Why Are So Many Stores Closing?

Perhaps you’re wondering why soooo many chain store retailers are closing sooooo many stores, especially after what has been hailed as a gonzo holiday season. To be sure, after every New Year retailers have always pruned deadbeat locations. But the numbers going into the trash bin of history are dizzying. More than 9,000 store units closed last year. A higher number is predicted for 2020 (https://moneywise.com/a/chains-closing-the-most-stores-in-2020).

The names coming off marquees across the country include some venerable labels: Sears, Kmart, Macy’s, Forever 21, Pier 1 Imports, Gap, Chico’s, Bed Bath & Beyond. Why is the contraction reaching unparalleled heights? Though each chain has its own problems, there are common threads that have unraveled throughout the retail industry.

Start with the fact that in the United States we are overstored (forgive me for not providing actual statistics, but after 32 years covering the retail industry as an editor and publisher of Chain Store Age I am taking retirement privilege and just providing trend analysis. You’ll have to trust I know what I am talking about).

How did we get overstored? No retailer thinks their store is not desired by voracious consumers. So when real estate developers pitched less than A+ locations they signed on the bottom line, sometimes induced to do so as the price of landing a truly A+ spot in a different coveted shopping venue owned or operated by the same developer. The developers, of course, needed those tenants to get their construction loans. Thus, it is no wonder that stores in secondary market are closing and with them secondary market shopping centers.

Everyone wants to blame Amazon and other Internet retailers and before them Walmart, Target, Home Depot and an assortment of big box retailers. Yes, they all contributed to the blacking out of storefronts on Main Streets and in strip centers. They killed off lots of independent merchants and weaker chain stores. As for Internet retailing, it still accounts for just about 15% of all sales.

So what’s behind the tsunami of store closings? Lousy merchandising choices, for one. For apparel and fashion home goods stores, if the wrong stuff is put up for sale customers will stay away in droves. As rents and labor costs are high, the combination with the cost of goods put retailers in a swimming pool of red ink.

Many chain stores have high levels of debt because private equity firms bought them by leveraging retail assets, mostly their leases or the land they owned for their stores, warehouses and distribution centers. When sales fail to meet budget expectations debt payments cannot be met. Suppliers refrain from selling them merchandise because if a company files for Chapter XI bankruptcy protection the law allows creditors to claw back all payments made in the prior 90 days. Suppliers fear being paid pennies on the dollar for their products. That’s why the first clue of a pending bankruptcy filing is insufficient product on shelves or clothing racks.

Failure to keep abreast of state of the art technology and distribution efficiencies are more harbingers of doom. Often it’s because companies did not have the cash flow to make the necessary investments. It’s a melting snowball effect in a red hot competitive industry driven by shoppers who demand instant gratification.

Let’s not overlook the polarization of our population. Not our political divide. The economic bifurcation. The fastest growing retail formats are dollar stores and food discounters like Aldi and Lidl, both European imports, that cater to families on tight budgets. Companies that serve middle income consumers are being squeezed.

Being a high end retailer doesn’t guarantee success. Barneys New York failed because of the aforementioned heavy debt load strapped on it by private equity owners. Toys “R” Us, which knocked off almost all toy competitors, succumbed as well from its private equity debt load. Toys “R” Us was never the price leader. It based its success on being in stock on the most wanted toys. When Walmart and Target matched Toys “R” Us on inventory management the game was lost. Walmart and Target had many more stores than Toys “R” Us in most markets, making it more convenient for shoppers to find what they wanted in their stores. Location, location, location. Three keys to success. Or failure.

Can you still make it in retailing? A resounding, emphatic, YES! Required are merchandise tailored to a specific audience; systems that provide seamless customer fulfillment and support; dedicated, driven staff from the top down; sufficient capital, and even more capital; savvy marketing including an Internet presence; and those historical three keys—location, location, location.

Successful retailers make customers their unpaid promoters. Think Trader Joe’s or The Container Store. A successful retailer would be missed if it closed its doors, missed not because it was nearby or a long time presence in a community, but rather because it brought excitement and fulfillment to the often mundane task of buying and selling everyday goods and services plus the occasional frills that make shopping essential and enjoyable.

If Sears and Kmart Closed, Would You Care?

