Toys "R" Us > Amazon

Have you ever used Amazon.com to order something online? What do you think of the site? Do you think of it as an amazon of greatness…or a poor excuse of a business without any morals?

Just two weeks ago I read a case study about Toys R Us and Amazon’s awful so-called strategic partnership in 2000. I must say, after reading that, I have never hated a company so much!

To catch you up on what I’m talking about here’s some brief history. The two retailers signed a 10-year strategic partnership to leverage each other’s customer base and assets and competencies. Around the time of the dot-com bubble craziness, the agreement between the two was Toys R Us would be the “exclusive” provider of baby product and toys for Amazon. Their objective was to increase sales and drive more traffic to their website. Toys R Us was ballsy enough to get rid of their domain name and sold all of their toys and baby products through Amazon. Sounds like a dream partnership right? Exactly, it would only work out perfectly in a dream, especially with the way the rest of the story unfolds.

So anyway, there seemed to be a huge misunderstanding of the word “exclusive,” after Amazon realized Toys R Us did not have very broad product selection. Even though Amazon knew they would be going against their agreement and Toys R Us would be infuriated, they went ahead and offered links to other stores and brands. Toys R Us consulted Amazon and said they were not staying true to the pact and changes needed to be made. To shut Toys R Us up, Amazon said they would make some changes only if Toys R Us improved their inventory and had a greater variety of products for people to select from. Amazon’s objective was to become a one-stop-shop online retailer. They wanted to dominate the market and have people go to their site for everything they needed. Amazon apparently thought by “exclusive,” Toys R Us meant they would be the exclusive suppliers of the specific brands they were selling. But everyone in their right mind knows that Amazon didn’t need a dictionary or three brain cells to figure out what Toys R Us meant by the word EXCLUSIVE.

When Amazon started linking to other toy and baby product sellers, they were creating direct competition for Toys R Us and everything went down hill from there. Long story short, Toys R Us won the lawsuit and resorted back to its independent online retail store.

I have learned there are three main reasons companies enter strategic partnerships.

• Value Enhancement Opportunities such as leveraging customer base
• Skills and Resource Gap and leveraging each other’s competencies
• Environmental Turbulence-helping you adjust in foreign countries, familiarize people with your brand…etc.

  

Words of greatness:

Think of strategic business partnerships as your ideal relationship with prince charming

• IF IT SOUNDS TOO GOOD TO BE TRUE, IT PROBABLY IS
• Be selective when it comes to deciding who you want to partner with
• Learn about the companies core values, goals, and motives
• Be extra cautious when entering an extremely long partnership. 10 years is like in eternity in business years. It’s like dog years, so much happens in 1 year. The economy changes, businesses develop new ideas and grow!
• Be careful when entering into a strategic partnership with a company that does the same thing you do! Ex: pairing up with another relailer…that can only lead you to trouble, unless you two are selling completely different things. But still, it pays to be extremely careful because they can easily steal your strategy and even worst, take business from you!
• When signing an agreement, make sure you both have a clear understanding on what you want out of the relationship remember---COMMUNICATION IS KEY!
• Just like in your relationship- If one of you is much wealthier than the other one, it would only make sense to sign a prenuptial agreement. I know, I know, it’s not the most romantic thing. But hey! It’s a crazy world and you never know what’s going to happen. Same goes in with business relationships…have everything written down clearly (make sure you have a SMART lawyer present when this all takes place).

Move Over Ronald McDonald!

Dear Ronald McDonald, 

I hope you are having a nice time at home and are being productive, now that you have so much time on your hands. I hear you drop by the Ronald McDonald Houses more often. I'm so sorry to hear they don't like you any more at Mc D's. Who would have ever thought, you of all people would be there new enemy. I guess that's being a little harsh, maybe not an enemy, just not the companies favorite person at the moment. Rumor has it, you are hurting their brand image because people associate you with unhealthy burgers and fries. Sorry buddy, better luck next time. Maybe you should consider becoming friends with Subway’s Jared and get him to help you lose some weight! Or even better, you should try eating the new items on McDonald’s menu! 

 As a strategic marketing decision, Mc Donald's has invested a lot of money to change their brand image. Not too long ago they used to have the same marketing strategy as their rival, Burger King. They have a competitive advantage over other fast food restaurants because they are the one of the first to transform their image target market.

 
Move over Ronald because according to a Bloomberg you are not the ideal bait for reeling in a sophisticate crowd. McDonald’s is shifting their focus from burgers to premium coffee and lattes. About two weeks ago after I visited the local McDonald's down the street, I could have sworn I thought I had walked into a Starbucks coffee shop. They have really upped their game. According to a New York-based restaurant consultant, the fast food restaurant is not giving up on kids and Ronald, 

“they just changed their marketing mix. Their colorful play areas have been replaced with warm toned cushioned seating areas. With an effort to keep up with society’s needs and consumer demands, Mc D's wants to be considered as healthy, modern, and innovative fast food chain rather than a saturated fat factory. They introduced the McCafe premium roasted coffee and added several healthier items to their menu. As much as I am going to miss zipping down their slides with the food trays, they are innovative and are moving in the right direction."

I find it interesting that Burger King is not conforming to the status quo. They recently introduced the King to the world, their version of Ronald. Ever wonder why the King looks like such a creeper and think "why on earth would kids like him...Ronald looks much friendlier?!" Well that's because his face was purposefully designed to look a little creepy and strange. News flash, fast food chains like Mc Donald's and Burger King are no longer striving to gain the attention of kids!! Their target markets have changed. The demographic Burger King is targeting is the young male audience, 18-35 year of age. Unlike many other fast food chains, Burger King is not focusing on offering a healthier menu, rather they are embracing the fact that they serve junk food, it is part of their unique marketing strategy. 

As bad as I feel for Ronald McDonald, it is cool to see how each company is fighting to be on top of the food chain (haha...literally). Now who's to say which company is right or wrong for doing what they're doing? I guess when you think about it there are a few lessons you can take away from this fast food marketing mayhem.

• Having a unique marketing strategy is very important. To help you relate think of relationships and what you look for when you’re out seeking your soul mate. You want somebody that is different, unique, and has a lot to offer; not somebody who is like everybody else…how boring. Then at that point  it doesn’t matter who you’re dating, if they’re all the same…why not just settle for the first one you come across. (Doesn’t sound like much fun now, does it?).
• Differentiate yourselves from your competitors. May the marketing mix be with you! You’re given these tools for a reason now use them. List out what your competitors are doing and what you are doing. If you are both doing the same thing, you may have a problem! It’s just like selling cars. If every single car company was selling the same exact car then nobody would bother searching around; once again they would settle for the nearest dealer and not have a preference as to what they purchase.
• Develop a unique selling proposition..it pays to be different! ( That is if you are doing it at the right time, place, for the right price, in a creative way!)
• In order to be successful, have a cohesive marketing plan. Make sure all of the strategies you are using are consistent and you are sending the same message the different channels you are using.
• Last but definitely not least-----------Mc Donald's vanilla ice cream and friends are a match made in heaven! (Well...they are!) Next time you’re their buy fries, dip then in a cone of vanilla ice cream and enjoy!

Until next time, TTFN, ta ta for now!