3/27/14

Toys ‘R’ Us emphasizes e-commerce growth as it seeks to rebound from a tough year

Toys ‘R’ Us is embarking on an ambitious business improvement plan. A cornerstone of the plan is to increase online sales, which grew 3% in 2013.

Mark Brohan , Research Director

The last year was a tough one for Toys ‘R’ Us Inc., whose total sales declined 7.4% even as online revenue increased 2.5%.  The retailer is embarking on an ambitious business improvement plan, and e-commerce growth plays a big part in that plan.

In the wake of disappointing financial results Toys ‘R’ Us is rolling out a business turnaround plan that includes cutting about 500 positions across numerous departments and closing a distribution center in near Virginia City, NV. The turnaround plan also places an emphasis on growing e-commerce and using more of its global network of 873 U.S. stores and 715 international stores to facilitate online sales.

“To improve the customer experience we will optimize the e-commerce experience by capitalizing on the online shopping growth and integration with stores,” says Toys ‘R’ Us U.S. president Hank Mullany.

While not providing much detail, part of the plan to boost e-commerce sales includes offering customers more ways to shop via mobile devices, especially overseas. Toys ‘R’ Us is in the process of launching updated m-commerce sites and apps in the U.S. and in Austria, Australia, Canada, China, France, Germany, Spain, Japan, Poland, Portugal, Switzerland, the Netherlands, and the United Kingdom. 

It’s also important for Toys ‘R’ Us to involve its stores more directly in fulfilling web orders in order to give shoppers more selection and to move store inventory. In just three years the percentage of web orders shipping from Toys ‘R’ Us stores has increased from 15% to 31%, says chairman Antonio Urcelay. “This approach provides growth opportunity and efficiencies in cost and inventory,” Urcelay says.

For its U.S. and international web sites Toys ‘R’ Us will continue to expand its store fulfillment program, look for ways to boost m-commerce site and app performance and improve order status messages to customers. Specific program details are still being worked out, the company says. 

“Our 2013 performance was, no doubt, disappointing,” Urcelay says. “Over the past several months, we have undertaken a comprehensive analysis and diagnosis of the business, and believe we have four main issues to resolve.”

Going forward, Toys ‘R’ Us will work to improve the customer experience in-store and online, Urcelay says. “We also will make progress on changing price perception, put disciplines back into inventory management and right-size our cost structure on a global basis,” he says. 

For the year ended Feb. 1, Toys ‘R’ Us, No. 30 in the 2013 Internet Retailer Top 500 Guide reported:

For the fourth quarter Toys ‘R’ Us didn’t break out web sales but did report:

Topics:

Antonio Urcelay, e-commerce, fulfillment, Hank Mullany, Q4 earnings, Top 500, Toys 'R' Us

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