Target announced Monday that it's partnering with the parent company of Toys R Us, TRU Kids, so that it can relaunch ToysRUs.com. This is big
This is big news for Toys R Us, which has started to open some small stores under its new, post-bankruptcy model. It means it will have an Internet presence for the holiday season, powered (and fulfilled) by one of the most powerful retail brands in America.
Now, if you’re a fan of Target or Toys R Us — and there are a lot of people who are fans of both — you’re likely to find this to be very good news.
But if you’re a student of business history, you’re going to find the whole thing incredibly ironic.
That’s because one of the key differences between Target and Toys R Us today — why Target is arguably thriving and Toys R Us is being reborn after bankruptcy and liquidation — has to do with parallel decisions that both companies made years ago.
And it now seems like history is repeating itself.
Amazon, Target and Toys R Us
The story begins in 2000 and 2001, when both Target and Toys R Us were successful retail brands with stores across the United States. E-commerce was tiny back then; about 1 percent of all retail sales.
And while big brands like Target and Toys R Us realized they probably needed to be on the Internet, lots of smart people thought of it as a small sideshow.
So, both brands — along with other big retailers like Borders (bookstore) and Circuit City (electronics) — outsourced basically their entire online operation to the e-commerce leader: Amazon.
I love writing that because it seems so crazy in retrospect. Even if it made sense at the time, within a few years it was clear that this was a better deal for Amazon than Target (and Toys R Us).
As one former Target executive put it afterward: “They learned a ton on our dime, and we didn’t learn much [in return] and that’s a massive issue.”
History doesn’t repeat, but it rhymes
Both Target and Toys R Us eventually got out of their deals with Amazon, but their roads diverged sharply there.
Target poured billions into building its own digital products — things that now go way beyond its website. But Toys R Us only announced in 2017 that it was going to put $100 million over three years into its online efforts.
And while $100 million sounds like a lot of money, it was really a paltry investment given the stakes and the scale of the industry they were in.
So, here we are all those years later — and it’s super-ironic that the new Toys R Us is right back where the old one was back in the year 2000, outsourcing its entire digital product to a giant competitor.
For both brands’ sake, here’s hoping it works out — and that Toys R Us (one of the most beloved brands in America, judging by my email inbox every time I write about them), survives its comeback.
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.
This article is from Inc.com