Toy’R’Us and Blockbuster, two business crippled by their lack of foresight and understanding changes in consumer behaviour. Although their fortunes could have both been very different had they focused on a proper digital strategy. Granted it’s easy to write with hindsight, however there will certainly be lessons learnt that you can take for your business moving forward.
I just want to have a quick look at the wider landscape and see how things could have been very different for both businesses had they accepted and respected the power of the internet and arguably, more so, consumer behaviour.
Potentially one of the most poignant graphs showing the speed and powerful changes in consumer behaviour. In just 12 months Blockbuster went from having a revenue of $4 billion to being bankrupt. From 2004 this graph clearly shows a picture was being painted, Netflix noticed a steady rise in revenue year on year whilst Blockbuster was in decline – the black and white of this being that consumer behaviour was beginning to change.
One thing people value with the same importance as money and health is time! Compare The Market, Uber, Amazon; all these companies save you money, but more importantly they save you time. How does this fit to Blockbuster? Let’s look at the customer journey; Would you rather get dressed, get in your car, drive to your nearest Blockbuster, search through the several racks of DVDs, pick out your film, pay (and converse with someone – we hate that a lot more than you’d think – consider how annoyed to get when someone dares ring your phone), then drive home? Or would you rather sit on your sofa and pick your film direct from the Television? You’d be daft to choose the former right? (Least not to mention any late fees).
Fundamentally the change in customer behaviour means that the old Blockbuster method was floored. But how could they have survived? The answer is simple, become the Netflix as we know it today. The transition would have been a simple one, it’s not like the brand wouldn’t have been respected in the field – what I mean by this, it’s not like McDonalds offering a video streaming service, Blockbuster were already the well-known name within film/video rental market.
Blockbuster should simply have innovated their service offering. They had the running start on Netflix, stronger brand, more finance, loyal customer base and an authoritative voice in the market – however the romance with the ‘traditional model’ and the mantra of ‘but we’ve always done it this way’ choked their desire to change and eventually they paid the ultimate price.
In 2000 Toys’R’Us signed a 10-year deal with Amazon to be the exclusive seller of toys on the site. In 2004 they sued Amazon as they breached this contract by selling toys from other vendors. That’s 4 years Toys’R’Us lost out on potentially creating and developing their own ecommerce website. In 2000 Amazon’s revenue was 2.7billion in 2016 it was 136billion – the point of this is that Amazon understood consumer behaviour and the power of the internet – they operated without any traditional retail stores and even used Google Adwords as one of their main sales generation tools.
What would have happened if Toy’R’Us backed themselves and created an eCommerce site? It’s impossible to say! However understanding consumer behaviour would have meant they’d have shut down many physical retail stores (seen as an unnecessary large expense) and focused more heavily on their online store – could this have lead to Books’R’Us? Tech’R’Us? Who knows? But one thing is for sure, they’d be a lot better off than they are now.
How can you save your customer time? I think this is the key predication to how your business will remain competitive. I don’t think it will be long until we see other businesses going the way of Blockbuster and Toys’R’Us – but it’s important to look at your business and the industry in which you operate and see how you can use technology/internet to innovate your process and drive sales. Just because it has worked once upon a time, does not mean it will keep on doing so, being romantic with the past could cripple your business in the future.