Toys “R” Us Succeeds In Spite Of Itself

1999 has been a tough year for Toys “R” Us. Still, despite major problems, it has proved itself a worthy e-commerce player.

In August, when Toys “R” Us chief executive officer Robert Nakasone stepped down, many analysts believed that the resignation was a direct result of the company’s inability to formulate an effective online marketing strategy.

Evidence of the failed strategy was displayed later the same month when the toy giant announced that it had severed its much-touted partnership with Benchmark Capital. Toys “R” Us declined to go into the details as to why the deal crashed and burned, but some analysts speculated that the Silicon Valley venture capital firm felt that the company would have insisted upon applying its brick-and-mortar mindset to its e-commerce-marketing foray.

This management upheaval came only a month after Robert Moog, who was recruited in May to be the Toys “R” Us Internet guru, decided to pack it in.

Forced Its Way Into E-Commerce Arena

Nonetheless, while other industry observers and I were writing Toys “R” Us off, the company was regrouping by hiring John Barbour as its new CEO and targeting $80 million (US$) to bring its site back to life.

Ultimately, despite crashes and difficulty with traffic management, Toys “R” Us increased its traffic by 277 percent in November with 4.8 million visitors. The report by Media Metrix showed, by contrast, that Toys’ pure-play rival eToys grew just 93 percent, attracting an estimated 4.9 million visitors.

Missed Christmas Deliveries

If anything, Toys “R” Us was overwhelmed by its own success this holiday season. This fact was never so evident as last week, when the company was forced to tell some of its online customers that it would not be able to deliver many of their holiday orders.

The company notified the disappointed customers by e-mail and threw in a $100 (US$) gift certificate that could be used toward purchases at its brick-and-mortar locations.

I realize that this gesture will not appease everyone, but at least Toys “R” Us showed that it is thinking fast on its feet and is willing to try to fix problems.

Branding And Persistency Paid Off

In the end, the same analysts that classified Toys “R” Us as a dinosaur a few months ago are now touting it as an undervalued winner.

However, I believe that there are two lessons to be learned from Toys “R” Us’ performance this holiday season.

First, branding and a brick-and-mortar presence do matter. Many people chose the company over eToys strictly because they have seen and shopped in its locations before.

The second lesson is that persistence covers a lot of marketing mistakes. Despite its numerous problems, Toys “R” Us never gave up, and reaped a great e-commerce harvest.

What do you think? Let’s talk about it.

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