Development of a CSR strategy for Toys R Us Germany

Content

1. General Information about Toys"R"Us

2. Retail Industry in Germany
2.1 General Information about the German Retail Industry
2.2 Most Dominant Stakeholders in the Retail Industry
2.3 Main CSR Issues and the CSR Performance of this Industry

3. Development of a CSR Strategy for Toys"R"Us Germany
3.1 Toys"R"Us Germany and Toys"R"Us Inc. in terms of CSR Performance
3.2 CSR Strategy for Toys"R"Us Germany
3.3 The Main Challenges and a Critical Assessment of the Implications of the Recommended CSR Strategy

4. Conclusion

References

1. General Information about Toys"R"Us

In 1948 the toy and baby products retailer Toys“R”Us, Inc., headquartered in Wayne, New

Jersey, was founded. It offers a wide range of products, including toys, learning aids and children’s apparel. Today the company employs 70,000 people in more than 1,700 stores in 37 countries. In Europe, Toys“R”Us, Inc., operates in Austria, France, Germany, Poland, Portugal, Spain, Switzerland and UK (Toys"R"Us, Inc., 2014a). In Germany, Toys“R”Us GmbH (= Toys“R”Us Germany in this paper) was established in 1986 and nowadays ranks with 66 stores, about 1,000 employees and a turnover of EUR 330 million among the biggest toy retailers (Toys"R"Us Germany, 2014a; Bürgel Wirtschaftsinformationen, 2014). In 2014 Toys“R”Us, Inc., launched the strategy “TRU Transformation” to ensure growth and to better implement their mission, bringing joy into lives of their customers. The strategy includes three guiding principles (Easy, Expert and Fair): “We will be the EASIEST place in the world to find solutions at FAIR prices for kids and babies because we are EXPERTS and understand the joys and challenges of parenting" (Toys"R"Us, Inc., 2014a). The focus of this paper lies on Toys“R”Us Germany operating in the retail sector.

2. Retail Industry in Germany

2.1 General Information about the German Retail Industry

In 2012 three million people were employed in the German retail business, which is the third largest German economic sector, with sales of EUR 428 billion (Reink, 2014). It can be divided into food (e.g. Aldi), apparel (e.g. H&M), online (e.g. amazon), electronics (e.g. Saturn), furniture retail (e.g. IKEA), drugstores (e.g. dm) and others. Consumers spend 40 percent (EUR 166 billion net sales) of their purchasing power on food while only two percent are spent on toys and hobbies (Bitting, Marschner, Verbeet, 2013; Federal Statistical Office, 2014a). The main costs in the German retail business in 2012 (in percent of the total expenses) included commodities (70 %) and salaries (13 %) (Federal Statistical Office, 2014b) while marketing presented a core investment (HDE, 2014a).

In 2012 approximately 3,400 companies existed in toy retail (Federal Statistical Office, 2014c) whereby most toys were sold in specialized shops (38 %), the Internet (27 %), consumer markets (14 %) and warehouses (10 %) (German Association of Toy and Game Retailers, 2013). Although Germany ranks among the leading toy manufacturer countries in Europe (TIE, 2011a) toys at a value of EUR two billion were imported in 2013 (Federal Statistical Office, 2014d). Thereby 94 percent of the toy products bought from non-EU countries came from Asia, especially China (TIE, 2011b). This is of importance as most of the products being recalled were manufactured in China (Anwar, 2014). Products bought most in Germany are Playmobil (18 %), games and puzzles (16 %), model railways and wheeled toys as well as LEGO (15 % each) (Focus, 2012).

2.2 Most Dominant Stakeholders in the Retail Industry

Corporate social responsibility strategies need to consider the interests of various stakeholders (Sharma, Starik, 2004) but “the vehemence of a stakeholder group does not necessarily signify the importance of an issue - either to the company or to the world” (Porter, Kramer, 2006, p. 4). Therefore it is essential to identify the major stakeholders in the retail sector. Freeman (2010, p. 46) described stakeholders as “any group or individual who can affect or is affected by the achievement of the organization’s objectives” and differentiates between primary (communities, customers, employees, suppliers, financiers) and secondary (government, competitors, media, consumer advocate groups and special interest groups) stakeholders (Freeman, Harrison, Wicks, 2007, p. 7). Referring to Buttkus and Neugebauer (2012) the most important stakeholders in retail are 1. Internal stakeholders (e.g. employees), 2. Economical stakeholder (e.g. customers, suppliers), 3. Special interest groups (e.g. environmental organizations) and 4.Communities (e.g. society). They state that consumers are said to be the stakeholders with the highest relevance.

