Contrary to popular belief, the Toys R Us’ bankruptcy is not due to the lack of toy demand (the small plastic toy minefield in my family room can attest to this) nor is the company’s demise due solely to Amazon, Walmart or even Target out hustling them.
It resulted from the company not being able to shake off acquired debt from its 2005 leveraged buyout and a stale customer experience. Believe it or not, debt’s shelf life is a little more forgiving in this day and age than a bad customer experience.
Within the next month or so, 735 Toys R Us stores will be closing. Even though it had $11.5B in revenue at fiscal year-end in January 2017, it was unable to overcome the significant amount of debt that had crippled its financial flexibility for years. Debt can be cruel, but here is where I like to play the “what if” game. What could Toys R Us have done to offset their brick and mortar expenses as well as improve their customer experience? I believe Toys R Us is a prime use case for smart space technology.
Not many folks want to shop in a dimly lit, hot (or freezing) store. Maintaining operations for hundreds of retail stores ranging from 20,000 to 50,000 square feet is no small feat. Manual controls of heating and lighting are often prone to costly misuse. This stems from personnel forgetting to adjust temperature controls and from disrupting floor traffic with the frequent maintenance of inefficient fluorescent lighting. In my previous blog Retail Is Not Dying, It’s Simply Evolving Thanks to IoT, I mentioned that building automated controls (BAC) can produce savings of nearly 30 percent, whereas smart lighting using LED can save an additional 40 percent on the retailer’s electrical lighting usage. Now, this may not have gotten Toys R Us out of “the red”, but this is something retail establishments should seriously consider when looking for ways to lower internal costs.
Over the last couple of years, it has not been the inventory of toys that has varied between Toys R Us and its competitors, but rather the customer experience. It is true that competitors may have had more financial freedom to invest in a better customer experience and competitive pricing. This has been reported as one of the reasons Toys R Us blames its competitors, but where is the mention of efficiency? Operational efficiency can lead to financial flexibility which in turn can be used to improve a customer’s experience. So, how can retailers improve efficiency?
Inventory control plays a major role in retail efficiency. First, retailers can reduce warehouse expenses by integrating web ordering to inventory stocked in stores. Retailers can have their customers pick up items in store or have the items shipped directly to the consumer’s door. Touché mega online sites.
The second option for improving inventory control is where IoT smart applications really shine. I recall a personal shopping experience at Toys R Us where my quest to purchase a Barbie Doll for my daughter could have been more positive had the use of smart technology been involved. While searching through the disheveled doll aisle, we were unable to find the coveted Barbie. The store clerk said that according to their computer they had the doll in stock. Heard this one before?
Now, regardless if you are the type of person who continues to search or just leaves the store, either way, you are a frustrated consumer. This is a no-win situation for all parties involved. Instead of Toys R Us losing the sale or spending unnecessary man hours searching for lost inventory, they could have used IoT applications that would have located the misplaced Barbie immediately and alerted the store staff to where the doll was supposed to be stocked, all before we even entered the store. In fact, once we entered the store we also could have been greeted by a Wi-Fi splash page that told us about the Barbie promotions and a smart kiosk that told us exactly where to find it. If we were a repeat customer and had previously logged in to the store’s Wi-Fi, Toys R Us could have leveraged smart technology to market to us in real time. This “what if” scenario could have had me walking out with the Barbie Dream House (!) and an ecstatic daughter instead of walking out empty handed.
Alas, would of, could of, should of is not going to change things for Toys R Us, but there are many retail businesses that need help lowering overhead, improving operational efficiency and acquiring the data needed for generating repeat business. The decline of the original toy conglomerate does mark the end of an era but leveraging this use case has so much potential for IoT opportunity in retail’s future.
Tech Data has a vendor-agnostic team of expert IOT consultants, architects, and engineers, with specialists in retail that can help. We have a comprehensive network of partners—including vendors, system integrators, resellers and service providers—readily available to provide the best quality IoT solutions in the channel.
For more information or to go into detail please reach out to IoT@TechData.com.