Walking the aisles of a big branch of Toys R Us at Xmas is like being in the engine room of a battleship at speed. It’s not pretty but everything is in its place and the bloody thing works. You can practically hear the purposeful thrum of capitalism in action. The tills ping and the point of sale demos hiss steam. Stokers replenish shelves with practiced grace. I think that’s enough naval analogies for now.
Anyway, the place is a machine. This is what it must have been like for Friederich Engels to walk the mill floors of nineteenth Century Manchester. There’s a mix of dread and awe. These hyper-efficient sheds are probably the apogee of the industrial model of retail commerce that he saw being born. We’ll probably never get any better at wrangling the shiny product of a 10,000 mile supply chain into the boot of a Ford Fiesta by the North Circular.
For box shifters like Toys R Us margins are a vanishing memory and competition from lower-cost channels is corrosive and unremitting (I’m thinking U-Boats). Store closures, mergers and… er… sinkings are speeding up. Everything rests on the December numbers. The prospect of a bad Xmas in a big outlet must be enough to make a store manager weep quietly into her steaming mug of Bovril (as she paces the bridge in the half light of a steely North Atlantic dawn, probably – sorry).
The big big U.S. players are now making as much if not more money selling extended warranties and similar products (like slotting fees) than they do selling actual products. The offering of products is done at or near cost.
Try going to a BestBuy in the U.S. and buying a flat screen TV and saying ‘no thanks’ to the 3-year warranty. They will treat you like a shoplifter!
Those extended warranties are a big deal her too, although pressure from consumer organisations has made them tougher to sell. Also, in the UK, you can now buy repair cover for the applicances in your house from your insurance company (or from British Gas) much more cheaply so that model is basically dead… Poor sods.