Perhaps if you’ve been paying attention to news unrelated to Hurricane Michael or new Supreme Court justice Brett Kavanaugh or the baseball playoffs or the 1,300 point plummet of the Dow Jones Industrial Average Wednesday/Thursday, perhaps you read or heard a story about the possibility venerable, no longer venerated, Sears and stepsister retailer Kmart may file for Chapter 11 bankruptcy protection as early as next Monday.  

Chapter 11 is not a death sentence. It is a reorganization tool meant to provide management with the time and financial freedom to resurrect a dilapidated business. Macy’s passed through Chapter 11. So did Best Buy. Plenty of other retailers, on the other hand, went from Chapter 11 into Chapter 7—liquidation. 

For more than 40 years I have been tracking the misfortunes, and occasional fortunes, of Sears and Kmart as they strived for relevance as societal and competitive realities evolved around them. (Once antagonists, Sears and Kmart became stepsisters as part of financier Eddie Lampert’s design to turn them around, or at least turn a profit for himself, by selling off their assets, including real estate and brands such as Craftsman.)

For 30 of those 40 years as editor and publisher of Chain Store Age, I met with the consecutive line of chairmen and chief executive officers of Sears and Kmart. Each sincerely believed his formula (it was always a he, never a she) contained the magic potion to resurrect a flailing business (that’s not a typo, I meant flailing). Perhaps, if Walmart and Home Depot and Amazon had not been imagined Sears and Kmart might have had a chance. But retailing is an industry that rewards innovation, particularly as it applies to efficient distribution. From better locations to quicker dissemination of products from manufacturer to store shelf to, especially in Amazon’s case, a consumer’s home, competitors outdistanced Sears and Kmart in their ability to meet consumer expectations.  

Sears was built with the mythology of the “Father Knows Best” family in mind. Even its one time diversification strategies—Allstate Insurance and the Discover card—reinforced the fulfillment of household needs. 

Kmart sought to capitalize on a growing middle class seeking cheap consumer goods in convenient self-service stores. 

But if the lady or teenage girl of the house needed something stylish to wear, Sears and Kmart were the last places they would shop. A department store or specialty store or Kohl’s fit the bill. Maybe even Target.  

If the man of the house was going to work on a home improvement project he turned to a local home center retailer, that is, before Home Depot or Lowe’s swallowed up their customers, as well. Electronics sales went to Best Buy. Toys to Toys “R” Us—the Sears Christmas Wish Book succumbed long before Toys “R” Us did. 

Kids could be dressed in Sears or Kmart clothing. Until, that is, they were old enough to voice their own apparel preferences. 

Will Sears and Kmart be salvaged or scuttled? Ask yourself these questions: When was the last time you shopped Sears or Kmart? If one or both stores disappeared, would you notice? Would you miss them?

For most of my professional life Sears and Kmart represented major portions of the copy that flowed through my editor’s desk. I walked their stores across the country. I shopped their stores. As recently as two weeks ago I bought some supplies in Kmart. 

Apart from the yawning gap closing the White Plains Sears and Kmart would have on their respective shopping centers, I cannot say I would miss them. I’d experience some personal nostalgia, but, no, I could not say I would miss them.

Three Deaths in an Extended Family

The official cause of death was reported as respiratory failure, but to me anything but a broken heart would be a mischaracterization.

Charles Lazarus, the guiding light of Toys “R” Us for 46 years, died Thursday, one week to the day after the company he founded in 1948 filed bankruptcy liquidation papers. He was 94. 

In a corporate obituary of Toys “R” Us I posted just a week ago, I wrote, “I cannot imagine what must now be gripping his emotions” (http://nosocksneededanymore.blogspot.com/2018/03/from-proudest-moment-to-saddest-saga-of.html).

It somehow seems fitting that Lazarus did not outlast his creation. Even if some parts of Toys “R” Us may be resuscitated, as some toy suppliers are trying to cobble together a successor company, the chain will never be the same as when Lazarus commanded the toy industry. 

I had the good fortune of knowing some of the titans of the retail industry during the last half century. Lazarus would qualify for Mount Rushmore status. He invented the category killer discount specialty store concept copied in numerous merchandise categories. 

Retailers with his merchandising, marketing and operational skills, linked by strategic perception and unmatched passion, are rare birds. He will be missed by all who knew him and by countless children, some still young, some now grown up, some not yet conceived.  

Back to the Shtetl: One never knows where inspiration for a posting will emerge, where a seemingly distant reference might intersect with some part of your or your family’s past.

