Story- Change is the only Constant
It began in Christmas 1999, in the middle of the dotcom boom, when the Toys R Us website was so successful it was flooded with toy orders and couldn’t ship to all customers in time, leading to a $350,000 fine from the US Federal Trade Commission.
So they decided to get serious about their online sales.
Within two months, by February 2000 they had secured a $60 million investment from SoftBank to grow online, and a few months after that announced a deal to be Amazon’s exclusive toy supplier.
Within the first year, the partnership with Amazon led to ToysRUs being the world’s top toy site.
So far so good! What happened next?
The world turned from competition to collaboration.
Soon after they announced their partnership, Jeff Bezos launched Amazon Marketplace, which allowed anyone to sell anything on their site. To the winner-takes-all mentality of companies like Toys R Us, this was a shocking strategy.
Other retailers began selling toys not available in Toys R Us, giving customers greater choice. Toys R Us CEO, John Eyler, flew out to meet Jeff for an emergency meeting to force him to stop them.
Jeff said “someone ought to be able to find everything” on Amazon – and that by giving more choice to the customer, everyone wins. He pointed to the ongoing increase in Toys R Us sales as a result, and said they hadn’t broken their exclusive as none of these new toys were available on Toys R Us anyway.
Jeff added, if they wanted more control, why not increase their product range? Amazon would then happily make them the exclusive seller on all of the new products they offered as well.
Instead, Toys R Us sued Amazon for breach of contract. John testified “We are at a point in the relationship with Amazon where we have no trust whatsoever in dealing with this organization.”
He got a restraining order to try and prevent Amazon selling any other toys on their site. Amazon countersued for “chronic failure” to carry stock of the toys customers wanted.
The court case dragged on for five years and eventually Amazon settled with a $51 million payment to get out of the fight.
Toys R Us took their toys and went home, trying to compete with Amazon (and the rest of the Internet) with their own exclusive site, and raising $6.6 billion in a buy-out the year after the court case began, in 2005.
How did that go?
Amazon sales went from $2.78 billion when the Toys R Us deal was first struck, to $8.49 billion when Toys R Us sued, to $136 billion recently, making it the fastest company in history ever to reach $100 billion in sales.
Toys R Us flat lined on $11 billion in sales in 2016 – the same level of sales they had ten years earlier.
Saddled with $5 billion in debt, recently Toys R Us filed for bankruptcy.
Learning from the story
1. Those who do not change, become extinct. Those who change after change merely survive, those who change with the change succeed and those who CAUSE the change LEAD!
2. If you need to be relevant for long in today’s disruptive business environment caused by customer centric innovation, you need to understand your customer segment very well and at least change with their changing needs.
3.Every change comes with an opportunity, our job is to find it and catch that wave early and ride it to the top.
Questions to ask ourselves
1.What are the changes happening in my Industry?
2.Are my customers and their needs changing?
3.How can I start catering to the changing customer needs and stay relevant?
If you want to know the answers to above questions, I invite you to my 4 hour seminar
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