It’s been about five years since Toys R Us filed for Chapter 11 bankruptcy protection and began liquidating its 700-plus big box stores in the United States. But a return to brick and mortar is under way – inside more than 400 Macy’s stores. Spaces, from 1,000 to 10,000 square feet, are combining merchandise and interactive experiences.
The openings will culminate with Macy's staging nine days of celebratory in-store events from Oct. 15-23, 2022. Maryland Smith’s Jie Zhang says the partnership makes sense.
Zhang, professor of marketing and the Harvey Sanders Fellow of Retail Management in the University of Maryland’s Robert H. Smith School of Business, studies consumer purchase behaviors and retail strategies in the digital and multichannel retail environments.
In a recent Q&A, she explains the Toys R Us-Macy’s strategy and its prospects for success:
For Macy’s, Why now? How will it capitalize?
Zhang: I believe it is a very sensible strategy for both retailers. For Toys R Us, opening in-store shops within Macy’s is a cost-efficient way for this iconic toy retailer to re-enter the physical retail space. It is also beneficial for Macy’s in multiple ways. The department store retail format has been on the decline for a long time, which is further accelerated by the Covid pandemic. Department stores like Macy’s have been looking for ways to attract back customers who are increasingly gravitating toward online stores and discount big box retailers. Having in-store Toys R Us shops can help Macy’s increase store traffic, broaden merchandise assortment, differentiate from competition, and expand its customer base to families with young children who were not typical customers of Macy’s before."
Why is this a sensible strategy for omnichannel marketing?
Zhang: “Toys R Us plans to offer hands-on demonstration tables, photo opportunities with their giraffe mascot Geoffrey, and other interactive activities for customers in their in-store shops within Macy’s. This is a great illustration of the role brick-and-mortar stores should play. Many retailers have realized the importance of embracing E-commerce and ramping up their omnichannel capabilities. In a multichannel retail environment, the brick-and-mortar channel should serve as an effective touch point for engaging customers, showcasing products, promoting brand image, and enhancing customer loyalty.”
Actionable takeaways for other retailers?
Zhang: “Against the backdrop of multichannel retailing, retailers need to fully utilize the opportunities offered by their physical space and in-person contacts with customers. Examples may include offering interactive activities for customers to try out products, providing excellent customer service and consultations, showcasing the latest and greatest products in their assortment, and facilitating cross-channel shopping from their own online stores. If utilized well, the brick-and-mortar channel not only can raise its own foot traffic and sales, but also play an active role in enhancing loyalty to a retailer and increasing total sales across channels.”
What does the Toys R Us return signal about non-commercial construction and leasing costs for new retail development?
Zhang: “With the steady increase of real estate construction costs, retailers are ever more cautious about building new physical stores. Instead, they prefer to look for opportunities to lease or sub-lease vacant commercial properties on a bargain, or to team up with another retailer that has plenty of physical space. Toys R Us has learned a lesson from its failure to control costs in the past. It is a very smart strategy for it to team up with Macy’s in opening store-within-stores.”
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