Leading People in Creative Teams

Case Study

Toys “R” Us has been operating since 1948 by making use of its brick and mortar store model. The company has employed amiable staff who are always willing to welcome customers within the stores and assist them in finding the products of their choice. Yet they failed to implement the aspect of customer touch in their online business. The major drawback of organisation was lack of direct engagement with customers. The e-commerce team of Toys “R” us possessed knowledge that a number of tools and techniques were required to gain additional information about customers through which business can design and implement accessible, engaging and specifically targeted campaigns. Contrary to large scale companies like Electrolux and Whirlpool, Toys “R” us failed to embrace digital transformation. The enterprise was unsuccessful in building a customer touch with its online base, consequently, the revenues as well as profits of company were massively impacted. Toys “R” us was not earning any profits since 2013. As a result of it, this enterprise finally filed for bankruptcy protection by the end of 2017. Company executed liquidation of its operations within United States in March, 2018. Also, the Canadian unit of organisation is up for sale together with their operations within Central Europe and Asia.

(a) The problem

Toys “R” us is a leading toy as well as baby products retailer. Their merchandises are sold in 860+ Toys “R” us as well as Babies “R” us stores within US, Guam and Puerto Rico. This company is headquartered in New Jersey, U.S.A and employs over 65,000 employees. Charles Lazarus found this enterprise in the year 1957 with major focus upon two key areas, namely, needs and wants of customer and the way in which these can be effectively fulfilled. It has been observed company made a number of changes in order to be compatible with the market situations and simultaneously meet the needs, demands and requirements of consumers. For this, enterprise started online selling of toys by entering into a tie up with the leading e-commerce retailer, Amazon. Yet, this failed largely owing to 4 major problems noted below:-

Lack of customer touch: Over years, organisation has been known for the personal touch that it strives to maintain with its large customer base in physical stores. However, when the company tied up with Amazon for e-commerce for increasing the scale of their operations, enterprise failed to take into consideration the aspect of direct customer engagement with online audience. Constant manual input was required from the creative team within Toys “R” us to build an effective communication with online customers and keeping them aware of the products and services being rendered by entity. The emailing system of company was unwieldy and restricted it to generic mails which were distributed in bulk quantity and optimised just for desktop users. Also, company did not much make use of social media platform or digital transformation to establish a direct communication with customers.

Lack of differentiated products: Except establishing a brand value within market, Toys “R” us is unable to gain a competitive and strategic edge in market over rivals. Within US, company has significantly lost its top position as the largest toy and baby product retailer owing to the presence of Walmart within marketplace which offers attractive packages to consumers. Company's brick and mortar store model has failed to render an opportunity to enterprise to gain the trust of customers and maintain their loyalty. Also, when company ended its tie up with Amazon, this massively impacted Toys “R” us. In many of the markets, organisation faced immense competition from retailer firms like Amazon, Kmart, Target and Walmart. It was noted that company failed to adopt and implement pocket friendly price models which could influence buyers to visit the store or make a purchase online. Thus, a very big problem with the entity was lack of unique offerings by company that could attract a large base of customers.

Filing of Bankruptcy Protection: As a result of continuous losses since 2013, Toys “R” us filed bankruptcy protection in 2017. As per the investigation into bankruptcy filed in Richmond, Virginia, this company was in a debt of $5 billions. This happened largely owing to the late entry of organisation in e-commerce industry. It was largely observed that company was not able to stave off the competition from key online players like Amazon. Thus, this enterprise is considering the option of undertaking financial restructure of organisation to make sure that Toys R us survive within the marketplace. As a result of this, confidence of vendors shook in context of the company and they have started becoming stringent about supplies to company besides decline in credit cycles.

Implication of problem

Owing to the various problems and issues noticed within Toys “R” us, there were massive outcomes. After 2005, the company leveraged buyout, started underinvesting in its operations as well as employees. Stores of the enterprise were largely functioning without maintenance. Dust collected on floors of stores and rafters as a method of cleaning services was cut back. Employees were stressed due to massive work load. Company even started deploying knowledgeable and competent staff while implementing cost-cutting campaigns. The focus upon continuous customer satisfaction was ignored as a result of the changed dynamics of business. Also, major IT systems failed at such stringent times. Besides this, at the store level, Toys R Us deprived customers of any reason to make a purchase of any product of entity. Sales of company started declining since 2013. Also, this enterprise did not earn any profits since 2013. Due to this, Toys “R” us filed for bankruptcy protection in 2017. Post this situation, an investigation was conducted which revealed that company was in debts of $5 billion. Further, Toys “R” us carried out liquidation of its business situated within the United States (US). As per the website of the enterprise, company's Canadian unit is already up for sale together with its business operations situated in Asia as well as Central Europe, including Germany, Switzerland and Austria. Liquidation of its US operations led to loss of job for over 30,000 employees.

