Just Toying With Us?

While it might still be September, Toys “R” Us isn’t wasting any time announcing what they clearly consider to be some newsworthy changes set to take effect this holiday season. As a recent article in Chain Store Age explains, the national toy chain recently unveiled its “holiday strategy”, which includes a free online layaway program, an enhanced loyalty program, and a streamlined and more intuitive online and in-store checkout process.



The free online layaway is definitely an attention-getter. To my knowledge it’s the first totally free online holiday layaway program. At the very least, it’s certainly one of the first. The enhanced loyalty program and improved checkout process are also welcome upgrades, with promised improvements for checkout transaction time both in stores and online. Toys “R” Us’ in-store pick up option has also been improved. The loyalty program upgrades enable customers to earn more rewards for less money spent, and promises an easier award/redemption process and additional “partnership perks” for members.



Are these exciting changes or just more noise?



To be honest, I’m a little underwhelmed, and think a practical analysis of what this flurry of changes really means reveals it to be basically some incremental changes and modest improvements—but nothing to write home about. Like so many glowing releases, I suspect this is more about making some noise for the investment community than about reaching out to consumers.



That being said, these changes should make the process of a shopping at Toys “R” Us and Babies “R” Us a little bit easier — both in virtual and brick-and-mortar environments. And for a brand under a lot of pressure (largely because toys can often be found at other retailers at a lower price point — specifically the larger discount stores), every little bit helps.



While Toys “R” Us’ online shopping tools have long lingered a little bit behind the curve in terms of usability and utility, it is that discounter competition that has really been the challenge. As discounters have tried to become more things to more people, it isn’t just pharmacies and electronics stores they are competing with: toys have clearly been on the agenda. Today, Toys “R” Us really only has one competitive advantage over the Walmarts and Targets of the world: selection and depth of merchandise. Toys “R” Us enables the consumer to enjoy a one-stop-shop toy-buying experience. To get people in the door, however, they had typically had to have loss-leaders (such as affordably priced diapers).



In some markets, the competition is fierce. In York, Pennsylvania, for example, Toys “R” Us has one location, but the large discount brands all have one or more stores there. If these promised changes bring Toys “R” Us a step closer to its competitors in terms of the convenience and customer service experience, that will certainly help, but it won’t come close to solving the fundamental problem: Toys “R” Us simply cannot compete on price.



While much of the Toys “R” Us “holiday strategy” strikes me as window dressing — or as a straightforward case of keeping up with the Joneses — there are two aspects that I have the potential to be significant. As I mentioned, the free layaway is a step beyond what other retailers have done. Sears and Kmart offer no-money-down online layaway options, but service fees apply. Walmart has no service fees, but requires a 10% (or $10, whichever is greater) down payment. If Toys “R” Us promotes that feature well, it has a chance to establish itself as a leader in that regard (at least until other retailers decide to implement the same type of program). The other thing that Toys “R” Us president Hank Mullany announced that I found intriguing was a pilot program with Google’s Shopping Express same-day delivery feature. Walmart has talked about same-day delivery and is still in the process of testing it, but I’ll be interested to see if Toys “R” Us can establish itself as a leader in this space, where brick-and-mortar locations are used as a kind of distribution hub for local and regional same-day delivery of online orders.



Overall, Toys “R” Us seems to be improving its online experience, but still lags behind its key competitors. The free online layaway and loyalty program improvements are nice, but this announcement strikes me as mostly smoke and mirrors aimed at a Wall Street audience. The bigger problems for the brand remain unaddressed, and that’s a problem, because the fundamental issues aren’t changing. Toys “R” Us is simply not as convenient and not as competitively priced as the competition, and those two factors are going to be important not only this holiday season, but likely for many years to come.



I’d love to hear what the parents out there have to say. What is your impression of Toys “R” Us online? When you are buying toys for your children or for birthday party gifts, is Toys “R” Us still your destination of choice? And, most importantly, will any of the recent announcements make you more likely to shop at Toys “R” Us in the near future? Contact me at [email protected] or leave a comment below to keep the conversation going.

Click here for past columns by Jeff Green