What a Toys “R” Us Comeback Could Look Like

Toys “R” Us is being resurrected for the holiday season. After filing for bankruptcy protection from creditors in September 2017, it closed all its stores in the United States and United Kingdom earlier this year. But on November 13, 2018, Judge Keith Phillips of the U.S. Bankruptcy Court in Richmond, Virginia, signed off on a bankruptcy plan that revealed that investors intended to use the company’s brands in various ways. An initial approach can be found inside 600 Kroger supermarkets, where there are pop-up toy stores called “Geoffrey’s Toy Box” after the company’s giraffe icon.

But the environment that caused the toy chain’s demise has not changed. It still must compete with Walmart, Target, and especially Amazon, a competition based on price and convenience that it could not win.

An HBR article that one of us (Joe) wrote a year ago made the case that retailers today face two choices: offer consumers time well saved or time well spent. Toys “R” Us failed at the former strategy in its first incarnation. In coming out of bankruptcy, the company must pursue a time-well-spent strategy, offering places where both parents and their kids enjoy great experiences. (The Kroger pop-up stores are not promising: They offer no experiences, just boxes of toys.)

Here’s what Toys “R” Us should do now that it is freed of the shackles of bankruptcy and has a blank slate:

The underlying issue that set up Toys “R” Us for its collapse into commoditization is that it lost sight of whom it served. Its efforts primarily centered on its vendor relationships and pushing more and more product onto the floors and shelves of its stores.

For the reborn company to have a chance, it must turn 180 degrees and embrace a parent- and kid-centric strategy. It must become a stager of toy-playing experiences — enticing consumers into its new places by offering experiences that both parents and kids value. (What child wants to go to a warehouse? What child doesn’t want to play?) It should strive to maximize the time consumers spend in its places, because the longer they are there, the more they will buy. This is the essence of a time-well-spent strategy.

Imagine venues designed not around stocking toy packages with never-ending red-tag sales but around toys themselves with never-ending play experiences — one with spots where children can play with LEGO sets and participate in gaming tournaments. Imagine a testing lab where vendors pay to have children play with their latest and greatest toys. Imagine a studio where kids can design and create toys. Imagine becoming THE place for children’s birthday parties. (Surely Toys “R” Us could stage a far better experience than, say, Chuck E. Cheese’s, an experience that actually involves parents rather than shunting them off to the side.) In such venues, the warehouse would be in the back, out of consumers’ sight.

The absolute best way of knowing you’re providing time well spent is to charge admission for gaining entry to at least parts of the store — as the old Toys “R” Us once did for the Ferris wheel in its former flagship store in Times Square in New York City. (The old company smartly didn’t just get consumers to pay for admission, it also got suppliers to pay for their brands to be painted on the Ferris wheel’s cars.

In addition, Toys “R” Us could create a toy club that parents would value so much they’d pay a membership fee. Not like Costco or Sam’s Club memberships that merely provide access to low prices and thereby teaches consumers to buy on price, price, price. Instead, it could be a club that helps parents assess their children’s styles of play, their proclivities for creativity, curiosity, socialization, and all the other factors that enable them to grow socially, mentally, and even physically. The club’s fees could include the ability to return toys past their useful life or age-appropriateness and upgrade them via customized recommendations based on each individual child. Imagine becoming partners with parents in enhancing their parenting skills, invested in the well-being of their customers’ children.

By changing its business model to offer — and charge for — time well spent, the new Toys “R” Us can carve out a lasting and valued role in the toy business for decades to come. It can become the enterprise where a kid can be a kid.