As I'm in the US for an extended week-end break, let's focus on an American case I've just read in the NY Times of yesterday sunday : Toys R Us, and see what we can learn from it !
Decades ago, Toys R US' huge stores redefined how toys were sold, it was the first of a new breed of retailers later called "category killers", but today retailing mass merchants and discount giants Walmart and Target have eventually pushed the company to the edge of a competitive cliff.
Toys R Us is no more the n°1 toy retailer in the US, Walmart is. Worse, they are not even n°2 ! Indeed, 10 years ago their market share in the US was above 20% while Walmart was just over 10% and Target around 5%. In 2006, their market share is down to 15% (-5%), Walmart is twice as big with 30% (+20%) and Target comes second with 16%.
One key metric indicates the problem : the average US consumer goes into the Toys R Us stores 1.33 times a year in average. The reason are diverse but when a consumer doesn't come back more often, it means he has been disapointed and/or he has other and better alternatives elsewhere, in particular when regrouping its purchases while at Walmart or Target, esp if he finds the same items cheaper there !
A so-called category killer has to live up to its promises of being THE industry specialist, it must truly be different and distinguishes itself from the discount guys : it must lead the pack, it must be innovative, it must have the widest selection of items, including exclusive items when possible, and it must provide the best shopping experience in the category. Where and when then you can't buy products which are hot (or when you can't secure exclusive products), you at least need to make them hot with the appropriate shopping environment and the appropriate marketing.
Indeed, a category killer needs to project an image as the biggest and best vendor in its category. Over the years, Toys R Us had progressively falled to a mere follower status and used dull marketing, including dull circulars : instead for example of having thick, glossy paper with kinetic images of kids playing with toys, they used to just have photographs of toys sitting idle on a table !
In every segment of retail, there are dedicated specialty retailers that are successful against the mass merchants. Contrary to Toys R Us, Office Depot, Best Buy and Home Depot have for example thrived in their respective niche of office supplies, electronics and home improvement, with Walmart not gaining shares there.
Last March, 3 private equity firms purchased Toys R Us, then publicly listed, for roughly half its 2006 sales ($7bn for $13bn sales). They brought in a retail industry veteran, Mr Storch, ex vice Chairman of Target where he oversaw the retailers' supply chain, technology and financial services divisions.
Now, Mr Storch has to steal business back from Walmart and Target, something which I think has never been done previously. I will follow that case closely : rise, fall, and potential rise again of a retailer which invented the concept of category-killer !
The first actions of Mr Storch were along the above lines :
- He secured more than 70 exclusive products. To position toys as a fashion item, he created a senior position, Director of Trends, and during the monthly worldwide conference call between divisions there's a focus obn which toys are generating buzz.
- He used sexier and more engaging TV advertising and marketing techniques.
- He launched a store revamp programme and begun testing a wide range of new concept stores.
- In order to boost store trafic, he re-emphasized seasonal products (a practice his predecessors had discounted) and re-united some Toys R Us and Babies R Us stores. Separating them had been a terrible strategic mistake as the consumers intrinsically come in the latter much more often, which is a normal shopping pattern.
And of course, if the company went into trouble, its fundamentally its culture and its senior management team were inappropriate. Half of the team was replaced by executives from successful category retailers.
I do think that the issues that have plagued Toys R Us vs discount mass merchants perfectly apply to e-commerce : having the right products, selling them with the appropriate atmosphere, differentiate yourself from competition, etc...
On top, I would say that this channel has a key opportunity vs the brick & mortar world (but as always, it could quickly become a threat) : consumers are always just one click away from the next competitor. There is not such a strong customer propension to regroup one's purchases. Consequently, I believe e-commerce is intrinsically likely to nurture many category-killers which will succeed in positioning themselves as the great specialists of their sector.
Est-ce que Toy's a développé une marque propre (comme Décathlon par exple) pour s'assurer de l'exclu et du prix sur certains produits?
En effet, le plan de relance semble logique et orienté offre. Toutefois ne penses-tu pas que ce type de surface à un avantage indéniable et un levier immédiat avec lequel jouer en cas de perte de business: les vendeurs?
J'ai été "élevé" dans la distribution spécialisée (enseigne citée ci-dessus), et le premier levier en cas de ralentissement est bien la vente. Remobilisation des équipes en magasin. Action n°1 ,qui n'est, bien entendu, que le préléminaire à des actions de refonte marketing d'envergure nécessaires.
Mais pour le e-commerce???? Quel est le levier assimilable au "vendeur"?
Posted by: Steeve REYNAUD | November 20, 2006 at 02:21 PM
Steeve,
Dans le e-commerce, les meilleurs vendeurs sont les clients eux-même, qui par le bouche à oreille vont apporter de nouveaux clients, qui n'auront pas coûté d'argent à l'entreprise, et qui arrivent avec un état d'esprit positif.
En conséquence, le levier est celui de la satisfaction client, en vérifiant que la validité de la gamme et la qualité des services aux clients.
La principale démarche est donc une grande écoute des clients et de leurs attentes, à laquelle le monde physique devrait également porter une plus grande attention.
Posted by: Philippe | November 21, 2006 at 01:57 PM
Bonjour Michel,
Merci pour ce post tres interessant ! Les facteurs clés de succes du e-commerce semblent etre communs a tous les produits ou presque: satisfaction client, rapidité et fluidité du sourcing, variété des produits... Pourquoi les pros du e-commerce n'ouvrent ils pas des sites en serie, pour y appliquer les best practices ?
Posted by: Gabrielle | December 04, 2006 at 10:50 PM
Gabrielle, je suppose que les très rares "pros" de l'e-commerce ont suffisamment à faire avec leur propre site ?
Posted by: Michel de Guilhermier | December 04, 2006 at 11:04 PM
What? i cant understand you. Well, I think Walmart has the edge over Target because they are bigger and they are everywhere. Especially their online walmart homepage where you can shop at your ease.
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