Toys “R” Us is an US based company that specializes in manufacturing toys and has added colours to the childhood of millions of children in America. Kids all across the globe has played with the toys produced by this organization in their childhood. The organization has 800 stores outside America and 800 stores within U.S. and has been functioning for about 65 years now. However, the organization has experienced a major downfall in sales in the global market in the recent years due to several reasons. The decline in sales percentage has been so severe that the company had to file a bankruptcy in 2018 and it was forced to shut down several stores all across the globe.
One of the major reasons for such downfall is the competition faced by the organization from companies such as Walmart and Target and Ecommerce sites, Amazon. Additionally, there was a disruption in the supply chain management of the organization, which contributed to the drop in sales of the organization (Ni, Flynn, & Jacobs, 2014). Moreover, when all organizations were changing their policies and adopting online platforms in order to sustain itself in the rising competition in the market, Toys “R” Us stuck to their old policies that was also a major reason for a drop in sales percentage (Talavera, 2015).
The main aim of this project is to identify the causes that led to the decrease in sales percentage of the organization, the marketing strategies adopted by other competitor organizations and to analyse the choices of the customers. This will further help Toys “R” Us to address these problems and thereby improve its sales percentage and profit margins. For example, the organization might consider offering the toys at cheaper rates than its competitors, develop on its marketing strategies to promote its products better and try to address the consumer grievances. These strategies would enable the organization to restore its sales percentages.
The research project has the following objectives:
Toys “R” Us was the second Disneyland for the kids of the 70’s or 80’s. However, the magic store is facing bankruptcy in recent times that has led to the company to shut down stores all across the globe. The organization has begun with the process of liquidation that results in shutting down stores and selling off merchandise and handing over the proceeds to the creditors (Freedman Kearney & Lederman, 2012). According to market analysts, the sales percentage of the organization has dropped by 10 to 15 percent. The company contributes to about 17 percent of the US market and therefore a drop in sales in the organization has led to overall decline in the sales of toys by 2.5 percent (Zavyalova et al., 2012). This significant contribution of Toys “R” Us to the US market suggests that the sales percentage of the organization can still be restored.
One of the prime factors that led to the sharp decline in sales percentage in Toys “R” Us is the intense competition that the organization faces from retail sector organizations such as Wal-Mart, Target and Amazon (Mann Byun & Li, 2015). However, according to experts the major reason for the organizations downfall is due to the lack of innovation in the business model, inability to adapt to advancements in the field of science and technology and inability to cater to the customer preferences (Thomas & Wilkinson, 2015). The company announced that would begin with liquidation on January 2018 and no single consumer stepped out to save the company from such downfall (Eisner et al., 2016). However, the company could have delayed its liquidation by taking help from private investors Bain Capital Partners, Kohlberg Kravis Roberts and Vornado Realty Trust (Cheris, Rigby & Tager). The company was drowned in debt and therefore did not want to take risks of avoiding liquidation and suffering major losses. According to Cohen, Toys “R” Us never tried incorporating innovations within their products, and was thus unable to sustain itself in the rising competition, where the customer preferences are constantly changing and the organizations need to evolve constantly in order to survive (Christensen & Raynor, 2013).
Additionally the stores of Toys “R” Us were not visually attractive to the customers, as they were filled with disorganized merchandise and the quality of staff was excessively poor. The organization failed to address the customer grievances and hence they would prefer purchasing toys from grocery stores or Ecommerce sites such as Amazon, instead of buying from Toys “R” Us (Zhu & Liu, 2016). As opined by Cohen, The organization never put any effort to clean up its stores and present its merchandise in an organized and visually attractive manner. Instead of putting in effort to improve them, the organization had the wrong notion that they were the centre of attraction in the toy industry.
The recent times has seen a major rise in competition due the new entrants in the market and a significant change in the customer preferences. Children these days prefer being a couch potato, surfing the Internet and playing online video games and therefore buying toys is the last option they would choose to add fun elements to their childhood. Moreover, most parents these days, are extremely busy, lead a fast-paced life, and therefore prefer online platforms in order to buy toys for their kids (Einav et al., 2013). They key competitors of Toys “R” Us, namely Amazon, Wal-Mart and Target are very strong online unlike the concerned organization.
