The Road to Online Retail Podcast 7 – How the online shopper experience led to the revival of a much loved global brand – the Toys R Us Australia/NZ story.
Nigel Miller: Now today you can probably hear some birds and ducks in the background because I’ve taken the journey up to Queensland to actually sit physically with Kevin Moore on his beautiful balcony on a canal, really near the sea because we’ve been finishing off our Road to Online Retail course doing our final little piece is ready to launch.
Kevin Moore: And because we’re actually now allowed to physically be in the same space because the Covid laws have allowed us to cross borders.
Nigel Miller: Yes, and we’re not quite sure for how long here in Australia,
Kevin Moore: No, we’re not, no.
Nigel Miller: Cause things are not quite going as well as they were. But, I was having a chat with Kevin the other day and I wanted to know more about Kevin’s journey into online retail because I’ve known Kevin for years and he was the marketing experts on shopper experience for physical, but he has made this huge transition into online and tied in with Toys R Us, how did that all happen? So today we’re going to explore that.
How do start an online retail business from scratch and make it into a very successful, much larger online business? So we’re going to go down that journey, but also, Kevin, you’ve been involved with an awful lot of other businesses along the way, both online and non-online and I want to explore some of the things you’ve learned and where you’ve learnt to come up with this idea of the second age of online retail.
Kevin Moore: So I guess as I started to immerse myself, so on the earliest podcast, I talked about the fact that I had immersed myself in a small agency that did all things digital, sitting alongside 20 somethings for 90 minutes a week, and just really eating a lot of humble pie. I was quite dismissive of online having been a professional marketer and a retail marketer for years in the physical environment. And it really was quite humbling to see the reach and power, understand the reach and power of online. It blew me away.
Because the work I was doing with a lot of physical retailers, or people had physical businesses, I was asked more and more to, to be involved in their business to help them I’m on that journey.
Generally speaking the journey was people saying, “we know we need to do this”. So “we ought to start doing it”, rather than “I’m passionate about this. I want to do it”. And hey, I was exactly the same. It wasn’t a thing. This is not about, you know, I’ve seen fights because I’ve stood on the shoulders of giants, but it isn’t that whole thing about being ahead of people. The majority of us get taken there. I’ve used the phrase many years, many times I haven’t had an original idea in my life. Any wealth I have created for me and my family has been from following trends.
I’m quite a fast follower. I do trust the way the wind is blowing and say, well, let’s understand that and move forward rather than be cynical and say, no, I’m not going to do that. But that describes the, the majority of us. There are very few of us who are genuinely first movers and they’re amazing people. I’m not one of them.
So some of the work I started to do, I was working with a fourth generation wine retailer and Christina Tulloch’s lovely lady and her dad’s an amazing wine maker, the business is 120 years old and they were doing more and more work online and they had a membership base that needed to grow.
So what we tried to do on that one was take, again, all those physical attributes and say, how do we start to bring those live? How do we tell the story of this fourth generation, a daughter in the, in the wine industry? I’m going back through the different relatives over the years, they’ve done amazing things. The story behind how they actually won the, the winery through, you know, there was a debt that needed to be paid back all these wonderful stories and also to bring alive the fact that you’re dealing with amazing wineries, you know, budding of wine, the budding of, of grapes at key times of the year, summer in the Hunter Valley in Australia is beautiful.
How do you capture that imagery? And we worked hard to develop that. It became an amazing thing. We actually then ended up with a significant increase in the number of members, online transactions increased, and we brought alive through the website an awful lot of that. And in fact, Nigel helped me with that. So you came and did a lot of filming for, for Tulloch.
Nigel Miller: Well, I was at the bleeding edge of technology doing some 360 videos. And that was another story. But anyway…
Kevin Moore: Yeah, so we did. So we did innovative things at that point. We put cameras on Harleys and rode round, you know, wineries. We captured the, the feel of that.
