The news this week that Maplin and Toys R Us have gone into administration is a blow for their staff. Up to 5,500 jobs are now thought to be at risk as a result of the news. Online shopping is now suspended at Toys R Us , while the Maplin website is trading but bears a banner showing that it’s now in the hands of administrators. Both businesses have failed at a time when, data suggests, the value of the pound has fallen, shoppers have less confidence in spending their money, and those that do have money to spend have taken their transactions still further online, perhaps because it’s easier to buy some items online, perhaps as a result of poor weather conditions in the New Year and, no doubt, now. These are factors that are affecting many businesses – Carpetright today delivered its second profit warning since Christmas. What, if anything, could they have done differently, and how can other retailers learn from them?
Inspire store shoppers
One retail expert suggests that Toys R Us missed an opportunity to reinvent itself as an ‘inspirational’ place to shop.
“A key problem for Toys R Us was a lack of clear focus: is it a big box discount store for toys, a store with a vast assortment of toys, a leader in quality and service?" said Professor Heiner Evanschitzky, co-director of the Aston Centre for Retail Insights at Aston Business School. "They missed an opportunity to reposition themselves as an inspirational place to shop at. Consumers rightly asked why they should bother going there instead of buying online.”
Evanschitzky has previously argued that an inspirational shopping experience - through store design, displaying products by use rather than category, and proactive, service-focused staff – is the only way store-based retailers can hope to compete with online stores.
He said: “People browsing in stores should be met with an environment that is entertaining and informative, with a focus on showcasing products in unexpected combinations or contexts. Our research shows this can improve customer satisfaction and lead to an increase in sales per customer. Online is an important distribution channel and traditional retailers must embrace it. But it is vital they also invest in improving their stores and equipping staff to help make shopping an enjoyable experience."
Develop new business models
Alastair Lockhart of shopper marketing agency Savvy says that both retailers made their names in offering an unrivalled range that was new and compelling – twenty years ago. "When Toys R Us entered the UK market, the concept of a toy superstore was revolutionary, while Maplin was the go-to retailer for all shoppers’ more obscure electronics needs, from disco equipment to a specialist SCART cable," he said.
"As we stand here today however Toys R Us and Maplin both find themselves built upon increasingly obsolete business models. The advent and growth of online retail – in large part driven by Amazon – means that distribution centres and websites, not vast store estates, are now the homes for retailers competing on range, depth and breadth.
"Granted Maplin and Toys R Us have their own individual strengths, but these too are fading in relevance. While online retailers may struggle to match the advice offered by Maplin’s in-store colleagues, the reality is that increasingly tech-savvy shoppers are comfortable seeking answers to their technical questions using Google. And while stores have a role in inspiring children, in truth Toys R Us feels more like a toy warehouse than a home for interactive play and engagement.”
Focus on omnichannel
Couchbase’s Perry Krug says that digital is not negotiable for 21st century retailers.
Krug, who is principal architect, strategic accounts at the engagement database business, says that retail is fast moving away from the large store model of Toys R Us, at a time when footfall is down and competition is up.
"Stores like Toys R Us were among the first to recognise that customers want more choice than could be found on the average high street, creating sprawling estates in order to supersize the physical retail experience throughout the country," he said. "However, this now pales in comparison with ecommerce, which gives customers infinite-scale retail from the comfort of their own home – as well as newer developments such as Amazon Go.
“All of the most successful retailer business models in 2020 will be digital-first or digital-only, it’s as simple as that. Ultimately retailers must meet the demands of the 24/7 global digital economy to guarantee faultless and reliable experience to customers, no matter what the scale or location. Physical stores have two roads ahead of them. Either they can continue doing what they’re doing, where further decline is the most likely outcome. Or they can try to function in parallel and support of ecommerce, by offering an omnichannel experience that merges online with offline experiences. For instance, this might mean being more boutique or acting as a showroom for big-ticket items that customers really need to try before they buy. Likewise, a business model like Amazon Go which successfully combines elements of physical and digital shopping experiences in one store may prove to be the blueprint for success in the years ahead, in which only the strongest and most innovative retailers will survive.”
Couchbase recently surveyed 450 digital transformation project leaders, such as CIOs and CTOs, to identify the biggest challenges facing digital transformation projects. It found 54% were concerned their firm would go out of business if their transformation strategy failed, and that 89% said their industry either was being or would be disrupted by digital technology - even after they had spent an average of $5.7m on digital transformation in the last year. It found 84% of businesses going through digital transformation had had digital projects cancelled, delayed or reduced in scope, while 90% of projects fail to meet expectations, delivering only incremental improvements.