What Programmers Can Learn From the Fall of Toys “R” Us

Working with aggregators helps, but that should not come at the expense of their own brands and apps
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Toys “R” Us failed to invest in its own digital transformation so, after 65 years, the retailer is closing its doors for good.

Among other things, the company cited the ongoing threat of Amazon, Walmart and Target as contributing to its demise. That these companies allegedly helped suffocate the U.S. retail giant underscores the ruthlessly competitive environment that is the retail industry.

The TV industry is going through a digital transition of its own and some major players will inevitably become victims of disruption in the market. According to the Video Advertising Bureau’s Q1 2018 report, the number of households using only over-thetop streaming services and devices has tripled since 2013, rising to 14.1 million homes (11% of all U.S. TV households).

So what can media companies learn from Toys “R” Us to ensure their businesses don’t follow suit?

Complacency Kills

To survive in the highly competitive world of retail, Toys “R” Us needed to be more than a place to buy toys. Customers wanting the lowest price could go to Walmart. Customers wanting a unique gift or personalized guidance could go to a local boutique (where they would gladly pay a bit more for great service). Toys “R” Us didn’t provide the best value or the best experience, and they didn’t keep up with the times.

Toys “R” Us missed the opportunity to develop its own online customer experience early on. In the early 2000s, Toys “R” Us management didn’t buy into the future of the internet and outsourced their fulfillment to Amazon. This led to people buying toys on the internet in an Amazon world and not a Toys “R” Us world. When Toys “R” Us finally updated and streamlined the user experience for their website in 2017, the damage was already done.

Toys “R” Us CEO Dave Brandon admitted: “Some organizations recognize faster than others there are shifts in the ways customers want to be communicated with and the way customers want to purchase products. It probably took us a while.”

Competition, Choice, and Convenience

In the TV industry, there have never been more options. Not only can consumers watch what they want, when they want and where they want, but they can do so even from the service they want. This is where I believe networks need to pay attention.

Toys “R” Us stopped providing customers with a reason to go into their stores and do business directly with them. They offered nothing more than what any customer could get from Amazon, and even pointed them in that direction. By the way, don’t underestimate Amazon as a threat in the TV space either.

If you’re a publisher and I can get your content via Amazon Channels, fuboTV, Sling TV, Pluto TV, or DirecTV Now, why would I used your owned and operated apps? As an Amazon customer, it is easier for me to just get your content through their platform with my existing payment account, and watch all content via a single interface.

Distributing your content to Amazon and other OTT aggregators can be a very successful part of your overall OTT strategy, but it should not come at the expense of your direct-to-consumer apps.

In world of unlimited choice, competition, and convenience, how do you create an experience, so valuable that customers would forgo choice and even convenience to do business directly with you?

Figure this out and direct customer relationships, higher margins, and valuable data and insight await. Don’t figure this out and your company risks becoming the next Toys “R” Us.

Experience Is Everything

According to PwC’s Experience is Everything: Here’s How to Get It Right survey, 73% of global respondents point to experience as one of the key drivers that influence their brand loyalties.

“Sixty-five percent of U.S. consumers find a positive brand experience to be more influential than great advertising,” David Clarke, PwC principal and experience consulting leader, noted in the study. “The ‘experience economy’ has ushered in a new B2C mindset, steering brands beyond emphasising products and services to selling rich consumer experiences. Our findings quantify the potential ROI [return on investment] on experience investments, upwards of 16%.”

Bad experiences are driving customers away faster than you think. In the U.S., the survey results show that even when people love a company or product, 59% of customers say they will walk away after several bad experiences, and 32% say they’ll stop doing business with a brand they loved after just one bad experience. In Latin America, that number is even higher — 49% say they’d walk away from a brand after single bad experience.

Your OTT brand has more value than the content you own and the number of households you’re distributing to. It’s time to rise to the occasion, own the experience you create for your customers and embrace emotional connections, not just commercial ones.

Don’t lose sight of why your brand matters to the world.

Kirby Grines is the founder of 43Twenty, a strategic consulting and intelligence company focused on the OTT ecosystem.

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