But that, that was, one part of it. Another one happened, there was a major retailer involved in news distribution, a news agency to use an Australian and UK term. And they were insignificant decline and it was how we started to offer things that were digital, all things digital. The realities that are bigger issues facing that industry as we’ve seen with media, we’ve seen mastheads close all around the world, but it was starting to get people to, to put their toe in the water. That was a difficult one. I don’t need to name the brand. That was difficult because it was such an embedded industry. I mean, the whole concept of a news agency was the fact that you were protected by government. Only certain people could sell newsprint. If you come from that environment, it’s very difficult to embrace change. I mean, we just don’t do it. Change is thrust upon us.
I did a great piece of work with the largest airport in Australia, Sydney Airport. And that was all around how we got landside, so as people came to the airport, how they flowed through as quickly as possible, and that was adopting and looking into technology online, the second age of, of online, if you will, things that aren’t obvious we don’t think of as being online, but Uber is online.
Yeah, ground transport is online. I can be picked up, I can be dropped off super swift, super fast. And that was a key part of moving traffic through. Being able to book online for, for coaches and being able to push the government and the state government to be able to allow people to use trains in an easier way so they didn’t have to end up with buying tickets that had high face value they couldn’t use. All sorts of these things that aren’t obvious, but they’re part of the second age.
Then I met Dr. Lewis Mittoni, who at that point was running Mittoni Technology, a distribution company in Australia who had just started Hobby Warehouse.
And that was where we, we both really started to work together, both with a passion for the space, but limited experience. And I think that’s the key thing about sharing two different abilities. He’s a brilliant left brain man, a co-developer phenomenological phenomenal intelligence and I’m right brain.
And being able to get those things together and respecting each other’s views on things gave us this amazing and very fast growing business. Now, one of the key things about that is when you go from a business to business company, so something selling products to other companies, to a shopper focused company, you have to completely retrain the mindset of the business because they’re very different decisions.
I mean, corporations, companies, people buying things on behalf of companies do it for different reasons. We talked about quality, price, movement, profit, and service. This don’t worry about it. And, but these are some of the things that a rational decision maker in a corporation will use to decide what they buy. As shoppers, we don’t do that.
Nigel Miller: Can we just get back a fraction there though? So Dr Louis Mittoni was a distributor of electrical…
Kevin Moore: Electronic, it was electronic. So everything that you have on your desk around here, Nige, in some shape or form, he would sell so into resellers, into, into companies reselling.
Nigel Miller: So how did he make that transition to hobby?
Kevin Moore: Passion.
Nigel Miller: Okay,
Kevin Moore: Here you get values and passion. So he was passionate about hobbies and wanted to, to be able to present people with a choice of having hobbies in their lives. Over time, we, we distilled out the essence of the business, the essence of the brand, but he was passionate about it.
And here’s the thing. I’m a great believer. This goes back to that, that comment about, you know, people get pushed into things. People get pushed into things. They think they ought to do it, but once they get into it and they see it and they, their minds are opened, then they develop passion. And that’s what he did and amazing passion.
So he secured amazing things, started to source remote control yachts, and design his own remote control cars around the world, and that just naturally blended in from hobbies into play. But the important thing about that on that journey, one of the greatest things that Louis does is listens and acts.
Now that doesn’t mean that what he does is blindly follow every word that’s thrown at him. Critical thinking. He thinks critically about what’s being proposed to him and says does that have a position? If he decides it does have a position in relevance in his business, he applies it quickly. So that speed and online just really lends itself to speed.
Because he can do it so fast.
Nigel Miller: But what was his original ambition? I mean, starting a online business that encourages your hobbies sounds like it’s a nice thing to play with. Was it always envisioned to be a big business?
Kevin Moore: No, I don’t think any of us, any of us do that. The majority of us start businesses that we own and run ourselves. We start doing it to feed our family. We do it because we see there’s an opportunity there and it should be something that people, it will resonate with other people that whole curation thing it’ll resonate with other people.
And I think that’s what he did. Louis just said, I want to do this. This is I can, it’s my own business so I can do this. I have the warehousing, I have the knowledge, I understand online. He’d been, also, selling gaming technology. So things like NZXT and Thrust Master for gamers out there, so he understood the whole online gaming section, which is a hobby, is a passion, is an e-sport, it’s a hobby. So he started that and we worked together and it was a pleasure to be involved. I mean, we bounced off each other, we sparked off each other and created this amazing relationship, which now is five, six years old.