According to Kahn, Amazon has targeted the customers who lead a fast-paced life and therefore has catered to the needs of consumers and added to their convenience (Haucap & Heimeshoff, 2014). As per reports, the organization had collaborated with Amazon in 2000, for a period of 10years (Lehmann & Srinivasan, 2014). This increased its sales percentage, but posed several threats as well. The organization lost is autonomous online presence, as the customers who wanted to visit the company’s website were redirected to the Amazon’s Ecommerce site (Epstein, 2018). Additionally several competitors of Toys “R” Us tried collaborating with Amazon too, which increased the competition levels.
According to Cohen, Toys “R” Us is an age-old organization and lack of incorporation of innovation pushed away many consumers (Way). The consumers now visualise the Toys “R” Us stores as mere buildings that are unable to adapt to the latest advancements in the field of science and technology and unable to cater to changing the consumer preferences (Teik & Yeik). Several entrepreneurs are opening up stores with lesser amount of merchandise and the excess amount of merchandise in the Toys “R” Us stores is a major cause that makes the stores visually unpleasant to the customers (Dunne, Lusch, & Carver, 2013).
Previously the organization used to rely on the holiday seasons for a hike in their sales percentage. The holidays that lasted for five to six weeks would create a huge demand for toys like Tickle Me Elmo or Cabbage Patch Dolls (Attaway & Singley, 2015). However, kids these days show much more interest in online games, daily soaps, television series, and therefore physical toys have lost their importance in the market (Ong et al., 2014). Therefore most toy stores all across the globe such as Toys “R” Us have experienced a major decline in sales and profit percentages (Goossen, 2013).
Conestoga College constitutes of 14000 students spanning local and international students. Among them 800 students are international. This study focuses on local students and hence, 13200 students are the target population for this study. About 10% of the target student population are taken as expected sample size for conducting this study. However, if the sample size exceeds the capacity of this research project a smaller representative sample will be taken.
The required sample size is calculated in the following section and it amounts to 346 students. Considering the time and cost factors about 10 percent of the required sample size is taken in order to scale down to manageable size. Hence, approximately 40 students are chosen as sample size for this study.
Here, ‘n’ is the ‘minimum sample size required’;
‘p’ is the total population size of USA students
‘z’ is the confidence level
‘E’ is the precision level chosen arbitrarily.
Hence, required sample size results into (0.10)(0.9) (1.96/0.03)2x(13200-1320)/(13200-1) or 346 (Approximately).
A Stratified sampling is used for identifying the sample. A stratified sample essentially subdivides the total population into different homogenous groups based on certain characteristics (Tipton et al., 2014). The sample is chosen from these strata using simple random sampling. A stratified sampling technique is beneficial for this research study is for the following reasons: –
Each of the samples is provided with survey questionnaire consisting of 10 close-ended questions. The total sample size is 40. Hence, 40 questionnaires are distributed across the identified sample from each stratum, which are ‘below 20’, ‘21 to 30’, and ‘31-40’ and ‘above 40’.
This exploratory study is conducted across 40 local students, who have been admitted in the academic year 2014. The students encompass the under graduate, graduate and postgraduate students across different age groups. A structured survey questionnaire is developed for conducting the survey. The medium of communication is in English for standardised communication to record their perspective as a consumer of Toys ‘R’ Us.
The questionnaire consisted of multiple-choice questions using nominal scale and ordinal scale. The nominal scale is those that use multiple variables that respondents will choose. The nominal scale used such parameters that neither are sorted, nor are measurable (Krosnick, 2018). Hence, these data are represented as multiple-choice questions where the respondents have to choose a single answer for each question. For example, in order to record the choice of retail method for a consumer, two answers are represented that are ‘online’ and ‘buying from store’. To analyse this type of scale, only mode can be used to count the maximum of responses for each answers. The answers with the maximum value are considered as the mean response.