The New York Times ran an obituary of Rabbi Mordechai Hager in Saturday’s edition (https://nyti.ms/2Dz4SUq). The 95-year-old rabbi was the leader of the American branch of the Viznitz Hasidim, a religious sect that began in the Carpathian foothills of what is now western Ukraine. My father’s shtetl town of Ottynia was in that region, so I was naturally interested in details of Rabbi Hager’s life. 

As I read the obituary I was struck by the following: “Mordechai Hager was born on July 20, 1922, in Oradea, Romania, known among Yiddish speakers as Grosswardein. His father, Chaim Meir Hager, was the fourth grand rabbi of Vyzhnytsia (Viznitz in Yiddish), the village in the Carpathian foothills in what is today western Ukraine; the village had been the seat of this Hasidic dynasty since its beginnings in the mid-19th century.”

The key phrase, “His father, Chaim Meir Hager,” made me race to my folder on Ottynia. In a booklet published in 2000 by Philip Spiegel, a descendant of Ottynia emigres, there are numerous references to “Rabbi Chaim Hager and the Chassidim of Ottynia.” (Observant readers will notice the cited names are not totally identical: Chaim Meir Hager vs. Chaim Hager, but the family of rabbis is definitely the same.)

“Rabbi Chaim Hager was born in Wishnitz in 1864. He was the sixth generation of the Wishnitz dynasty of rabbis who descended from Rabbi Kopel Chassid, a student of the Baal Shem Tov, the founder of the Chassidism in the early 18th century (interestingly, my father’s first name was Kopel). At age 13, Chaim Hager was ordained as a rabbi after studying with his grandfather. … 

“Toward the end of the 19th century he settled in Ottynia and thousands of Chassidim came there to study with him.”

Ottynia changed hands several times during World War I. Seeking safety, Rabbi Hager moved to Vienna during the war. “When the war ended he found much of Ottynia and the synagogues in ruins so he moved to Stanislawow,” now called Ivano-Frankivska, a larger city to the northwest. He died in 1931 in Krakow. He was buried in Stanislawow. 

Many Viznitz Hasidim emigrated to Israel after World War II. They settled in Bnei Brak, outside Tel Aviv. Yeshivat Ottynia, in Bnei Brak, has been run by a grandson of Rabbi Chaim Hager. 

I’ve visited Israel numerous times, never stopping in Bnei Brak. Now that I have a connection, I cannot say it will make a difference the next time I am in Israel.

Leading Lady: I got to know Charles Lazarus and other retail luminaries because I worked for Lebhar-Friedman, publisher of Chain Store Age. L-F is a family run company, founded in 1925 by Arnold Friedman, Godfrey Lebhar and John Stern (I have no idea why his name is not part of the company). 

Since 1981 after the death of his father, Roger Friedman has led the company. Once, twice or maybe three times a year, I would see his wife Pat at the office, a company function or at one of our conferences. She usually wore something red. She always smiled and had a graceful gait, walking with head held high. 

The last time I saw Pat Friedman, about five years ago, Gilda and I were eating lunch with Ellie in the basement cafeteria of the Metropolitan Museum of Art. Ellie worked at The Met. Pat was there because she was a docent. 

Pat died last Thursday, March 15. Here’s a portion of the death notice printed in The Times:

“Patricia Mosle Friedman of New York, NY, and Pecos, NM, passed away on March 15th, 2018, after an intense battle with cancer. She died peacefully, in her sleep, surrounded by her family’s love. Born in Litchfield, CT, to A. Henry Mosle and Jane Magor Mosle, she graduated Magna Cum Laude from Columbia University where she was elected to Phi Beta Kappa, and awarded a Woodrow Wilson Fellowship. She later received her M.A. from the Institute of Fine Arts, and spent several years as an adjunct professor at Hunter College where she taught Impressionism and Post Impressionism. She earned a Certificate of Achievement from The New York School of Interior Design and freelanced as an interior designer with Stroheim and Romann. 

“Passionate about the arts as a whole, Pat excelled as a student and teacher of Middle Eastern Dance, and performed several times at Lincoln Centre under her stage name, Patrima. For the past 30 years, Pat truly loved being a Docent at The Metropolitan Museum, serving as Chair of the Collection Tour Program from 2008-2010. She served as a guide in the High School Program, and an adult tour guide in Highlights, Impressionism, Post Impressionism, and Modern & Contemporary. She was perpetually inspired by the works of art that she covered, and rejoiced in the constant sense of ongoing discovery and learning. 

