm | Permalink

    Loved reading how Toys R Us harnessed digital marketing to grow their business during this economically stressful time. Their use of mobile coupons was especially smart – in 2011 it would benefit them to use Droid compatible tools as well. Great job Toys R Us.

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