On that journey, things were happening and it leads into the Toys R Us. When the physical retailers were changing around the world, we’d been talking to each other about the fact that physical retail was in decline. Every leading indicator out of the US and the UK, were saying this is declining. Or the research we were starting to read, but from the manufacturers who sold their products into retailers, we’re seeing their share of online retail customers growing whilst the share of their physical retail customers was declining.
And I don’t mean that the physical retailers were a smaller share of the same size of pie. They were smaller share of the same size of pie. They were genuinely in decline. This wasn’t, the pie was growing, they were genuinely in decline. And the rate of change, the rate of growth in the online was just unbelievable, but they also were in this dichotomy.
It’s difficult to balance your businesses when you’re selling to physical retailers and online retailers, because buyer/supplier power means that often a physical retailer will say, “if you sell to that online retailer I may not give you the prominence in my stores that you had previously”.
It’s just reality. That’s negotiation. That’s what happens in life. So a lot of the guys in, in the different industries were very cautious about getting involved with, with online retailers and I’m not going to name them, but some of the guys we spoke to, we warehouse wouldn’t do business with us three years until we grew and grew and grew until their own source of business into physical retail had declined so far, they had to make that decision.
When they did, they were blown away. So to put it in perspective, again, I’m not going to name names, but one of the businesses that we took on, one of the lines we took on, we bought in our opening order, more stock than any physical retail had bought that month.
Now remember, we’re a small online retailer. It. And we weren’t being funny. That’s what we need it. Remember we could reach 1.1 million people. And in the first month we sold that out in less than I think 10 days, we reordered double that. We reordered double that . We’ve done four times, so at the, by the time we got to our fourth month, we were doing more volume online than the rest of the retailers, physical retailers had bought that month in Australia. That’s the rate of, of growth and it’s a small category.
So when you get your head round the reach, that humility, the reach and power of online, it changes everything. and that’s what we saw. So we continue that journey. we then saw that Toys R Us could no longer operate in the market as a physical retailer and they did the right thing, they exited the market by paying everybody, everybody got paid in Australia and New Zealand. And then the guys who had taken on Toys R Us Kids, which is the licensing body that owns the IP, the intellectual property, looked for partners in Australia and New Zealand, and they ran a process, an interview process, if you will, a pitch process or a tender process, whatever term you’d like.
And they looked at, we believe six to eight players of established online retailers and a very well established and longterm physical retailers. What struck them was the research that we were presenting was the same research that they had been reading, which is about the future of online retail.
And they knew they were making decision in 2018, 2019 that would have its true play-out in 2023, 24, 25. And it was a bold decision. I mean, a genuinely bold decision. And they looked at our strategy. They looked at our relationship with the brands. They look at our understanding, the right brain and the soft elements of it.
They understood our relationship with their brand. Toys R Us and Babies R Us are loved brands. You know, they’re 60, 70 years old and they’ve been almost all in our lives at some, all of our lives, as we sit here and our children’s lives and our grandchildren’s lives. And they wanted a custodian and a guardian and a shepherd for a brand that was important to them. And a combination of that digital and then understanding the brands and at the strategy we’re proposing, they said, guys, we’re going to try this and we’re going to use you as our Petri dish. We’re going to use you as a little chemistry project. We’re going to watch you and see what you do. And then we can take those learnings from Australia and we can apply them to different parts of the world.
Nigel Miller: So, your point of difference over the bigger, more established, online and online/physical retailers, was the fact that you had such a strong focus on the shopper experience?
Kevin Moore: Twofold. So we are very focused on the shopper and our shopper was in a specific category. So remember Toys R Us was a category-killer back in the day, they were called category-killers. They did one sector really, really, really well.
So Toys R Us started in the fifties and they had one store and a few skews and few products in their store. And then they had bigger stores with more products. Then they had more bigger stores. Then had much more, much bigger stores and they focused on that category.
And we were a category killer. We weren’t to marketplace. We weren’t trying to sell, you know, everything from batteries and shoes and toys, we were toys and we were hobbies and we were going to clearly understand the baby sector too.