“She was a Colonial Dame, a Sustainer of The Junior League of New York where she was named Volunteer of The Year, a Founding Member of the Board of the National Dance Institute in Santa Fe, New Mexico, and sat for many years on the Board of The National Council on Alcoholism and Drug Dependance. 

“Pat is survived by her husband of 55 years, Roger, their daughter, Amanda, son, Randall, daughter-in-law, Tomomi, and twin granddaughters, Sasha and Myla.”

From Proudest Moment to Saddest, the Saga of Toys "R" Us Founder Charles Lazarus

With the liquidation bankruptcy filing of Toys “R” Us, the era of the category killer store may be said to be over. Toys “R” Us was the original category killer chain that overwhelmed small specialty and large general merchandise stores by offering a supermarket-style presentation of wide and deep assortments of sharply priced category specific merchandise. 

To be sure, a few category killers remain—Best Buy, Dick’s Sporting Goods, Bed Bath & Beyond, and even the struggling Barnes & Noble, to name several. But the graveyard list of category killers is much larger. An incomplete list would include Child World, Lionel Leisure, KB Toys, Circuit City, Crazy Eddie, Sports Authority, Oshman’s Sporting Goods, Linens ’n Things.

When Toys “R” Us began in 1948, if you wanted toys, or an appliance or housewares item—virtually anything—you would go downtown to a department store. There were no suburban department stores back then. There were no suburban shopping centers. 

Charles Lazarus used $4,000 to transform his father’s Washington, DC, bicycle shop into a juvenile furniture store. After customers kept asking for toys, Lazarus quickly evolved his merchandise mix to focus on toys. 

He believed staunchly in regimental uniformity. All business decisions–which products to carry, merchandising and store layout–emanated from headquarters. “I should be able to close my eyes and walk 130 feet and put my hand down and touch the very same stack of items in each store. If not, there’s something wrong,” he used to say. 

Lazarus was an early believer in the power of point of sale data. He partnered with suppliers, accepting early inventory deliveries and sharing sales data in return for discounts and assurances that Toys “R” Us would be kept in stock on the most wanted toys. The chain’s wide and deep inventory position became a strategic advantage when desperate parents and grandparents scavenged for the most wanted present during the holiday season. In stock leadership, not price, cemented the company’s position as the go-to retailer for toys. 

This advantage started to dissipate in the late 1980s as Walmart and Target refined their POS data systems. They concentrated on the hottest toys, selling them at discounted prices. They had more stores than Toys “R” Us. Shoppers visited them more often. They siphoned off sales in buckets, not drips and drabs. 

If you needed a specific toy, the place to go no longer was Toys “R” Us. In the age of the Internet, you searched on line, Amazon most likely.

With the advent of electronic games, computers and hand-held devices, traditional toys began losing their cache among children. Toys “R” Us added video games to its assortment, but one didn’t need to visit a store to upload apps to a hand-held device.

The real dagger to the heart of Toys “R” Us and other retailers, however, has been the greedy tentacles of private equity fund managers. They swooped in to ostensibly rescue retailers, offering cash secured against a retailer’s real estate. Some merchants had lagged because they could not compete against more streamlined, better financed competitors. Some were unable to cope with changing market conditions. Some just had inadequate management. It mattered not to the equity funds. They reaped their profits upfront from the leveraged buyout transaction, from interest payments on the debt it provided and, hopefully, from taking a retailer public if its profitability improved. 

Ever since Charles Lazarus retired from his creation in 1994, Toys “R” Us has lacked an energetic, bold merchant at the helm. Profits lagged. The equity funds offered money. But at a highly leveraged  price. Executives with no proprietary interest in a company, other than to maximize their personal returns, usually succumb to the siren song of a deep-pocketed equity fund. Bain Capital and Kohlberg Kravis Roberts, along with Vornado Realty Trust, loaded Toys “R” Us with $5 billion in debt in a 2005 leveraged buyout. 

The downward sales spiral kept Toys “R” Us from paying off the debt and, ominously, from upgrading its stores and systems. All that’s left now is to sell off its real estate. 

Charles Lazarus is now 94. The last time I saw him was about 15 years ago as I was leaving work. He was window shopping a store located on the ground floor level of the Park Avenue office building housing Chain Store Age. We exchanged pleasantries but even then, a decade removed from active Toys “R” Us management, he resisted talking about the company he founded. 

