What you need to know:

• Struggling with ongoing losses in the millions and a need to turnaround the retail business, ASXlisted Toys R Us has invested heavily into overhauling its tech and data platforms across commerce, marketing and customer service.
• Tech is one of several strategic pillars in a plan instigated by CEO, Penny Cox, who joined in August last year among a suite of board and executive changes at the pureplay retailer.
• The group, which runs the Toys R Us, Babies R Us, Hobby Warehouse and RIOT arts and crafts brands, has seen 4050 per cent improvement in conversion rates from switching from an open-source commerce platform to Shopify.
• Outof-the-box integration between Shopify, plus new marketing system, Klaviyo, and new customer service system, Gorgias, is creating a near real-time view of customers for the retailer, providing the foundation for personalisation and better service satisfaction.
• Product recommendations, customised user journeys and tailored service are all beginning to be realised.

It’s a year of turnaround for ASX-listed pure-play retailer, Toys R Us, to get its house of brands back on track and redraw a red profit line towards black on the balance sheet.

Some readers may be surprised to learn Toys R Us is still a live ASX-listed retailer with three online-only brands: Toys R Us, Babies R Us and Hobby Warehouse. Its latest incarnation came after ASX-listed retailer, Funtastic, took on the ashes of the Australian business in 2019 and gained a licence to the global brand. Yet it’s not been an easy ride. In its 2023 financial year, Toys R Us reported another loss of $32.6 million after top-line revenue declined by 15.2 per cent. In its half-yearly report to 31 January 2024, the group reported $9.2 million in revenues, down 54 per cent year-on-year (including non-continuing operations), with activity losses of $6.58 million and a net loss overall of $9.55m.

So in came a new chair, board members and CEO, Penny Cox, with a reset agenda. Since then, Toys R Us has secured up to $5 million in funding from Mercer Street Global Opportunity Fund II LP, and exited its UK business.

In March, it acquired RIOT Arts and Crafts, a 50-year-old Aussie retailer with average gross profit margins of 36 50 per cent, and a database of 540,000 customers with average order values of $74.17.

In the midst of all this financial and operational efficiency work is a rebuilding of the technology and data stack. This has included switching from open-source ecommerce platform, osCommerce, to Shopify; replacing MailChimp with Klaviyo’s marketing platform; and adopting the Gorgias customer service suite.

It all started with ecommerce, Cox tells Mi3, across the core Toys R Us website, which represents about 80 per cent of total revenue. The site was migrated in three months, in time for the Black Friday and the Christmas trading season last year.  It’s a big step to an out-of-the-box platform like Shopify after a former set-up which saw web developers in-house maintaining and building anything needed on the website front.

“A lot of what we do is fairly vanilla e-commerce. We could get to the same starting point relatively quickly with Shopify. From there, we have a platform we can do more things with like AI and personalisation. We have an ability to leverage those things much better than we did previously,” Cox says.

Migration of its second site, Babies R Us, happened earlier this year. Toys R Us worked with agency partner, The Digital Mavens, on bringing the new sites and platforms to life.

From an ROI perspective, conversion rate was always going to be the mark of success for Cox. “We felt we should easily be able to improve our conversions by doing the migration but also our website stability,” she says.

“In previous years on Black Friday, our old toys site fell over because there was too much traffic coming on one day. I could not have that happen last year. Because we managed to do it in time for Black Friday, we found everything worked smoothly. Orders shipped out within two days, even though it was a peak period for us. From my point of view, the performance of the website but also security and stability in terms of what it can handle was a great win for us.”

A new addition, meanwhile, is a gift registry, which Babies R Us didn’t have before. “We also put in a similar offering for toys with gift cards. None of it is groundbreaking but those were very difficult things to manage if you're building from scratch,” Cox says.

The Digital Mavens CEO, Kingston Lee-Young, says overhauling the tech has made the whole retail experience more intuitive inside and out.

“Rather than being limited by the capabilities of developers, this was about flipping it and saying, let's look at what the customers want. How can we change the home page? How do we give them different user journeys because we know some people are coming in and know what they want, so we want we make that a seamless transition, versus someone who's browsing? The ability to bring in basics like that to life is really important,” he comments.

Alongside commerce, Toys R Us has migrated marketing from MailChimp to Klaviyo, which seamlessly integrated with Shopify from the outset.

“What that allows us to do is a lot more segmentation, understanding what these different customer segments are and marketing specifically to them. We're just starting ready to do that with babies,” says Cox.  

It’s the same with customer service, which now uses Gorgias – part of a “holy trinity” of platforms integrating out-of-the-box with almost real-time data syndication, says Lee-Young.

“All of a sudden, you can see in real time or close to real time what is actually going on. Customer service can see complaints coming through or queries on social media, their impact on an order, and if a customer has ordered previously,” he says. “Having three very core parts of the business all with windows where data comes up and is close to real-time sharing is important for making the right decisions and managing the business.”

