April 30, 2009
Toys ‘R’ Us Expanding Kids Convenience Concept
Toys
"R" Us is looking to give shoppers a reason to visit its stores
more frequently with the rollout of the "R" Market store-within-a-store
concept that provides a wide range of kid-focused products including diapers,
infant formula, baby food, lunchbox items, paper goods, health and beauty
items, household cleaners and more.
Each
"R" Market will feature roughly 1,300 items in a convenient shopping
format located at the front of Toys "R" Us stores. The chain currently
has "R" Markets in 260 stores with plans to roll the concept out
to all of its 585 locations in the U.S. this year.
"As
part of our business strategy, we are continually focused on improving
the shopping experience for customers in our stores. This includes looking
for new ways to provide busy parents with the convenience of finding everything
they need for their kids under one roof," said Jerry Storch,
chairman and CEO, Toys "R" Us, Inc.,
in a press release. "The introduction of ‘R’ Market offers customers
a uniquely edited presentation of differentiated, kid-focused products
from well-known manufacturers, as well as newer brands."
Discussion Questions:
Is Toys
"R" Us on the right path with the "R" Market? What do
you see as the relevant strengths and/or weaknesses of the concept?
BrainTrust
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The “R” market concept makes some sense but at the same time is unlikely to drive big incremental sales to Toys “R” Us. It is potentially a way to reallocate square footage and make the overall store more productive. The product can be expected to drive some higher sales to the customer’s “shopping cart,” and it helps smooth out the seasonal peaks and valleys of the toy business.
But the drawback is that consumers are unlikely to switch their loyalty from Walmart or other destination stores for household products, even kid-focused categories like diapers. Toys “R” Us needs to be very price-competitive to be meaningful in these businesses, which may not be a margin win for them even if the strategy drives incremental sales.
Didn’t we say getting away from core business is bad? I see the connection here but this is such a high maintenance category. Is TRU going to add hours to the floor for this? I’m really skeptical on this. Maybe an integration with BRU and more baby products is a better fit? A large blue video store chain that shall remain nameless tried to sell milk, eggs and bread in some test stores in Toronto. The store managers were definitely crying over all the milk they had to spill out. TRU should focus on the T, and not anything else.
What puzzles me about this announcement, is the depth of the SKUs devoted to the aisle.
And since these guys aren’t foodies, what about freshness, let alone price points?
The other big boxes that sell both toys and snacks, baby diapers, cereals, and related food items have the leg up on Toys ‘R’ Us.
You go to Toys ‘R’ Us for toys, not cereals and snacks.
A really dumb idea.
I think this concept has legs. It really compares well to Frito-Lay section of nutritious snacks for women.
The appeal for shoppers has to be reinforced with good value and a full array of regularly needed products. If Toys ‘R’ Us doesn’t offer that, then there’s little reason for parents to come back more often. Store location will also play a factor. No matter how alluring the section is, if the Toys ‘R’ Us store is not near frequently-shopped retail stores, consumers will have to go out of their way to return. I don’t believe that is likely.
So with an appropriate combination of product assortment, good value along with the good location in the store and for the store itself, I think Toys ‘R’ Us has a viable strategy.
Adding the ‘R’ markets will undoubtedly add costs for Toys ‘R’ Us–from the disruption of store renovations, to the cost of new fixtures, to the overhead of merchandising the 1,300 incremental SKUs, to the inevitable marketing and management challenges associated with rolling out their new offering. The question is, will the costs be worth it? Will they drive additional store trips, increased baskets, or both? Is ‘R’ a loss leader designed to get more people in the stores, or is it intended to be an independent profit center?
Toys ‘R’ Us is setting itself up against some pretty tough competition, as grocery chains have learned the hard way. They’ve seen their traffic diminish as customers defect to club stores like Costco and BJs, discount superstores like Walmart, and convenience formats like CVS and 7-11. For Toys ‘R’ Us to compete in this space, they will need to offer a compelling value proposition beyond convenience–because with fewer than 600 US stores they won’t be able to win there. In this particular economic climate, price may be their most powerful lever to get customers into their stores. If they can turn budget trips into cross-promotional opportunities, they may be able to succeed.
Why would a mom make a trip to TRU to buy what she can get at any grocery store or mass merchant? Will the TRU prices be lower than Walmart or another competitor? Unless she is already in TRU to buy toys, I don’t see how this is a “win” for the chain.
