A few years ago, I used to joke that one of the fastest growing jobs was that of sign makers, particularly with regard to the frequent revisions in the names of banks and other financial institutions that had resulted from purchases or consolidations. It was a clear indication of the changing times. (A few years before that it was arsonists, but we don’t want to go there.)
The recent announcement by Toys ‘R’ Us relating to the selling of its global toy division and spinning off of its Babies ‘R’ Us unit as a separate business beginning next year shows that shifts in today’s markets are still demanding redefining and rethinking of products, images, and strategies.
Founded in 1957 with a single toy supermarket, Toys ‘R’ Us went public in 1978. Since that time, the novel-named company has become a household word while revolutionizing the toy industry. It gradually has evolved into a powerful international toy vendor. As my kids (born from 1982 to 1988) grew up, a weekly visit (at least) was a treasured family ritual. The name, the jingle, and the giraffe became a part of our culture.
Babies ‘R’ Us was added in early 1996 with the opening of a store in Westbury, New York. By 2002, the number of these types of stores approached 200 and locations were spread across the country. During the past five years, Toys ‘R’ Us launched its Internet operations with the creation of Toysrus.com and Babiesrus.com. It now has approximately 700 stores in the US and almost 580 internationally.
Over the years, Toys ‘R’ Us has entreated parents and children into its stores with a wide merchandise selection displayed for one-stop toy shopping and convenient purchases of infant needs. However, fierce competition from major discount merchants has chipped away at Toys ‘R’ Us market share. It now occupies second place in toy sales. As a sign of the times, Wal-Mart is first.
Today, Babies ‘R’ Us is the largest baby products chain in the nation and has been considered for some time to be the crown jewel of Toys ‘R’ Us. Sales of the babies division have been steadily climbing, while revenue from the mother company (no pun intended) saw a slight revenue drop last quarter.
Although large discounters are heightening their pace to bid for infant clothing and furniture customers, Babies ‘R’ Us offers amenities not currently provided by its mass merchant rivals. Among them are close-in parking for expectant mothers, special nursing rooms, and vast quantities and varied selections of items and styles.
Even so, discounters are expanding their baby sections in an effort to obtain greater shares of the $6 billion baby business, which some estimate to be expanding upwards of 6% annually. As a result, the logistical advantages of Babies ‘R’ Us could be offset to some degree over time as shoppers search out the most economical prices.
Although major discounters could affect Babies ‘R’ Us sales, the company will probably have an easier time in fending off competition than has Toys ‘R’ Us, since the desire for baby merchandise is year around, while most purchases of toys occur during the fourth quarter of the year.
The example of Toys ‘R’ Us’ restructuring is being mirrored by numerous industries across America. Such movements have frequently been necessitated by rising costs and fierce competition within the US, as well as globally.
There is an expression that I have always liked: “When the going gets tough, the tough get going.” In today’s changing marketplace, businesses often must rethink and redefine themselves, because in tomorrow’s world, only the tough will succeed.
Change is inevitable and often times necessary to remain viable and profitable. Realignment and focus can provide new opportunities for success in spite of the dangers of emerging competition. How a company or organization handles such changes may well determine its future. Still, it seems really weird for Toys ‘R’ Us to become Toys ‘R’ Somebody Else.