Troubled Toys ’R’ Us’ retail experience is outdated: Shopify CEO Lütke

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Shopify CEO Tobi Lütke gives a fireside chat alongside Marcie Murray, head of merchant support, at the finale of the firm's Shop Classes series. Photo by Craig Lord.

Speaking to a crowd of aspiring merchants on Wednesday night, Shopify CEO Tobi Lütke advised them not to let their customers’ retail experiences fall by the wayside, lest their businesses end up like the ill-fated Toys ‘R’ Us.

The global toy brand announced this week it would file for Chapter 11 bankruptcy protection in the United States as it seeks a plan to restructure the $5-billion debt on its balance sheet. Toys ‘R’ Us Canada was granted creditor protection by Ontario Superior Court on Tuesday, adding in court documents that it was still performing well financially.

Still, the chief executive of Ottawa’s e-commerce giant smells blood in the water. Mr. Lütke borrowed a line from his chief product officer Craig Miller when he told merchants gathered for the firm’s small business workshop that the retail industry is having its “Napster moment.”

When Napster debuted, it disrupted the music industry by changing consumers’ experiences, Mr. Lütke said. Cost savings aside, the convenience of downloading music – even illegally – trumped the old model of physical CDs. Today, the industry has caught up with streaming services such as Apple Music and Spotify – companies that had little to nothing to do with music before taking their enormous market shares.

Online shopping, led by firms such as Amazon and Shopify itself, is the disruption of convenience threatening brick-and-mortar retail.

“We are going to look back in 20 years at big-box retailers and what they got away with … it’s going to look as insane as now, watching movies from 20, 30 years ago and watching parents smoke in the front of the car,” Mr. Lütke said.

There are three pillars for retail, of which a minimum of two are needed to build a business, he said: solution, value and experience. Toys 'R' Us has value, but its big-box solution has become outdated with the rise of e-commerce.

Mr. Lütke argued quite passionately that the store never provided the third pillar, an enjoyable shopping experience. He said linoleum floors, rows of boxes and shelves and “obnoxious” distractions were not in keeping with what a toy store should, at its core, be: fun.

“How insane is it to go to a store that sells probably the most exciting thing … and you go into this space, and it looks like you’re selling tombstones,” he said to crowd laughter. “They ignored experience, and the solution became irrelevant.”

Mr. Lütke’s fireside chat marked the close of Shopify’s Shop Classes, a series of touring workshops around Canada. The firm’s retail gurus met with merchants and prospective entrepreneurs in multiple cities to help Canadians with tips for getting started and for marketing their businesses.

With files from Canadian Press.