August 18, 2004

Nothing R Us

Last week, the news came out that Toys R Us is planning to sell off its toy business. This sounds like a businessplan by Magritte: Ceci n’est pas un toy store.

This would turn Toys R Us into Babies R Us, which is apparently the only thing they’re doing that’s making a profit. The explanation offered by most analysts was that the company couldn’t keep up with Wal-Mart and other huge superstore discounters.

No doubt some companies do just plain old get beaten at their own game by a new player who does it better, but many just fumble the ball all by themselves. Toys R Us might be about to get out of the toy business simply because they’re really bad at it. I’ve had to spend more time in their hallowed halls than I might like in recent years, and the simple truth is, they suck. Their stores are usually dirty and badly laid out. Finding a clerk to ring you out—don’t even think of asking for help with the merchandise—can be a real chore. Their selection of merchandise is spotty and inconsistent.

Their ecommerce division is even worse. The Toys R Us neightborhood of is the one domain of Amazon’s that is almost guaranteed to have problems. I’ve given up ordering from them. (I’ve tried getting things for my daughter and also (blush) action figures for my own collection.) They suddenly cancel open orders or allow you to order goods they don’t have and never intend to get, even when you can find the things you ordered if you go to a brick-and-mortar store.

I can think of a lot of other retailers that have sabotaged themselves pretty effectively. Our local supermarket, Genuardi’s, is a great example. When it opened near us, we were very happy. Before that, when I first arrived at Swarthmore, the nearest grocers were uniformly horrible, and then Genuardi's came and saved the day. At first, the Genuardi’s was a smallish chain with high standards, but not a gourmet or boutique grocer like Wholefoods. It was well-kept, well-managed, good quality ordinary produce and meats.

Then Safeway bought out Genuardi’s and proceeded to pretty well destroy it. The worst thing they did was to aggressively move in a big line of their own branded generics in every part of the store, removing many brands previously stocked. This unsurprisingly drove many customers away, particularly because the Safeway brand was often inferior. I quickly got to the point that I wouldn’t buy it even when it was actually pretty good, just out of annoyance. The meat and produce standards went way down. Many brands of goods I rely on and buy regularly began to be stocked inconsistently. The whole store was reorganized for no particular reason. Safeway has apologized to its Genuardi’s customers, but I haven’t seen any actual changes to the stores themselves—if anything, standards have gone down even further since 2002. Nor have they brought back many brands that customers want. I actually tried calling their complaints line once to report specific brand absences—a phone number advertised on "apology" banners within the store—and got buried in an automated phone maze, which I took to be deliberate.

I suppose in terms of “competition”, this is what tennis players call an “unforced error”. If Toys R Us were a better toy store, I think they wouldn’t have so much of a problem with Wal-Mart. Since they suck, most people figure, “Why not go to Target or Wal-Mart? It isn’t like Toys R Us is more reliable, or cheaper, or even especially fun to walk around and shop in.” If Safeway had just bought Genuardi’s and left it alone, or added product without subtracting others, they’d be doing great. But some corporate wizard decided that if you dump product lines and replace them with your own, you double-dip your profits. Not if people stop buying altogether: Genuardi’s hasn’t sold a single cold-cut to me since they dumped Boar’s Head for their own inferior Safeway brand. (Yeah, I know the official line: they didn’t dump Boar’s Head, Boar’s Head withdrew when Safeway stuck its own line in. Amounts to the same thing: Safeway chose to push their crap on me at the cost of letting me buy the brand I want.) When you make me go to two or three or four stores in order to get what I feel is minimum acceptable quality, you make me start looking for a comprehensive alternative, besides losing all that business.

I always find it amusing when someone claims that privatizing a government service will make it more efficient and responsive. What they’re confusing is the abstract efficiencies that market mechanisms and competition produce—which I agree they do produce—and the internal organizational character of corporations. Corporations are often inefficient, lumbering bureaucracies no different from government bureaucracies in their ability to make, conceal and mendaciously defend bad decisions, no different in the way they allow middle-managers of few talents to fumble the ball and screw up the lives of thousands of employees, not to mention disrupt the everyday existence of numerous customers. Dilbert was funny for a reason (before it got stale and old): because that’s the way most corporations are, really are. At some moments, “Office Space” is more documentary than fiction. The interesting thing is, capitalist idealism aside, a giant lumbering company can fester to the brim with dysfunctional crap and still survive on a combination of inertia, accumulated capital and crony capitalist manipulation of public policy for decades.

Yes, there are business failures that I think are much more mechanistic, much less contingent. Krispy Kreme is clearly struggling with an overly rapid pace of expansion; the same thing happened to Boston Market a while back. There’s a kind of automatic, unplanned character to that sort of problem: it’s like bread dough rising too much when you put in too much yeast.

Yes, there are smart companies that simply outmaneuver and destroy their rivals by being smarter and better when their rivals haven’t done anything particularly wrong. (Or by being more ruthless and amoral, like Wal-Mart is with their employment policies. That’s something Wal-Mart can’t just wash away by giving money to NPR.)
But I think a lot of business problems incubate in the dysfunctionality and unresponsiveness of corporations as social institutions. There’s no reason to prefer them to government bureaucracies—in fact, they’re much worse, because as “private” institutions, they can hide information about their own incompetence and malfeasance much more effectively.

I’ve thought about this a little in some more formal and scholarly contexts. The business-case method favored in MBA programs pays a lot of attention to failure as well as success, and a lot of business consultation touts reorganization and innovation (sometimes in ways that simply creates a new layer of middle-management crap to interfere with common sense). It seems to me that a lot of economic history, business history, history of advertising and related fields could do the same. One of the things we don’t study enough is failure, and when we do, we tend to study huge, messy, Enron-level earth-shaking failures. But I suspect the smaller failures—the ad campaign that falls flat, the marketing decision that goes haywire, the product line that dies on the vine, the business venture that sprouts and goes to mold within two years—are by far the more compelling thing to study, and could introduce a healthy dose of contingency and agency to both the orthodox core of business and economic history and to left-leaning critiques of the history of capitalism. I even think there's considerable room for a quasi-Foucauldian take on the history of the corporation as institution: Dilbert and "Office Space" are already half-way there, as are John Bruce's tales of corporate bureaucracy.