Nigel Miller: But when they were still here as a physical retailer, where they also dabbling online?
Kevin Moore: Oh yeah. And respect! So the last CEO of Toys R Us did a phenomenal job.
She led that business. She was one of the people who truly understood that this was real online was real. She recruited a very, very good team. They were growing so fast, but the realities of the global brand and the issues it faced in markets upstream from us. Remember, Australia’s we’re protected. We’re three years behind the, the opportunities and the pain of North America and Western Europe.
We are. You know, we sit at the bottom of the planet and we we’re protected. So the pain that they were going through meant that really good work that was taking place here, the learnings coming out of North America being applied this business, and what she was doing here was fantastic work. So all credit to her, she did an amazing job.
And in fact, over the process, she reached out to us and said, guys, I’d love to see what you do with the brand. You know, great. All the things we’re talking about are now coming alive with a focus just on the, on the online. They were doing a good job. They were just starting to turn the corner.
Nigel Miller: But the physical drag them down?
Kevin Moore: Yeah, because of footfall, not because of anything they were doing wrong. Remember at the same time as, as they were facing issues here, our own retailers, who are nothing to do with that sector, who had no exposure to North America or exposure to Europe were shuttering. They were going out of business.
Nigel Miller: So, in the overall story here, we’ve talked before about you applying the shopper experience physical elements to try and create emotion and attachment and all the other things in the online world. When did you start to see that working with Hobby Warehouse?
Kevin Moore: It’s very fast. So again, that’s one of the greatest things about online.
We would make a change to something. We would shoot a video. We’d boost something on Facebook. We would no matter what it was, and you could see within hours the impact. And within hours and with people who are obsessive compulsive, like you and I, Nige, and like a lot of people that we work with, that immediacy is unbelievable and you go, wow.
So let’s play with that. Let’s do that. We could do things with pricing that you can never do in physical retail. Not because you don’t know what to do, but because it takes so long to feed.
Nigel Miller: Well, that was one of your other technologies you’re involved in, which were the, shelf labels.
Kevin Moore: Yeah. So I mean the Home Depot in the USA runs the same technology that we, we sell in Australia. There was a product called Display Data and it is fantastic technology. They’ve got 2005, I think, of their stores in the US and are running this. That meant that they were able to on Black Friday and Cyber Monday, they were able to run absolutely aligned pricing in store and on their website for the four days that that was happening and then seamlessly be able to take all the pricing across the digital assets and the physical assets up in exactly the same. It’s just, and that’s the thing. And so sometimes I think people listen to what I’m saying, saying “oh, physical retail is dead”, no bad physical retail is dying. Physical retailers that can’t change and don’t have a vision. Physical retailers that don’t like Toys R Us did in Australia have a female CEO who goes, we can do this, we do this and embraces the change. I mean, it was fantastic to see.
Nigel Miller: Yeah, it was funny. Cause I was actually talking to, I always call her my goddaughter, who I’ve known since she was a couple of weeks old and is now in her thirties, today and she’s been working for a big hardware store over here called Bunning. She started in March, just at the beginning of COVID working for the digital team and they have just been
Kevin Moore: They’ve done a great job.
Nigel Miller: Exploding stuff.
Kevin Moore: So again, that was the vision of a CEO coming in saying, I’m going to do this.
Lots of uhmming and ahhing from the markets. So by the markets, I mean the financial markets. “Oh, you’re not going to invest money in that online thing and not make money are you?” And he said, you’ve got to do this and a crisis, a change. Remember Covid…
Nigel Miller: those changes are hard because a, an organization like that responds, you know, they’re basically, they’re self contained entities per store.
So you’ve got to get them to buy into the concept and you know, the same with a lot of the electronics retailers over here. If you’re a franchisee what’s in it for you for online?
Kevin Moore: So two separate issues. So the large retailers that are centrally controlled, are much, much better and have proven around the world to be much, much better in embracing online because they’re a single call to action. There’s a single purpose. They’re there to provide service to their shoppers.
When the leaders in those businesses understand that the best way they can provide that service, continuing services, is to truly embrace online, they’re away. They can put together strategies. They can roll it out across their businesses with a single purpose and people line up.