The ordinal scale uses order variable there the interval is not known. In this questionnaire, parameters such as competitor affect sales and frequency of purchase utilises this scale to generate 5-point factors (Amber, Ashlam & Bashir, 2016). In this type of scale, the possible responses can be sorted in to a specific order (Hill & Brierley, 2017). However, the answers cannot be measured in any standardised form. Further, the interval between each of the answers in the scale cannot be determined. For example, in order to record frequency, ‘never’, ‘rarely’, ‘sometimes’ and ‘always’ are used. Similarly, to record accessibility, ‘easily accessible’, ‘moderately accessible’, ‘accessible at long distances’ and ‘not at all’ is used. In this type of scale, measures such as Mean and mode can be used to identify the average response.
The questionnaire consisted of several parameters that are used to record the perception of the respondents. The questions are developed in English and in clear and concise manner to aid the respondents in understanding the meaning. While this will reduce the degree of bias and incorrect response, it will also enhance the ease of undertaking this survey (De Bruijne & Wijnant, 2014). The parameters that are chosen include frequency of purchase, medium of purchase, factors influencing purchase preference, impact of competitors, customer service, price, discounts, and locations. The parameters are derived from secondary studies such as textbook, articles, journals, and reports.
In order to design the questionnaire, normal and ordinal scale is used. All the questions in the survey are multiple-choice questions. However, in the questions involving ordinal scale, the respondents are required to choice one response for each parameter in that question. A cover letter accompanies each question that explains the legal policy that the research will follow. The questionnaire and the cover letter are provided in the Appendix section.
The statistical tools such as measures of central tendency are used to analyse the data collected from normal scale of this research. The mean score is used to understand the average perspective of the sample for multiple-choice questions. The mean score is also used to identify the mean value for the ordinal scales. This allows the study to identify the general perspectives of the respondents. The t-test is used to test the hypothesis developed in this research. Correlation analysis is used to understand the association of specific variables identified from this research (Burns, Bush & Sinha, 2014). In order to represent the data, bar graph and pie chart is used. These charting techniques allow to easily visualising the responses and aid towards comparing between the different respondent types. Excel is used as a tool to conduct the analysis and producing the data representation charts.
This research is conducted within a strict ‘time-frame’ and under a strict budget. The ‘time-frame’ is determined by the term timeline and the cost is limited to the limited capacity of the individuals in the research team. In order to enhance the accuracy of a primary research, higher sample size is required. However, due to time limitation a lower sample is used, which may increase the possibility of error in the study. The study is also limited to the choice of population. While this study focuses on consumer preferences and attitudes towards Toys ‘R’ Us, this study uses only 40 students of the college as the target consumers. It is clear this will not fully represent the attitude and perception of the entire college.
Due to limited financing, the study cannot be conducted across the local communities that can effectively represent the target consumers of Toys ‘R’ Us. Hence, the study is conducted on the college students, who may not an ideal population to consider this research. This is because the target market may not be accessible for the study. However, as a potential consumer the college students are chosen.
Further, the reason for bankruptcy of the organisation should include the perspective and other factors spanning the global consumer because this was a global organisation. However, in order to scale down the research to a more manageable level, this scope of this study is highly restricted.
Finally, the study considers limited secondary data for the background study. In order to delve deeper in to the topic, a more comprehensive literature study is essential to explore various perspectives on consumer attitudes and preferences, and impact of competition. However, due to resource and time constraints, this study is limited to the identified parameters in this study, which are derived from limited literatures.