2.3 Main CSR Issues and the CSR Performance of this Industry

The main CSR issues in the retail business are identified by analyzing the expert opinion of Stefan Genth, managing director of the German Retail Federation (rheinischer-edhv, 2007), as well as by looking at Buttkus and Neugebauer’s (2012) description of consumer expectations. In the following, Genth’s issues are listed and complemented by Buttkus and Neugebauer’s suggestions (in brackets): 1. Responsible product politic and sustainable consumption (regional and sustainable products), 2. Working conditions (sustainable employing politic, trainings), 3. International supply chains (working conditions, wages), 4. Environmental protection and efficient logistics (waste and energy management), 5. Society (openness and transparence, social engagement, open information politics). On top of that, Buttkus and Neugebauer (2012) found that the company philosophy shall be orientated towards social and ecological issues. To conclude, one can say that the five main CSR issues are similar in 2007 and in 2012: 1. Product politic, 2. Working conditions, 3. Supply chain management (SCM), 4. Environment and 5. Society. The European commission (2013) informed that toys are the second most announced product category presenting a risk for health and security (19 % of recalls) after clothes (34 % of recalls), which highlights the relevance of product safety. Research also states that recalls lead to consumer frustrations, negative publicity, loss of brand value and legal actions (Anwar, 2014). Furthermore, the headlines about employee monitoring at e.g. Lidl over the past years show the importance of working conditions.

Concerning the CSR performance, many retail companies still tend to focus on economical issues and little on social and ethical questions. Even today there are no uniform CSR standards and benchmarks. That is why some implement their own initiatives, while others present codes of conducts with a focus on audit of suppliers (Buttkus, Neugebauer, 2012). In Table 1, big retailers selling toys in Germany are listed alongside their CSR activities¹ and stakeholders they address. None of the listed companies (drugstores, warehouses, specialized shops, manufacturers) has a CSR report although most of them consider CSR, especially the above mentioned main CSR topics and stakeholders identified in 2.2.

Abbildung in dieser Leseprobe nicht enthalten.

Table 1: CSR Activities of Retailers in Germany

3. Development of a CSR Strategy for Toys"R"Us Germany

3.1 Toys"R"Us Germany and Toys"R"Us Inc. in terms of CSR Performance

Toys"R"Us Germany understands responsibility as meeting the needs of children and their parents by offering easy accessible markets with enough parking spots, generous and well- arranged shop space, friendly employees, a vast selection of offers and an outstanding price- performance ratio (Toys"R"Us Germany, 2014b). This fits with its TRU transformation strategy mentioned in chapter 1 and indicates that the focus is still on economic and legal responsibility rather than on ethical and philanthropic goals (Carroll, 1991). Furthermore Toys"R"Us Germany neither has a CSR report nor a link about “CSR” on their website. Yet the company mentions two CSR related topics without explicitly naming it CSR: First, by product safety they mean offering products that comply with European security rules, recalling them in case of safety concerns and giving advice about the safety of toys to their customers. Second, the company supports children’s charities, e.g. Ronald McDonald House Charities and SOS Children’s Village (Toys”R”Us, Inc., 2014b). Overall, that commitment is rather weak as Toys”R”Us GmbH mainly focuses on calls for donations. Concerning their employees, Toys“R“Us Germany claims to offer “optimal training”, but hardly any additional benefits (Toys”R”Us Germany, 2014c).

All in all, one can say that Toys"R"Us GmbH has neither developed a CSR strategy nor do they care a lot about society and environment. The two pillars of engagement, product safety and donations, are small and product safety is even required by law. One gets the impression that the company does not intend to integrate CSR in their daily business as even small initiatives, such as donations, are announced in short press releases instead of publishing them under the children’s charities topic on their website. In contrast, the parent company Toys”R”Us, Inc., supports less fortunate kids, military families and the Special Olympics. Moreover, they have volunteering programs and the Geoffrey Fund, which is used to provide monetary assistance to employees affected by personal distress (Toys"R"Us, Inc., 2014b). Additionally, a Toy Guide is made available for customers with disabled children (Toys"R"Us, Inc., 2014c). Toys"R"Us Germany should consider copying some of their parent company’s CSR activities.

3.2 CSR Strategy for Toys"R"Us Germany

“No business can solve all of society’s problems or bear the cost of doing so. Instead, each company must select issues that intersect with its particular business” (Porter, Kramer, p. 6). Therefore by means of the information collected and provided in the previous chapters, the most relevant social issues for retailers are analyzed. Aldi Süd serves as a role model as it has, in contrast to Toys”R”Us GmbH, a reasonable CSR strategy which emphasizes important stakeholders and addresses main CSR issues in retail.

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¹ Due to the limited space available, Table 1 represents a non-exhaustive list of German toy retailers. Kaufhof and Karstadt represent warehouses, Müller rates as a drugstore, mytoys is an online retailer while Lego ranks among manufacturers with own shops whereas Rofu Kinderland and babyone are specialized shops.