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RIP!! – Your Kids Will Be Born Into A World Without Iconic Brand Toys “R” Us



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Mar 18 2018
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Toys “R” Us is joining other companies such as Compaq, Enron, Kodak, Pan Am, Lehman Brothers, Woolworth and General Foods – iconic brands that have vanished. Although Toys “R” Us has not officially closed down, at least not yet, they’re as good as dead. Founded in 1948 by Charles P. Lazarus, the brand originally was in the business of children’s furniture.

 

The company filed for Chapter 11 bankruptcy protection in the U.S. on September 18, 2017. But on March 15, 2018, what many had feared becomes a reality – the world’s biggest toy store is officially going out of business and is in the process of closing down all 800 of its U.S. stores. Essentially 33,000 Toys “R” Us employees will soon be jobless.

 

The demise of the company, which owns or licenses 810 Toys “R” Us and Babies “R” Us stores in the United States and Puerto Rico, didn’t happen overnight though. The one-stop toy store suffers a long and slow death. Die-hard supporters point their fingers at Amazon. In reality, the toy empire collapse under its own weight – arrogance.

Charles Lazarus - Toys R Us

Armed with its status as the most important toy store in the world, Toys “R” Us refused to believe it could go bust. After all, during its heyday, it was Toys “R” Us which pushed competitors such as Lionel Kiddie City and Lionel Playworld (then the second-largest toy store chain in the United States) out of business in the 1980s and 1990s.

 

Ironically, it’s now Toys “R” Us’ turn to be pushed out of business by Amazon.com. But online stores such as Amazon wasn’t the only competitor that Toys “R” Us has lost its business to. Even against brick and mortar stores such as discount shop Wal-Mart Stores Inc., it was giving Toys “R” Us a run for its money.

 

The cocky Toys “R” Us, believing it was too big to fail, was too lazy to innovate. It also couldn’t care less about making its stores nicer and cleaner. Toys “R” Us stores were mostly boring, unlike during its heyday when kids and moms would make the stores their only destination to spent their weekend mornings – even the toys were mostly overpriced.

Toys R Us - Closing Down Sales Banners

To be fair, the toy empire did try the internet strategy during the dot-com boom. But it was clumsily done. Toys “R” Us signed a dumb and expensive partnership with Amazon in 2000, giving Amazon the exclusive rights to sell Toys “R” Us products on its website. And Toys “R” Us actually paid Amazon roughly US$50 million a year for such exclusivity – one of its kind in the world.

 

Its plan to toy around with e-commerce had proven to be a tactical mistake. The partnership had in turn helped Amazon to become a fierce competitor instead. Amazon had learned how to beat Toys “R” Us in its own game by undercutting the toymaker on price. Toys “R” Us had rested on its laurels for too long that it couldn’t think anymore.

 

Eventually, the company was acquired by three investors – KKR, Bain and Vornado – who paid US$6.6 billion (financed largely with debt) for the store in 2005. It was a gamble though. The trio saw value in its real estate, not toy business, hence the aggressive expansion in Asia. They hoped to revive the company and take it public, using those proceeds to pay down the debt.

Toys R Us - Shoppers Searching For Toys

The plan didn’t work. Annually, Toys “R” Us had to divert its cash flow to pay US$400 million just to service its more than US$5 billion in debt. Thanks to technology, kids’ interest in board games or action figures has changed, without Toys “R” Us realizing the changes of consumer spending habit. The kids have shifted to playing with computers, tablets and video games.

 

Toys “R” Us’ fate was practically sealed 6 months ago. They managed to secure a US$3.1 billion bankruptcy loan in September. But they needed a blockbuster holiday sales during the 2017 Christmas season to make it through. However, suppliers and vendors reportedly holding back on shipments unless the toy retailer is able to make cash payments on delivery.

 

Now that Toys “R” Us will be gone soon, parents suddenly realize their life could be affected too. Sure, Amazon, Wal-Mart and Target sell toys too, but shopping there is less fun than Toys “R” Us, no matter how boring Toys “R” Us has become since their glory days. Besides, those online and discount shops aren’t toy specialist like Toys “R” Us.

Toys R Us - Frozen Toys

The new generation will be born into this world without the iconic brand – Toys “R” Us – which grew up with their parents. Toys “R” Us, with US$11 billion in annual revenue and shops up to 50,000 square feet (4,600 square meters) in size, was the last major specialty toy retailer on planet Earth. The significance of Toys “R” Us cannot be underestimated.

 

Besides children, the toymaker was also the brands for Walt Disney Co that rolled out products with partner labels for blockbuster films like “Frozen” and some of the “Star Wars” series. The kids aren’t going to experience a place where there are just shelves of toys. The sight of the coming Christmas season without Toys “R” Us is simply unbearable.

 

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