The data collected from the questionnaires distributed have been analysed below:
1. What Age group do you belong from?
|
Under 20 |
21-30 |
31-40 |
Above 40 |
Total |
|
|
Number of respondents |
15 |
20 |
5 |
0 |
40 |
|
Ratio of respondents |
37.5% |
50% |
12.5% |
0% |
100% |
Table 1: age of the respondents
2. How long have you been the customer of Toys “R” Us?
|
Particulars |
Percentage of respondents |
Number of respondents |
Total number of respondents |
|
1 year or less |
50% |
20 |
40 |
|
More than 1 year but less than 5 years |
37.5% |
15 |
40 |
|
5 years or more |
12.5% |
5 |
40 |
Table 2: customer of Toys “R” Us
Figure 1: customer of Toys “R” Us
As per the details provided in the graph, it can be stated that one of the major reasons for the downfall of Toys “R” Us is that company had fail to retain its customers. It could be clearly observed that just 12.5% of the total respondents have been the customer for Toys “R” Us for more than five years and 50% have been the customer for 1 year or less than that. This is one of the reasons for the decline in sales of the company.
3. How frequently do you prefer to shop online and by visiting the stores?
|
Particulars |
Percentage of respondents |
Number of respondents |
Total number of respondents |
|
Online Shopping |
75% |
30 |
40 |
|
Buying from store |
25% |
10 |
40 |
Table 3: preference of shopping online and buying from stores
Figure 3: preference of shopping online and buying from stores
According to the details provided in the above graph, it can be seen that majority of the respondents prefer shopping online rather than making purchase from stores. Thus, it could be said that since most of the customers prefer shopping online it immensely affects the sales of companies such as Toys “R” Us.
4. What do you prefer more while buying a product?
|
Particulars |
Percentage of respondents |
Number of respondents |
Total number of respondents |
|
Quality of the product |
37.5% |
15 |
40 |
|
Quantity of the product |
12.5% |
5 |
40 |
|
Price |
25% |
10 |
40 |
|
Branding |
25% |
10 |
40 |
Table 4: preference while buying products
Figure 4: preference while buying products
From the statistical data provided it could be said that the reasons for the decline in sales of Toys “R” Us might be high pricing of the products or not being able to deliver high quality products to its customers.
5. Did the competitors affect the sales at Toys “R” Us?
|
Particulars |
Percentage of respondents |
Number of respondents |
Total number of respondents |
|
Slightly Agree |
45% |
18 |
40 |
|
Completely Agree |
30% |
12 |
40 |
|
Neither |
5% |
2 |
40 |
|
Slightly Disagree |
12.5% |
5 |
40 |
|
Completely Disagree |
7.5% |
3 |
40 |
Table 5: competitors affect the sales at Toys “R” Us
Figure 5: competitors affect the sales at Toys “R” Us
As per the data given in the graph above, it could be stated indeed the competitors of Toys “R” Us affected their sales immensely. In addition, it can be said that the company was not able to make proper decisions due to which its competitors were able to effect the sale of the company.
6. How many times did you buy toys from others than Toys “R” Us in past year?
|
Times |
0 |
1-4 |
5-8 |
9-12 |
13 or more |
|
Mastermind Toys |
10 |
15 |
10 |
5 |
0 |
|
MEGA Brands |
5 |
0 |
10 |
15 |
10 |
|
Big Boys with Cool Toys |
0 |
5 |
15 |
10 |
10 |
|
Amazon |
0 |
0 |
5 |
5 |
30 |
|
Others |
0 |
0 |
0 |
0 |
0 |
Table 6: buy toys from others than Toys “R” Us in past year
Figure 6: buy toys from others than Toys “R” Us in past year
As per the details provided, it can be stated that in past year majority of the respondents in the past years purchased toys from Amazon. They also made purchase from other stores such as Mastermind Toys, MEGA Brands, and Big Boys with Cool Toys. The preference of customers buying toys from these stores for so many times shows the manner in which these companies affected the sales of the company.