He always was a reluctant interview (see http://nosocksneededanymore.blogspot.com/2017/09/toys-r-us-bankruptcy-brings-back.html). I cannot imagine what must now be gripping his emotions. 

His proudest moment, he used to say, was paying off the creditor debt Toys “R” Us assumed when its then-parent company, Interstate Stores, dragged it into Chapter 11 bankruptcy reorganization in 1974. Other Chapter 11 filings have occurred, none under his watch. 

On Thursday, management filed for Chapter 7 liquidation. The same market forces that will silence Lazarus’ once ubiquitous airwaves jingle—“I don’t wanna grow up, I’m a Toys “R” Us kid …,”—are sure to wreak havoc among remaining category killer stores. For some, if not all, it is just a matter of time before they share a similar fate.  

Toys "R" Us Bankruptcy Brings Back Memories

News that Toys R” Us filed for bankruptcy protection late Monday stirred a memory of one of my first encounters with Charles Lazarus, the founder and, at the time, chairman, president and chief executive of the chain which is credited with being the first of what became known as the category killer segment of retailing that subsequently included companies such as Best Buy, Staples and Sports Authority.

It was in the conference dining room of Windows on the World, the 106th floor of the North Tower of the original World Trade Center at the tip of Manhattan. Lazarus was a featured presenter at the Modes of Creative Retailing conference organized by Jeff Feiner of Merrill Lynch. For some obscure reason, Jeff relaxed his “no press” rule by allowing me to attend the two-day affair. So it was that during lunch the first day I strategically sat across from Charles Lazarus, an iconic retailer known for strict adherence to organizational discipline (he used to say that if he was blindfolded in any of his stores and walked down any aisle he would find the exact same merchandise on the shelf where he stopped regardless of location. No deviation. That, to Lazarus, was chain store retailing.)

Lazarus, at the time 56-years-old, had founded Toys “R” Us in 1948 as an outgrowth of a juvenile furniture store in Washington, DC. His enthusiasm for his adopted product line was evident in the many pictures that accompanied articles in Fortune, Business Week and Forbes. He’d be photographed riding a tricycle, or surrounded by plush animals, most prominently Geoffrey, the giraffe that became the company’s symbol. 

He rarely, if ever, spoke to the trade press, of which I, as editor of Chain Store Age, was a prominent member. Perhaps he didn’t recognize me across the table. Or maybe he was more concerned with talking up the money managers sitting next to him, who, as I did, clung to his every word. 

Charles Lazarus loved to talk about Toys “R” Us. He tried to share the limelight with his top executives, but, invariably, whenever they would finish their presentations or responses to questions he would not be able to contain himself. He would have to, he’d feel compelled to, add a coda to their comments. 

When we did an extensive report on Toys “R” Us two years later, Lazarus adhered to his no talking to the press rule. Except, when I called him to ask that he sit for a cover shot, he wound up talking for 45 minutes, concluding by insisting he would sit for a photograph only if we agreed to include his three top executives in the  picture. 

On the appointed day we met at a New Jersey store near corporate headquarters. As my son Dan was just shy of his third birthday (Ellie was months away from being born), I decided to do some shopping after the shoot. Toys in hand, I stepped towards the one staffed checkout line. I was third in line. On the other side of the checkout, Lazarus paced back and forth, like a caged tiger. It became obvious he was stifling an explosion aimed at the store manager for failing to open another checkout lane after a third customer entered the line, a transgression made all the more violent by the fact that I, a member of the press, was that third customer. I left the store before the expected confrontation. 

Lazarus was rightly proud of his accomplishments. Toys “R” Us was the biggest toy retailer in the world. And profitable. Very profitable. Only one thing really ticked him off. Too many times interviewers from the consumer and business press wanted to ask him about his wife, Helen Singer–Kaplan, a renowned sex therapist, from whom he was widowed in 1995 after 16 years of marriage. 

As he sat across from me at that 1980 luncheon he revealed that his proudest moment was paying off the bankruptcy debt of Interstate Stores. Interstate had bought Toys “R” Us eight years earlier but had lapsed into bankruptcy, carrying Lazarus’ chain with it. Toys “R” Us emerged from bankruptcy as the surviving enterprise with no obligation to pay off Interstate’s creditors. But Lazarus felt an obligation to. Not many businessmen would.