The appeal in this move isn’t the attempt to drive more traffic to the store. Rather, it’s the natural conclusion that average basket sizes are likely to go up as a result. Provided they don’t burn themselves by being anything less than price competitive on these commonly shopped items (consumers might not know how much a Teenage Mutant Ninja Turtle is supposed to cost, but they know the price of diapers!), they should be successful with this initiative. Core business growth is essential, but finding incremental growth along the way is also needed.
It’s a good idea but the product may be wrong. The R concept would work if they include hard-to-find incremental products that will entice a consumer. I agree, cereal doesn’t cut it. Moms would not want to stop at TRU for cereal and hear kids whining for a toy.
A better idea might be the concept of Mommy & Me seminars, sharing knowledge with fun…while showing the latest and trendiest products; aka, sales!
This is a big investment and commitment in terms of square footage and resources so you’d assume they’ve tested this. It will be interesting to see if the company can get customers into the habit of shopping in this new format. If so, it could clearly drive incremental store visits though I’m not sure it will hurt them. So on balance, it appears to be a good move.
TRU management should not be faulted for trying to find ways to maximize the marketbasket opportunity from their existing traffic. The economic realities at TRU do not involve spending large amounts of money to drive incremental traffic…a legacy of the buyouts and past difficulties. Demographics do not indicate a toy sales revival (no baby boom to benefit from), and the “needs” based recession economy absolutely impacts non-event toy purchase behavior.
Standing “still” in the face of a confluence of negative macroeconomic trends would be bad management. Assessing opportunities and testing the benefit is good management. I am confident that TRU tested the ‘R’ Market before rolling it out, and that the results were worth the effort other writers have speculated about. This isn’t poorly thought out, and should have no impact on their core business. Providing a convenience store specifically tailored to their customer and the family shopping experience leveraged TRU’s knowledge of that customer, and requires no special or unique skill sets. The same systems and processes that refill high velocity SKUs already carried (candy?) will be of use here.
Sound tactic.
Other big box stores have re-configured assortment and merchandising location to increase trip frequency with some success (HBA and ready-to-serve foods in the front of store). But they are destination, broad-range assortment outlets. I find it difficult to see cash and time strapped moms making another stop to buy staples available everywhere. The added challenge for a shopper is the temptation for an unplanned, impulse toy purchase. While that might be a benefit for TRU, in these economic times, the prudent approach is to avoid temptation.
It will be interesting to see how this plays out. Any idea how the big blue movie store is doing selling gaming hardware?
Every retailer should be finding ways to make brick and mortar stores more relevant. As retail shopping continues to tilt online, what will entice a shopper to physically go to a store? In the case for TRU, not this idea.
Are they offering a convenience? Of course. But only if a shopper is already making the trip. There is nothing in this offering that a consumer can not get at a retailer that they more frequently visit and is considerably more CONVENIENT. I doubt the shopper skips the kids’ cereal in the supermarket just to make a trip to TRU for it.
The only way I see this working is if TRU promotes these products with heavy, heavy price reductions on high volume, high-ticket items like diapers to incent a shopper to make a special trip and hope that shopper will end up buying a high margin toy. This is a long shot!!!
What was the name of that brand again? Ooops!
Aside from the brand conundrum (does it matter?), it seems like an interesting idea…basically an accessory department to add impulse items to the basket. Smart. And obviously, if they’re rolling it out, it must be working, so, watch the criticism for fear of getting hit with all the laughter on the way to the bank.
Having said that, I can’t see TRU becoming a destination for those products. But as long as it’s planned like an accessory department, I’d keep it up.
I am worried about Toys ‘R’ Us. I have seen a couple of decisions lately that make me think that are getting out of step with their customer and this decision does not make me feel better. They need to get back to basics of customer service.
Great comments, from all.
The appeal is the $18 billion dollar maternity and new kids expenditure “Prize” that seems to fog the senses.
TRU has wasted space today that could be much better utilized to build bigger baskets (Incremental products per trip), as well as more frequent trips. They cannot out-market the Walmarts in sheer space, product assortment or trip volume with the current merchandise mix.
I would suggest they do need to continue to morph into something more attuned to the market needs. Whether this current strategy will work is (based on previous posts) doubtful. I hope they watch very closely which types of the new assortment are being purchased by the consumer, and adjust just as quickly to trend.
Their strength is in their ability to react quickly to their stores’/consumers’ needs by tailoring the mix to the specific needs.
I wish them luck.
IMO, this is a very bad strategy.
Toys ‘R’ Us is going to take on Walmart, Target, Costco, and grocery stores as competitors. Are they serious?
We will look back in a couple of years and see this as the decision that put an end to Toys ‘R’ Us.