It takes a long time cause they’re big beasts to turn, but when they do turn it all comes together. And the point I was gonna make about Covid, all Covid has done is, is, is accelerate a behavioral change that was already happening. Now, not to be confused about this. We were going online in droves. And one of the things I was gonna touch on this week is in the UK, the last quarters retail sales came out. 33.4% of every pound spent in the United Kingdom was spent online, not in a category, 33.4% of every pound that came from a shopper was spent online. Now people say, Oh, that’s Covid. Great it’s Covid. So by the time the, the retailers who were not able to deal with this have close their stores, by the time that the behaviors that we’ve developed over three, four, five months become embedded in the way we shop, it’s going to drop to 31. Hmm. And then it will continue to grow it. You know, this is this isn’t going back. I still have conversations. I had a conversation with a very successful, very wealthy Australian retailer who still to this day believes that online cannot make money.
Now, the first trillionaire on, on the planet is a guy called Jeff Bezos. Guess what he does? He sells online.
But it’s a mindset. So it is unusual to find, it is now less unusual, but it has been unusual to find leaders in physical retail who genuinely believe, not because the market’s told them they should do, not because of optics, which people talk about, because they truly believe this is a way to create a great shopper experience.
If I take you back to the issue you talked about franchisees. Franchisees, it’s tough to do, you know, you’re saying there’s a centralized point of purpose and you can buy these items from a .com.au, .co.nz, .co.uk site, but that is taking away from the franchise in that postcode, that zip code. And that’s what they’re struggling with.
And, you know, for all the challenges and all the great things about franchises, is it’s a more complex model. Some are getting through it, there isn’t an obvious one that springs to mind, but now people are trying to find the way through it.
Nigel Miller: I guess the only thing I can think of on that front is, you know, people like the franchisees who take on cafe brands and stuff like that. If they get supported with. ordering online, ordering and stuff, but it’s local delivery.
Kevin Moore: Yeah, the UberEATS model, fantastic. So harnessing UberEATS and fantastic, Menulog, great. You’re absolutely right. So in that space, it’s working in the physical retailing of things, it’s tougher.
So I, again, I won’t mention the name. My mum has always said to me, we haven’t got anything nice to say, Kevin, don’t say it. And she’s 87. She’s a very powerful woman, very strong woman, frightens me at times.
But there’s a, one of the largest retailers on the planet had a terrible decline in footfall into their stores in the backend of 2019. So before COVID. Their online offering was so confusing for the shopper. I tried to shop them, I’d heard about it and I deliberately tried to shop them. Wasn’t going to buy from them.
They’re a great retailer, but I tried this out and it was absolutely true. They had this bizarre thing where their online inventory was store based. So I could be in a postcode, it could be the zip code and I could go online and the item wasn’t in that store that week. Now it was in a store 10 kilometers away, you know, six miles away.
But I wasn’t in that catchment area, so I couldn’t get it. And I went through this process of calling them each week and saying, “Is it in?”, “Just missed it”. “Is it in?” “Oh, it’s gone”. It was crazy. Now I gather they’ve now solved that and they announced we’ve now invested in our online system processes. There’s another major retail that went through an upgrade in Australia, struggled significantly. They’re a physical retailer, they’ve lost most of their competition in their sector and their online offering was rolled out and it failed. They had to roll out their previous offering. So again, it is this get the best and the brightest and pay them the most.
You can’t do that. I’ve got these guys in my business who are 20 year retailers. You can’t give me this guy’s been around guys and girls been around for 10 years and pay them more money! Pay them more money because they’re the future. They’re the future of retail.
Nigel Miller: So just going back again to what you were saying earlier with the journey with Hobby Warehouse. So Louis had the idea and the passion to build this up. What were the key milestones along the way? And where were the moments that were most stressful, but also where you began to think, “Oh, this is big!”