(For a taste of his enthusiasm, view this short video of Lazarus talking about the making of Toys “R” Us: https://www.youtube.com/watch?v=JG2W0F_rdvA).

Wanted: Honest Customers

Whose customers are more honest, Wal-Mart’s or REI’s? Based on recent announcements from the companies, one might conclude shoppers at the discount store giant are more trustworthy than those of the outdoor gear retailer.

Already the nation’s largest seller of fresh fruit and vegetables, Wal-Mart wants more market share, so it has initiated new sourcing, quality control and employee training strategies for its produce section. The lynchpin of the program is a 100% money-back guarantee. What’s more, customers do not have to bring the offending produce back to the store to claim a refund. Their word will be their bond, or as Wal-Mart explained in its release, “If customers are not completely satisfied with Walmart's produce, they can bring back their receipt for a full refund. No questions asked and no need to bring back the produce.” 

No doubt Wal-Mart will keep tabs on customers to make sure the same ones are not abusing the privilege. Easy enough to do if the customer paid with a credit card. But many of the retailer’s patrons pay in cash, so it might be hard to track all who make returns, especially if there are multiple Wal-Marts in the local market. Still, it’s nice to see corporate America extending trust to the average citizen.

Seattle-based REI, on the other hand, has shelved its long-standing policy of accepting returns till the end of time. Because of a few bad apples taking advantage of the never-ending return policy, REI has put a one year limit on the practice, unless products prove to be defective. Outlet merchandise bought on REI.com will be returnable for just 30 days. 

In explaining the policy change to The Seattle Times, Senior Vice President of Retail Tim Spangler said, “What we found is that (a) small group of folks who are probably extending the policy beyond its intent, is getting bigger. And It’s not a sustainable thing long-term if we want to maintain this fantastic policy.” 

The Times also reported, “To reduce dubious returns, REI also has stopped accepting returns without question and is more insistent that there be proof of purchase. Some REI stores had been known to give store credit, if not money-back refunds, to customers without a receipt.” 

The newspaper noted that REI, which officially stands for Recreational Equipment Inc., had earned two dubious nicknames for its liberal return policy: “Rental Equipment Inc” and “Return Everything Inc.”

REI has reason to be more cautious. According to a report in The Wall Street Journal, the National Retail Federation “noted a newer trend of stolen goods being returned to stores without receipts for store credit in the form of a gift card. That gift card is then sold online or elsewhere for cash. The NRF's (ninth annual organized retail crime) survey reported that 77.8% of respondents had experienced some form of this gift card scheme.”

Accepting returns without making customers feel like criminals is a delicate balancing act. Reputations are burnished or tarnished at the customer service desk. Stories, some no doubt apocryphal, abound about retailers taking back suspect goods including some they didn’t even sell. Nordstrom has always been held up as the gold standard. It reputedly took back a set of four tires even though it never sold tires. Another of its legendary returns was of a wedding dress said by the mother of the bride never to have been worn by her jilted-at-the-altar daughter. Yet when the store staff took the dress out of the box after the customer left grains of rice came out as well. And then there was the story of the widow who returned a suit bought by her recently deceased husband. Store staff noticed the suit had an unusual odor. Turned out to be from embalming fluid. 

One of my favorite retailers is Costco because of its liberal return policy. But even Costco had to make accommodations because some customers were taking advantage. They would return consumer electronics items when newer models came out. So Costco, as did many other retailers, imposed a 90-day window for returns of electronics. Some, like Best Buy, even put a restocking fee in place.

One of my favorite examples of a rigid return policy gone wrong happened before my very eyes in a Child World toy store some 30 years ago. A distraught father was trying to return a plastic kiddy pool, only to be repeatedly told the store did not carry that brand. The customer screamed and screamed, insisting he bought the pool there, that he’d never shop there again if he didn’t get satisfaction. The store manager stuck to his guns. It was embarrassing to all who witnessed the extended exchange. 

No doubt the customer had conflated Child World with the Toys “R” Us barely a mile away. When I related the incident to Charles Lazarus, the founder and CEO of Toys “R” Us, he said his company’s policy was to take back any toy, even if it was not stocked by his chain. The overall customer experience was most important. The value of a customer telling his or her friends and relatives about a good experience, even one where they snookered the retailer, provided more long-term positive results than the negative publicity that same customer would generate if he or she went away angry. 

A few years later, Child World, the second largest toy store retail chain, closed down. Toys “R” Us is still in business.