Toys R Us - Feedback on the Game Console commission changes

[Miche]

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Hi - I have posted this message on behalf of Toys R Us, as they have
applied to the forum today and cannot post themselves until they're approved

kind regards
Michelle
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Thanks to everyone who has commented on this.

Many consoles, not just Wii, will be in short supply this Xmas and we are doing everything we can with suppliers to secure as much stock as possible. We sell many of the consoles we receive within minutes in the case of Wii, and hours in the case of most of the others particularly NDS. Video Games has always been a low margin area for us, but this year has been the most challenging yet, so much so that when we looked at the numbers after commissions and costs, margins are indeed eroded. We don’t buy in $ either as one affiliates comment implies. While in previous years we may have been able to level out overall, that has not been the case this year and that is how we have come to the difficult decision on console commission. Our overall commission is again what we can afford as a business – margins are extremely tight.

I would have loved to have contacted you all personally but this was not physically possible. I did however contact a couple of affiliates who have given us the most console sales to explain the situation. Everyone (although obviously disappointed) understood why Toys R Us felt we needed to follow other retailers in this decision this year. We have relied on our network to help and advise us on the best way of handling this situation but it still seems that between us we should have done more to explain the situation to you and an understanding of a suitable time period.

There is another issue I should comment on here too. The reason I raise this is just to show an example of where we need to work together. We have had 2 very successful affiliates who have been running a stock check on Wii consoles. We obviously congratulate them on their ingenuity to set up such great customer service tools but they have caused us challenges. Last time we were in stock of Wii consoles these stock checks caused such high visitor volumes in the space of a few minutes that the site had serious problems (as it coincides with the Christmas peak period) and this does obviously not benefit any of the affiliates, us or our customers when this happens.

We clearly need to work much smarter together to get the best from the scheme. We understand your comments and appreciate your constructive feedback and will continue to look at ways to improve our proposition.

We have many topics for review for 2008. We currently only have one commission on everything except consoles which is very limiting for you and us so we are not able to counteract commission in another product area. We are also currently one of the merchants who has a budget set at the beginning of the year and has to work hard to prove the case for more in this budget year on year – this has a knock on effect of not being able to currently offer PPC. This makes the scheme from our side difficult to control, we want to build, but we need to build within budget. I’d like to use this as an opportunity for us to get feedback from you of what other things we could do with our scheme – please email me at truweb@toysrus.com with a subject line of Toys R Us Affiliate Scheme and I will review these. I obviously can’t promise on what we will be able to deliver but we will be open to all your views.

Lastly, to clarify, we will honour all 30 day cookie based commissions on consoles/bundles prior to our cut off period and apologies for promoting a DS Lite deal the day before our decision. This was purely circumstance that the following day we had to make this decision.

Larissa Gallagher
eCommerce Head of Marketing & Product Strategy

[John Jupp]

Originally Posted by Miche Many consoles, not just Wii, will be in short supply this Xmas and we are doing everything we can with suppliers to secure as much stock as possible. We sell many of the consoles we receive within minutes in the case of Wii, and hours in the case of most of the others particularly NDS. Video Games has always been a low margin area for us, but this year has been the most challenging yet, so much so that when we looked at the numbers after commissions and costs, margins are indeed eroded. We don’t buy in $ either as one affiliates comment implies. While in previous years we may have been able to level out overall, that has not been the case this year and that is how we have come to the difficult decision on console commission. Our overall commission is again what we can afford as a business – margins are extremely tight. We have had 2 very successful affiliates who have been running a stock check on Wii consoles. We obviously congratulate them on their ingenuity to set up such great customer service tools but they have caused us challenges. Last time we were in stock of Wii consoles these stock checks caused such high visitor volumes in the space of a few minutes that the site had serious problems (as it coincides with the Christmas peak period) and this does obviously not benefit any of the affiliates, us or our customers when this happens.

If your buyers department hunted around they could buy in $. It doesn't matter even if you buy in £'s. You have taken a corporate decision to retail at a certain price for low margin products. Everyone is feeling the pinch and sometimes margins can be squeezed, but zero commissions on products is not a good way to go.

As for commending then complaining that two affiliates (and well done on their sites, brilliant job) send too much traffic because they inform customers when you and other retailers have stock quite frankly is the most lame excuse I have ever read. Get a better server and more RAM. Or is it because customers go to their highly rated websites, see you and others have the product they want in stock and click through the affiliate link to you? Either you want the referrals or you don't. Make your mind up.

[amcd78]

First of all Larissa, welcome to the forum and I'm glad that you are opening communication channels with affiliates. Please refer back to the Toys R Us email informing us of this commission change.

The limited stock volumes and zero margins on these products mean that a loss is made for each of these sales, and unfortunately this cannot be sustained.

I just don’t understand the timing of this announcement. What has changed? Please help us to understand this, because in my opinion, there are just a few things that don't add up.

The Nintendo Wii has been on the market for almost a year. It has taken Toys R Us a year to realise that they are losing money on Wii consoles. Losing money on every console that you sell? Furthermore, Toys R Us are not selling the console on its own and tend to bundle it will games (generally unpopular ones at that). So, what you are saying is that Toys R Us are losing money and have been for the past year on Wii bundles priced at £250 -£300.

Just to be clear, Toys R Us are unable to make a profit off these Nintendo products, and have not been able for almost a year?

Remember, we are talking about selling over the internet – the cheapest route to market, no bricks and mortar and all that. So presumably, Toys R Us are losing money for Nintendo products instore either ?? I mean, all the additional overheads that come with stores??

To be honest, I just don’t believe this is the case. I don’t believe, that given the buying power of Toys R Us, (a worldwide organisation), they have put a product on the shelf that is making a loss, and it has taken them a whole year to realise this. It just doesn’t make sense. (If you were offering the Wiis as a loss leader, then why have you not announced this during a period of high stock availability – with limited stock, surely the losses are smaller.)

However, as I say, I just don’t accept Toys R Us are making a loss.

So that brings back to the other component of the Toys R Us email, and my question “What has changed? Why now?”.

“The limited stock volumes....”

So, if we assume that Toys R Us are not incompetent, and are making a profit on Nintendo Wiis, it is really that the limited stock volumes are been the driver behind their decision to reduce commission levels.

I think my criticism also extends to other retailers who have followed this route. I just think this shows a complete disregard for the work that affiliates do, and I also find it slightly patronising when we are given excuses like this. Just tell us the real reason behind this.

Also, I am looking forward to when there is full stock availability and see the response that these merchants take, when they are having to work a lot harder for sales.

[leveldisc]

Broadening the discussion a little...

I understand the general policies on Wii commission - I don't like it, but I understand it.

But ...

I don't understand Toys R Us, blanket ban on all PPC traffic.

It means I actively don't promote Toys R Us!

They are just completely excluded from any PPC activity. I wish it I had a choice, but they would zero any commission from PPC activity.

[ian]

I read it as...they have a fixed budget and can use it up via content affiliates. Adding ppc affiliates to the mix would bust the budget and result in suspension.