I don’t like this concept. The products stocked in ‘R’ Market are largely non-discretionary. That means the same items are likely to be available at many grocers, discounters, club stores and drug stores at a lower price. Not only that, but the latter chains are likely to have a wider selection, they have loyalty programs, and consumers frequent those chains more often. Seems a better idea would have been to offer some truly unique product that consumers can’t find at dozens of other chains.
The only category with slimmer margins than Electronics is Grocery/Drugstore.
TRU needs to look at total GMROI (Gross Margin Return on Investment) of the test stores before rolling out this concept to the entire chain.
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The “R” market concept makes some sense but at the same time is unlikely to drive big incremental sales to Toys “R” Us. It is potentially a way to reallocate square footage and make the overall store more productive. The product can be expected to drive some higher sales to the customer’s “shopping cart,” and it helps smooth out the seasonal peaks and valleys of the toy business.
But the drawback is that consumers are unlikely to switch their loyalty from Walmart or other destination stores for household products, even kid-focused categories like diapers. Toys “R” Us needs to be very price-competitive to be meaningful in these businesses, which may not be a margin win for them even if the strategy drives incremental sales.
Didn’t we say getting away from core business is bad? I see the connection here but this is such a high maintenance category. Is TRU going to add hours to the floor for this? I’m really skeptical on this. Maybe an integration with BRU and more baby products is a better fit? A large blue video store chain that shall remain nameless tried to sell milk, eggs and bread in some test stores in Toronto. The store managers were definitely crying over all the milk they had to spill out. TRU should focus on the T, and not anything else.
What puzzles me about this announcement, is the depth of the SKUs devoted to the aisle.
And since these guys aren’t foodies, what about freshness, let alone price points?
The other big boxes that sell both toys and snacks, baby diapers, cereals, and related food items have the leg up on Toys ‘R’ Us.
You go to Toys ‘R’ Us for toys, not cereals and snacks.
A really dumb idea.
I think this concept has legs. It really compares well to Frito-Lay section of nutritious snacks for women.
The appeal for shoppers has to be reinforced with good value and a full array of regularly needed products. If Toys ‘R’ Us doesn’t offer that, then there’s little reason for parents to come back more often. Store location will also play a factor. No matter how alluring the section is, if the Toys ‘R’ Us store is not near frequently-shopped retail stores, consumers will have to go out of their way to return. I don’t believe that is likely.
So with an appropriate combination of product assortment, good value along with the good location in the store and for the store itself, I think Toys ‘R’ Us has a viable strategy.
Adding the ‘R’ markets will undoubtedly add costs for Toys ‘R’ Us–from the disruption of store renovations, to the cost of new fixtures, to the overhead of merchandising the 1,300 incremental SKUs, to the inevitable marketing and management challenges associated with rolling out their new offering. The question is, will the costs be worth it? Will they drive additional store trips, increased baskets, or both? Is ‘R’ a loss leader designed to get more people in the stores, or is it intended to be an independent profit center?
Toys ‘R’ Us is setting itself up against some pretty tough competition, as grocery chains have learned the hard way. They’ve seen their traffic diminish as customers defect to club stores like Costco and BJs, discount superstores like Walmart, and convenience formats like CVS and 7-11. For Toys ‘R’ Us to compete in this space, they will need to offer a compelling value proposition beyond convenience–because with fewer than 600 US stores they won’t be able to win there. In this particular economic climate, price may be their most powerful lever to get customers into their stores. If they can turn budget trips into cross-promotional opportunities, they may be able to succeed.
Why would a mom make a trip to TRU to buy what she can get at any grocery store or mass merchant? Will the TRU prices be lower than Walmart or another competitor? Unless she is already in TRU to buy toys, I don’t see how this is a “win” for the chain.
The appeal in this move isn’t the attempt to drive more traffic to the store. Rather, it’s the natural conclusion that average basket sizes are likely to go up as a result. Provided they don’t burn themselves by being anything less than price competitive on these commonly shopped items (consumers might not know how much a Teenage Mutant Ninja Turtle is supposed to cost, but they know the price of diapers!), they should be successful with this initiative. Core business growth is essential, but finding incremental growth along the way is also needed.
It’s a good idea but the product may be wrong. The R concept would work if they include hard-to-find incremental products that will entice a consumer. I agree, cereal doesn’t cut it. Moms would not want to stop at TRU for cereal and hear kids whining for a toy.
A better idea might be the concept of Mommy & Me seminars, sharing knowledge with fun…while showing the latest and trendiest products; aka, sales!