Critical literature review

According to the point of view of Sandra Hartog (2019), the demise of Toys R us was a result of managerial misconduct. The operations as well as functioning of company went haywire largely owing to the lack of adequate and relevant leadership and management that could align the behavioural conduct of employees and give them a direction to meet the goals and objectives of enterprise. The CEO of this organisation kept on changing at regular intervals which reflects a high degree of unsystematic approach adopted by entity. There were hirings of big-name executives within the company with the prime motive of solving the problems prevailing within Toys “R” us. This was done without considering the alternative that “Great leaders can be grown.” It was required that company could have invested in developing leadership rather than hiring successful leaders who led large scale enterprises successfully in future. The company was capable of selecting a leader who possessed the stellar capabilities needed for leading the creative team within enterprise. It was then that the top management of company could have given training to the personnel to assist in developing the right skills and potential needed for leading and managing the creative team such that it could meet the organisational goals and objectives. It is largely observed that great leaders tend to move to next big opportunity. Thus, company should keep structure their developmental journey in a way that they remain loyal towards the enterprise and maintain their inevitability. Leaders within an entity should be well aware of the short as well as long term goals of company so as to lead the team in a manner that can ensure the accomplishment of all the objectives. By giving focus upon developing rather than just hiring employees, Toys “R” us could have had an edge in marketplace.

As per the views of Alexandra Coutts (2018), Toys “R” Us’s stores were of warehouse formats which were not capable of appealing to customers in order to influence them to come and make a purchase. Although the pricing model used by company was quite satisfactory yet it was not strong enough to make the in-store experience compelling for shoppers. This largely owed to the presence of online competitors like Amazon which contributed immensely in the demise of company. Amazon’s Prime business is largely focussed upon out-of-town warehouses for the purpose of meeting online purchases. On the contrary, Toys “R” Us possessed the brand name, means as well as the buying power to effectively become a leading online retailer but the enterprise did not make a move to make that happen. The company was capable of adopting a digital marketing strategy to gain a high stake in market and gain a strategic edge over rivals. This could be done in the following ways:-

• Toys “R” Us could have tapped the advantage of their product range to appeal to a wide base of audience by way of well optimised product pagesalong with Google Shopping Campaigns.
• The enterprise could have used Social advertisingfor presenting the brand in front of parents and letting their minds retain it for a long time.
• The company could have implemented cross-channel purchaseby effectively utilising their website in order to captivate customers towards special events, discount days, product launch etc. along with making use of flyers in store to promote online purchase.
• Toys “R” Us could have rewarded their customers by increasing the scale of their loyalty schemeand enhancing it by way of rendering rewards in the form of discount offers or free gifts.
• Toys “R” Us could have joined customer reward schemeslike Avios or Nectar in order to gain access to customers who look for collecting points for making other purchases.
• To bring improvements within brick and mortar model stores of company, Toys “R” Us could have made use of augmented realitywhich would assist enterprise in captivating a large base of audience and developing a sense of loyalty among them towards the brand by delivering high quality products with unmatchable experience.

Critical application of strategies

There was a large need for Toys “R” Us to implement digital strategy so as to promote its online business. Also, the experience of its physical stores needed to be enhanced so as to compel customers to visit and make a purchase. For this, company could use augmented reality. Application of these strategies within the enterprise could have taken place in 3 stages described below:-

Step1: Analysing the challenges of disrupted retail industry

By gaining knowledge of the current trends and developments within the retail industry, Toys “R” Us could have analysed the needs and wants of customers in relation to products sold by company. As illustrated in the SWOT matrix below, it has been analysed that Amazon was disrupting the retail sector and there was high need for company to adopt digital transformation within the enterprise so as to deal with the competition from Amazon.

Further, an in-depth study of toy retail industry illustrates the need of a well structured digital strategy which would have changed the face of products delivered by Toys “R” Us. Company possessed the potential to bring in new generations toys – Toys 2.0 which were developed by utilising mobile, cloud computing, IoT and AI technologies.
 

The strategy which is prescribed for Toys “R” Us is explained below:-

• To challenge the cost leadership of Amazon, company can make use of cloud virtualisation and develop internet-driven as well as  on-demand features in toys.
• Innovation within Toys “R” Us by making use of mobile, AI and IoT technologies so as to gain an edge over product differentiation of Amazon
• To make use of company's brand image within toy retail sector in order to gain a leading position within new generation toy market.

Step2: Establishing Digital Innovation

Innovation is a major disruption factor within any industry. It was necessary for Toys “R” Us to implement an innovation culture at workplace. It had to be encouraged within all the elements of business, namely, values, staff, processes, beliefs, skills etc. Its necessity is related to capturing the attention of customers towards the innovative ideas brought in by enterprise. Toys “R” Us could have executed digital strategy to save themselves from the demise. This could have been done by effectively utilising the innovation life cycle which shapes the innovation culture. Also, innovation portfolio management is a software that assists the innovation lifecycle in taking within Toys “R” Us. By opting for a digital innovation strategy, company could have leveraged Internet of Things (IoT)

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