Toys R Us Contributes to Its Corporate Death Wish
COMMENTARY: The company did not just fall behind its competition. It promoted the eradication of its future customer base.
The once-popular chain Toys R Us, which had hoped to survive through a Chapter 11 bankruptcy it filed in September, is closing all of its 735 American stores. Most of its locations have already announced “store-closing” sales. Customers with gift cards are scrambling to buy last-minute Nerf guns and Barbie tents before the cards become the retail version of Confederate money circa 1865.
The business media have treated this as yet another story of a firm losing out to its more tech-savvy competition.
Competition is fierce among retail stores, and Toys R Us tried to respond.
“Just a few months ago,” reports USA Today, “Toys R Us CEO David Brandon had mapped out a goal of upgrading online sales, renovating stores and introducing augmented reality into the shopping experience.” It didn’t work. And in any case, that’s only part of the story.
Toys R Us did not just fall behind its competition. It promoted the eradication of its future customer base. One doesn’t need a Harvard MBA to see that that’s a bad idea.
You see, for years, Toys R Us funded Planned Parenthood, the nation’s leading promoter and provider of abortions and contraception. This is a company that has many stores called Babies R Us!
In 2010, Life Decisions International (LDI) called for a boycott of the chain because of its support for the abortion giant. By the end of that year, the bad publicity led Toys R Us to pull its direct support for Planned Parenthood. In response, LDI removed the toy store from its boycott list.
The irony that Toys R Us executives failed to connect the dots between the number of babies and its bottom line is staggering. In its bankruptcy filing, Toys R Us cited declining birth rates as one of the reasons for its trouble.
So, are we to suppose that, before August 2010, Toys R Us brass didn’t know that fewer babies meant fewer customers and only figured that out after it was too late to save their company?
That doesn’t seem likely.
Why, then, would a firm, which claims declining birth rates helped destroy it, spend money making the problem worse?
The late management guru Peter Drucker once said that the purpose of a business is to create a customer. A firm can’t survive long term unless it first gains and then retains customers. But in recent years, many companies have acted as if they’re trying to do the opposite. Toys R Us is just one example.
Film critic and political commentator Michael Medved pointed out years ago that big Hollywood studios continue to produce films that lose money by alienating most potential viewers. That includes many of the films that come with an R rating. In the U.S., PG-13 films make, on average, more than three times as much as R-rated films. And yet those films keep coming.
And just think how many television series seem designed to promote homosexuality. A mere pursuit of profit doesn’t explain this. After all, most viewers aren’t clamoring for sermonettes on sex in every other sitcom.
Or take Target. The popular big-box store has helped bury Kmart and gives Walmart a run for its money. But in 2016, it decided to make an unforced error.
“We welcome transgender team members and guests,” it announced sanctimoniously, “to use the restroom or fitting room facility that corresponds with their gender identity.”
Customers were not demanding that grown men use the same restroom as 12-year-old girls. Nor did Target show any concern for the right to privacy of those girls. In fact, the number of customers with children surely outnumbered — by several orders of magnitude — the number of men who would insist, publicly, that they be allowed to use the women’s restroom.
So, what’s with this corporate death wish?
First, executives in many private companies hold views that contradict the views of most of their customers. These executives are sealed inside elite bubbles. It may never occur to them to think sympathetically about the moral convictions of their customers. Until the 2010 boycott, perhaps the Toys R Us board really thought Planned Parenthood was just a nice nonprofit helping women who are down on their luck.
Second, activists have been hard at work getting into spheres of influence in corporate America — just as they’ve done in government agencies and universities. They work in human resources, communications and in marketing. They help shape the messaging and philanthropy of their companies. They attend the right cocktail parties and have access to corporate boards and leadership. Five well-placed “transgender” activists may have more power over corporate policy than do a million faceless customers.
Third, many private companies want to push certain ideas, even if their advocacy takes a bite out of the bottom line. These companies are not just placating activists. They’re doing what they think is right. We are all moral creatures. Morality, even if misguided, influences what we do. That’s as true in business as it is anywhere else. Not everything in business is about business.
As foolish as it was, Target really seemed to think that it was on the side of the angels when it invited men to use their women’s restrooms.
The result of all this is that far too many large companies respond to the whims of “transgender” activists than to the needs of most of their customers. This might work for a while, but it’s hard to see how it’s a good long-term business plan.
Toys R Us might just be the first terminal case of the corporate death-wish virus. The chain not only helped to fund an organization — Planned Parenthood — that works to shrink the chain’s own customer base. It also angered millions of its customers, while gaining few, if any, new ones.
How much of a role did this 2010 controversy play in the company’s later demise? No one can say for sure. But Toys R Us would surely have done better if it had spent the last decade following Peter Drucker’s advice: that is, if it had avoided distractions and stayed focused on its current and future customers. As it is, all of its employees, and not just its leadership, will soon be looking for new jobs.
Jay W. Richards is an assistant research professor at the
Busch School of Business and Economics at
The Catholic University of America and host of A Force for Good on EWTN.