What C-Stores Can Learn from Toys R Us

Did now-defunct retailers fail to provide a compelling experience at a time when it mattered?

July 19, 2018

By Frank Beard

Toys R Us closed down on June 29. Social media was abuzz as people shared a mixture of nostalgic memories and sadness, and a photo of Geoffrey the Giraffe leaving an empty store quickly went viral. But it seems there was one question underlying much of the discussion: How did this happen? 

Similar stories have played out across our cities and neighborhoods as once-iconic retailers exit the marketplace. In my hometown of Des Moines, Iowa, Younkers—a brand of department stores that installed the state’s first “electric stairway” in 1939—is being liquidated after the demise of parent company Bon-Ton. This too, has generated much interest since Younkers anchors each of the area’s four malls.

There are many reasons for what happened in both situations, and it’s certainly more nuanced than simplistic rhetoric about a so-called “retail apocalypse”. But there’s one lesson worth unpacking because of its ramifications for convenience retailers. Simply put, they failed to provide a compelling experience at a time when it mattered.

Take Younkers, for example. Although I have fond memories of early shopping trips with my family, I stopped seeking out their stores years ago. To step inside Younkers was like stepping back in time ten or fifteen years. Many of the styles were outdated or boring, the selection of others was simply lacking, and the entire model felt like a holdover from a different era. The few things I did want were easily obtainable from other competitors both in-store and online. The Des Moines Register pointed out as much in a recent article, aptly-titled From Younkers to 'Junkers'.

The experience at Toys R Us had declined as well, as mentioned in a recent expose by Retail Dive. Cost-saving measures reduced floor care, parking lot cleaning, painting, and general maintenance. Staff reductions led to inventory shortages, customer service issues, and other problems since a 40,000 square-foot store might operate with only two or three employees.

"They normally high-dusted every other year,” said Rick McGee, a former district manager. “That means dusting off the tops of fans and girders across stores, the lights. If you don't wipe that off, that dust starts falling. In later years, they started canceling high dusting."

These things matter. I visited my local Toys R Us before it closed, and it looked almost exactly as I remembered as a kid—only now with a few decades of wear and tear. I can’t confirm this for sure, but I think the registers sat on the same countertops that were there in the early to mid-90s. They were in dire need of replacement.

It used to be that Toys R Us was like a trip to a theme park. When I was a kid, it was simply the place to get the latest toys and video games. But things have changed since the rise of Amazon and e-commerce, and they didn’t respond accordingly. Writing for Inc, Dustin McKissen explains as much:

“Amazon might have put the final nail in the giraffe-colored coffin that contains the corpse of what once was Toys "R" Us, but Amazon didn't build the coffin.”

“In other words,” he continues, “Toys "R" Us managed to make shopping for toys an experience wholly devoid of anything resembling, well, an actual experience. It was merely a giant, dirty box.”

He’s right, and nobody has to visit a dirty, boring, or unexceptional store when the same products are available with free two-day shipping from Amazon—often at lower prices—or available with same-day pickup at a handful of other retailers around town.

But this lesson applies to convenience retailing as well. Sometimes the nearest competing fuel canopy is across the street, and customers have many options for meals, snacks, and other daily needs. This is why it’s essential consider your retail proposition from the perspective of your customers—especially since data indicates that they do prioritize high-quality stores.

And let’s not forget about challenges coming from outside the channel. GoPuff delivers thousands of products in 30 minutes or less and continues to expand. Services such as UberEats make it easier to order lunch or dinner, and grocery delivery makes it less-likely that anyone will stop by the gas station because they forgot to purchase orange juice or eggs. Paired with the expansion of Dollar Stores and competition from QSRs, it’s clear that yesterday’s playbook may not be sufficient for tomorrow.

But I’ll leave you with one more thing to consider. A recent report from Deloitte suggests that many of today’s retail challenges are due to a growing bifurcation in income distribution. The result being that balanced retailers who target the middle class have experienced only 2% growth in revenue in the past five years as compared to premium brands at 81% and price-based brands at 37%. Indeed, a recent article from The Outline ponders whether the rise of on-demand fuel will result in upper-income customers avoiding gas stations.

Who are your customers, and how do they perceive the experience at your stores? These are questions that increasingly demand answers.

Frank Beard is a regular NACS Daily contributor who has traveled to more than 1,000 convenience stores in 24 states. He raised awareness of the industry's healthful food options with his “30 Days of Gas Station Food” experiment, and he's an analyst/evangelist for convenience store and retail trends at GasBuddy. Follow Frank on Twitter here.