Kevin Moore: Ah, I think I can answer that question, and people listening who have grown businesses, they’re the same squeeze points: we have working capital, we have banks to deal with. We have supplier terms to deal with. They’re not, none of them are different. Fast-growing businesses just have issues that they face. So none of them were different, the things I’ve talked about . I think the difference with online is you can see the changes. So the problems of getting suppliers to support you, some of the biggest payment companies with payment terms, we approached them and they wouldn’t return our calls. They wouldn’t return our calls, we weren’t important. When we took on the Toys R Us and Babies R Us franchise, our phones rang off the hook. That’s just reality. You don’t mind that and you don’t go, Oh, no, because you were so mean to me.
Hey, this is about the shopper. It’s not about us. It’s not about you. It’s about the shopper. And straightaway said. Yeah. What can we do? How can we, how can we work with you? The marketplaces, likewise, absolutely work with the marketplaces. But it’s an immediacy it’s you can see when you take on a new line and when you change your pricing slightly, when you do a particularly quirky piece of social media. When we put the, the randomly put toilet gift, grab toilet paper, and those rolls into toys that went out. That was great. It just ran. When we did the free shipping for grandparents. So it became evident that grandparents would not see their grandchildren.
When you know this, I met with you with my grandchildren and your daughter, you know, 700 kilometers away. It’s the first time we seen him in six months. So it was obviously evident that grandparents couldn’t be with children. So how could we facilitate it and make it easy for them? And when we did that, again, was on trust.
The little box you tick, I’m a grandparent, tick. Anybody can tick it. So it goes back to your values, goes back to trust. And you can see those things happen. It’s good to see, you know, you gone, going the right way when you have that immediate feedback, that really fast feedback.
Nigel Miller: And were there any pivot points where you had to change direction?
Kevin Moore: Oh yeah. It’s funny the pivot points tend to be physical. What happens is you run a business and it starts to grow and your physical infrastructure outgrows the demand of shoppers. It was all nice problem to have. Yeah, it is a nice problem to have but remember when you do that, when you get those squeeze points, the first thing you do is you compromise service because you can’t get orders out fast enough, and you can’t have the range of product that you want, your teams or your pick pack dispatch teams have to learn new locations. There’s a lot of things going on. So that’s, that’s the key thing. It’s the capital to invest and to be able to have the infrastructure keep up with the demand that you’re creating.
Nigel Miller: Okay. So yesterday we had a little outing to one of your other investments, which was the new face of online retail or new face of retail, in fact. So we went across…
Kevin Moore: Went to West Burleigh. So we went about four kilometers from here. So it’s about 300 metres from one of the biggest freeway systems on the East Coast of Australia. So couriers and trucks run up and down it. What we looked at was a purpose built development of 18 warehouse/offices combined.
So the office space is above the warehouse space. Beautifully fitted out. It’s like you’re walking into an apartment. So when you go to buy these things, you actually see the fittings of the taps and the fittings of the toilet roll holders. How the kickboards are going to be, what the carpets are going to be.
This is a place where a business owner is going to spend 50, 60, 70, 80 hours a week in their business. They want to be comfortable. They’re close to the stock. When we looked at those, they’re 150 square metres, so a hundred square metres of, of warehousing space, 50 square metres of air-conditioned office space.
You can probably get between $120,000 and $150,000 worth of inventory in that space. You can turn that eight to 10 times a year. You’ve got a beautiful business, a beautiful online business that you don’t have to bring shoppers to you anymore. Shoppers come to your site and you ship to the country. You ship nationally, but you actually end up shipping internationally as well. But it is absolutely the future of retail.
Nigel Miller: And the other thing, being curbside pickup, which is getting more and more popular.
Kevin Moore: Yeah. People would pop in and then they can come and pick something up in the local area. It’s a nice to have, but the reality is it’s a self contained thing. It just took me back. I remember when people first went into retail when retail was really booming. So the mid eighties and the early nineties, and it was just the shopping malls around the world… Paco Underhill captured it all in “Why We Buy” and “The Call of the Mall” – brilliant books!
And we saw that happening when people would go and take a shop in a small strip mall or in a mini mall because they couldn’t afford to be in the big malls. And that was the domain of the, you know, the big brands, but they’d do that and they’d feed their family for 10, 15 years. They’d be retailers and they’d have giftware stores.
They’d do whatever it was. And they could do that. And then footfall declined and things changed and online came of age.