The tech has led to several customer wins. According to Toys R Us’ second-quarter results, nearly nine in 10 customers were new customers, and 45,000 new consumers subscribed to the Toys R Us database. CSAT scores remained over 4.3 out of 5 through the busy November and December sales trading months.

“This allows us to respond to customer queries from anywhere - social media, emails, orders, whatever. We can respond much faster. Our customer experience in general is much better because the technology enables us to react more quickly,” adds Cox.

Balancing progress with scope creep

The team could have just done the front-end Shopify migration and left other systems as they were. “But we felt we’d be missing a lot of the benefit that comes with some of these other parts,” Cox says.

“Yet we had to carefully control scope creep. We did encompass these other services but then we'd have to say, okay, the line is going to be drawn here and we can only so far with the project. With core use cases, we saw the benefit immediately. There are still more things on our roadmap we didn't get to do in the first iteration. But we just couldn't handle putting them all in at the same time.”

Toys R Us used The Digital Mavens for design and implementation. Technology wise, the retailer handled a lot of integration internally, including connecting back-end systems, its ERP and robotic fulfilment centre to the new suite.

Often tech migration comes with a steep learning and culture change curve. “Because it was so much better, the customer service team were instantly happy, and it wasn't too painful a process. They were like, thank God, this is making our lives way easier,” Cox says.  

To help with alignment, the team stuck to a few straightforward metrics, ideally measurable on both old and new platforms.

“This meant we could keep track of how we are performing on these core things while we get all this other data as well,” Cox continues. “With the ticketing system for example, we have much more information now but we focus on a few key metrics such as: How long it takes to us to respond to customers; and how many tickets are unanswered?”  

Longer term, Cox’s vision is to see cross-sell and seamless movement of customers across its house of brands. As a first step, the refreshed websites have all brands visible to make it easier to cross shop.

“If someone comes in for babies, you hope you've migrated them to toys in a couple of years’ time and they're a frequent buyer. What we don’t want to do is be very siloed,” she says. “What we really want to do is look at our customer lifecycle across all brands and say, can we get them to buy into kids art and craft? Now they've migrated out of baby, what's next?

“We haven't broken the back of that yet, because right now information is stored in different places. But where we want to get to is that holistic view across all of our brands.”

An unforeseen benefit so far is extendibility. With RIOT arts and craft already on Shopify, integration of that newly acquired business was done in 30 days.

“All our systems connected together beautifully because we'd done it before,” Cox says. “If we hadn't done that, that opportunity would be completely different.”

Results

It’s been nine months, and Toys R Us has seen a step change in conversion rates across both toys and babies of about 50 per cent.

“It goes up and down as we get to end of year, when conversion rates naturally increase because people are shopping more for toys. But we saw in that realm of 40 to 50 per cent increases in conversion rate, which is obviously huge,” Cox says. “That's without the additional features or fine-tuning it yet.”

Shopability is much better too. Another thing Cox spots is more products discovered by more customers.

“People just weren't finding some of the longer-tail products in the previous website versions. Whereas when we went to the new site, you see a much broader spectrum of different types of products being bought,” she says.

The next step for Cox is to “go hard on using our data better” through personalisation and AI. “One of the things we've talked about is a toy recommendation engine where you can say you’re buying a toy for eight-year-old Johnny who likes Spider-Man and it suggests things. It’s about being smarter and more customer friendly in terms of how people can shop and find what they're looking for,” she says.

Personalisation of product is also in Cox’s sights given the business controls front-end, fulfilment and back-end.

“This is particularly relevant for babies but also for gifting in general - how do you personalise products? Can you put their name on it? So it's personalisation of the site experience, but also how you give a truly personalised gift,” she says.  

Then there’s the back-end stuff Lee-Young points to which is less sexy but critical: Linking all this to operations, finance and warehousing to streamline operations.

“From an e-commerce perspective, that’s where it eats up a lot of man hours, cost and bleed. Integrating and streamlining means you can be more flexible in the front end. You can start to do real-time promotions or bring in personalisation, and know you're not going to tie up your supply chain or the rest of the business trying to make this stuff happen,” he says.

“At the front end, it’s about moving from being point in time, historical data to contextual data. It’s saying we really understand not just who's coming to visit, but if they have been here before. What else have they clicked on? Have they shared anything from a baby perspective any information voluntarily around their baby? Are we able to offer up better suggestions and keep the clutter away?”

Cox says the next phase is relooking at the Babies R Us database for cross-sell opportunities.

“That's an example of how we're looking at ways we use our databases wisely to get the best outcome for us and for our customers. Just spamming the entire database of people who had babies years ago doesn't really make sense, but it's what we were previously doing because we didn't have great segmentation of those customers,” she says. “Step One is making sure the most relevant people are getting the core messaging, but step two is then what do you do with the other segments who you think are migrating out.”