7. Were you satisfied as a customer from the service dealing Toys “R” Us offers?
|
Not at all satisfied |
Slightly satisfied |
Moderately satisfied |
Very satisfied |
Completely satisfied |
|
|
Staff |
5 |
15 |
15 |
5 |
0 |
|
10 |
20 |
5 |
5 |
0 |
|
|
Location |
5 |
5 |
15 |
10 |
5 |
|
Cleanliness |
0 |
10 |
20 |
5 |
5 |
Table 7: satisfied as a customer from the service dealing Toys “R” Us offers
Figure 7: satisfied as a customer from the service dealing Toys “R” Us offers
From the details provided, it can be said that majority of the respondents were satisfied due to the location and cleanliness offered by Toys “R” Us while the reason for dissatisfaction is the Store hours.
8. What do you think of the prices of the toys at Toys “R” Us?
|
Particulars |
Percentage of respondents |
Number of respondents |
Total number of respondents |
|
Prices are Moderate |
25% |
10 |
40 |
|
Prices are well placed compared to competitors |
12.5% |
5 |
40 |
|
Prices are slightly high |
50% |
20 |
40 |
|
Prices are very high |
12.5% |
5 |
40 |
Table 8: prices of the toys at Toys “R” Us
Figure 8: prices of the toys at Toys “R” Us
From the data give, it can be stated that because the prices of the toys at Toys “R” Us are slightly higher than that of its competitors played a significant role in declining the sales of the company as its competitors were offering similar products at lower prices.
9. How frequently does Toys “R” Us offer special discounts to its customers
|
Particulars |
Percentage of respondents |
Number of respondents |
Total number of respondents |
|
Never |
12.5% |
5 |
40 |
|
Rarely |
37.5% |
15 |
40 |
|
Sometimes |
37.5% |
15 |
40 |
|
Always |
12.5% |
5 |
40 |
Table 9: Toys “R” Us offer special discounts to its customers
Figure 9: Toys “R” Us offer special discounts to its customers
From observing the graph, it can be stated that another reason for the decline in the sales of the company is offering discounts rarely and sometimes.
10. How do you look at the locations of the Toys “R” Us stores?
|
Particulars |
Percentage of respondents |
Number of respondents |
Total number of respondents |
|
Easily accessible |
62.5% |
25 |
40 |
|
Accessible at a long distance |
25% |
10 |
40 |
|
Not at all accessible |
12.5% |
5 |
40 |
Table 10: locations of the Toys “R” Us stores
Figure 10: locations of the Toys “R” Us stores
Observing the graph it can be said that majority of the respondents likes the location of Toys “R” Us stores as it makes it possible for them to easily access the store and purchase toys.
The data is displayed and described using Bar Graphs and Pie Charts. The section of research methodology helped to collect accurate and reliable data for the research topic and based on that the researcher was able to prepare well-structured questionnaires. Further, the data was analysed and based on that recommendations are going to be provided. Lastly, the data was collected from college students and their confidentiality was maintained.
We will test that there is correlation between decision-making process of Toys “R” Us and decline in sales of the company
R= 0.766728
This shows a strong relation between decision-making processes of Toys “R” Us and decline in sales of the company.
Hypothesis
H1: decision-making processes of Toys “R” Us and decline in sales of the company are correlated
H0: decision-making processes of Toys “R” Us and decline in sales of the company are not correlated
As per the analysis done in this case it can be stated that H1 is accepted and H0 is not accepted.
Conclusion
The study focused to understand the underlying causes for the drop in sales percentage in the most popular toy store of US, Toys “R” Us. The research identified several factors that included, the organizations inability to innovate, adopt to the latest developments in the field of technology, inability to sustain itself in the rising market competition and the inability to cater to the changing customer preferences. In order to identify the causes a stratified sampling procedure was adopted that included 40 respondents and the data obtained was analysed and presented graphically. The data revealed that most consumers in the fast-paced life days prefer to shop for toys from online platforms and majority of them focuses on the quality of product, its pricing and brand image while purchasing the same. The competitors like Amazon, Walmart and Target are responsible for the drop in sales in the organization. Inability to conduct sales through online platforms is another major reason the organization had to liquidate. Additionally the consumers these days prefer video games, online games and television shows over physical toys which has led to the liquidation of several independent toy stores all across the globe including Toys “R” Us.
From the study, the following recommendation can be proposed:
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