This is a big investment and commitment in terms of square footage and resources so you’d assume they’ve tested this. It will be interesting to see if the company can get customers into the habit of shopping in this new format. If so, it could clearly drive incremental store visits though I’m not sure it will hurt them. So on balance, it appears to be a good move.
TRU management should not be faulted for trying to find ways to maximize the marketbasket opportunity from their existing traffic. The economic realities at TRU do not involve spending large amounts of money to drive incremental traffic…a legacy of the buyouts and past difficulties. Demographics do not indicate a toy sales revival (no baby boom to benefit from), and the “needs” based recession economy absolutely impacts non-event toy purchase behavior.
Standing “still” in the face of a confluence of negative macroeconomic trends would be bad management. Assessing opportunities and testing the benefit is good management. I am confident that TRU tested the ‘R’ Market before rolling it out, and that the results were worth the effort other writers have speculated about. This isn’t poorly thought out, and should have no impact on their core business. Providing a convenience store specifically tailored to their customer and the family shopping experience leveraged TRU’s knowledge of that customer, and requires no special or unique skill sets. The same systems and processes that refill high velocity SKUs already carried (candy?) will be of use here.
Sound tactic.
Other big box stores have re-configured assortment and merchandising location to increase trip frequency with some success (HBA and ready-to-serve foods in the front of store). But they are destination, broad-range assortment outlets. I find it difficult to see cash and time strapped moms making another stop to buy staples available everywhere. The added challenge for a shopper is the temptation for an unplanned, impulse toy purchase. While that might be a benefit for TRU, in these economic times, the prudent approach is to avoid temptation.
It will be interesting to see how this plays out. Any idea how the big blue movie store is doing selling gaming hardware?
Every retailer should be finding ways to make brick and mortar stores more relevant. As retail shopping continues to tilt online, what will entice a shopper to physically go to a store? In the case for TRU, not this idea.
Are they offering a convenience? Of course. But only if a shopper is already making the trip. There is nothing in this offering that a consumer can not get at a retailer that they more frequently visit and is considerably more CONVENIENT. I doubt the shopper skips the kids’ cereal in the supermarket just to make a trip to TRU for it.
The only way I see this working is if TRU promotes these products with heavy, heavy price reductions on high volume, high-ticket items like diapers to incent a shopper to make a special trip and hope that shopper will end up buying a high margin toy. This is a long shot!!!
What was the name of that brand again? Ooops!
Aside from the brand conundrum (does it matter?), it seems like an interesting idea…basically an accessory department to add impulse items to the basket. Smart. And obviously, if they’re rolling it out, it must be working, so, watch the criticism for fear of getting hit with all the laughter on the way to the bank.
Having said that, I can’t see TRU becoming a destination for those products. But as long as it’s planned like an accessory department, I’d keep it up.
I am worried about Toys ‘R’ Us. I have seen a couple of decisions lately that make me think that are getting out of step with their customer and this decision does not make me feel better. They need to get back to basics of customer service.
Great comments, from all.
The appeal is the $18 billion dollar maternity and new kids expenditure “Prize” that seems to fog the senses.
TRU has wasted space today that could be much better utilized to build bigger baskets (Incremental products per trip), as well as more frequent trips. They cannot out-market the Walmarts in sheer space, product assortment or trip volume with the current merchandise mix.
I would suggest they do need to continue to morph into something more attuned to the market needs. Whether this current strategy will work is (based on previous posts) doubtful. I hope they watch very closely which types of the new assortment are being purchased by the consumer, and adjust just as quickly to trend.
Their strength is in their ability to react quickly to their stores’/consumers’ needs by tailoring the mix to the specific needs.
I wish them luck.
IMO, this is a very bad strategy.
Toys ‘R’ Us is going to take on Walmart, Target, Costco, and grocery stores as competitors. Are they serious?
We will look back in a couple of years and see this as the decision that put an end to Toys ‘R’ Us.
I don’t like this concept. The products stocked in ‘R’ Market are largely non-discretionary. That means the same items are likely to be available at many grocers, discounters, club stores and drug stores at a lower price. Not only that, but the latter chains are likely to have a wider selection, they have loyalty programs, and consumers frequent those chains more often. Seems a better idea would have been to offer some truly unique product that consumers can’t find at dozens of other chains.
The only category with slimmer margins than Electronics is Grocery/Drugstore.
TRU needs to look at total GMROI (Gross Margin Return on Investment) of the test stores before rolling out this concept to the entire chain.