Use Crisis as Opportunity
I remember 15 years ago, when I briefly resided in Korea, I came across a unique distribution system for the first time. When I went to buy a digital camera at a store, my colleague suggested I buy it online, and after searching, I found the same product for a cheaper price online. At first, I had my doubts whether it was genuine, but when I verified that it was the genuine product, I bought it online for a cheaper price. From then on, I started searching online whenever I needed to purchase another product.
However, since there was the disadvantage that I could not physically check the product online, I had to go to the store to check out the product in person. Since I did this continuously when ordering online, I wondered how the offline market would fare in the future with this type of distribution system. It would be a huge blow to the offline market if the distribution phase is minimized to reduce unnecessary expenditures resulting in a lower unit price. I believed it would just be a matter of time when businesses with big stores would be ruined. I did not forget this experience and started online sales immediately upon returning to Canada.
After 15 years, Toys R Us filed for bankruptcy and has started to close their stores. There are certainly a variety of reasons for the decline of Toys R Us, including that as smart devices emerged, fewer children were playing with toys and declining birth rates were making a large impact. However, I believe that it is the result of a delayed response to the digital age that has been long-anticipated. One of the biggest problems with offline sales is the rent, but it not simply due to rental costs. I am pointing out my long-time experience in Korea of going to a physical store, checking the merchandise, and ultimately ordering online. In fact, a couple of months ago, I went to a Toys R Us to buy a bicycle for my daughter. She tried out the bike, found it satisfying, and I ended up ordering it from Amazon. As the saying goes, one does all the work and another takes the credit. Amazon does not have a showroom, but Toys R Us was able to provide this.
Nothing can be done about offline stores incurring not only rental expenses but operating expenses as well as fixed costs. Since they cannot compete with online prices, recent performances have inevitably been sluggish. So, does this mean that offline stores will all collapse in the future? We can see examples of businesses that have made a distinct advantage of operating offline. Best Buy is one of North America’s largest distribution enterprises.
Even just a few years ago, Best Buy was being pushed aside by the online market and its store sales were sharply declining. However, unlike other offline retailers, they pulled out their innovation card. They realized they could not compete with online companies, such as Amazon, on pricing but on the other hand, they used the strengths they had as an offline company that online companies did not have and it led to customers physically going to their stores. They used the omni-channel strategy. Omni-channel, which combines omni (of all things) and channel (referring to the distribution channel), breaks the boundary between online and offline, allowing consumers to buy products whenever and wherever they are. In fact, Best Buy does not consider offline stores as spaces that merely generate expenses but defines it as an efficient asset that can create a customer experience, offer efficient delivery services, and create a space where consumers can receive the products they ordered online directly from the offline stores. Additionally, the consumers can physically touch these products and have an experience they cannot have online, therefore possibly leading to more sales.
“Success is not final, failure is not fatal: it is the courage to continue that counts.”
When crisis approached, Best Buy was able to adapt to the changing times, but Toys R Us did not. Although they were faced with the same crisis, Toys R Us failed because of their shortcomings, but Best Buy succeeded in turning their disadvantages into advantages.
Even at this moment, trends are rapidly changing, and crises may continue to come in the future. However, if you do your best in each moment and are on the offensive or are flexible to change, that crisis can become a stage to growth.