“I don’t wanna grow up!” A slogan heard for decades from what was the World’s Biggest Toy Store. No matter what room you were in when you heard that jingle come on the TV or radio, your ears perked up! What was the new toy Toys R Us was going to tell us about? Could there be some great sale going on? Getting gift cards and trying to figure out what game you were going to buy. The awe from walking the Lego section and seeing all the cool displays. Shopping in the R Zone for gaming accessories and finding that rare game title. Unfortunately, we may never hear that jingle again or walk those sections as Toys R Us has fallen on hard times and has declared bankruptcy. How did Toys R Us get here? What caused a beloved store of many to fall from grace? Depending on who you ask, you’ll get a different opinion.
The easy choice is Toys R Us lack the ability to get into today’s world. Kids don’t do Barbie’s, Legos, and puzzles as in years past. The company’s inability to recognize that the kids of today live in a digital realm was a major flaw. Kids want to have handheld game systems like Nintendo Switch or tablets like an iPad. Smartphones are the new walkie-talkies. You can even do puzzles and board games online! Toys R Us being reactive to changing times instead of proactive was definitely a factor.
Being left behind in the times wasn’t a choice though. Back in 2005, Toys R Us was in financial trouble and was bought out by a trio of investors (KKR, Bain, and Vornado). The total cost of purchase was $6.6 billion. The hopes of the investors were to turn the struggling chain around and expand into Asia. The fact of the matter was the investors closed down a bunch of underperforming stores to sell off the real estate and make a quick return on their investment. Full disclosure here. I was a manager at one of those closing stores and agreed with the decision to close it. The idea was to buy then sell Toys R Us in a three-year window. Once the investors could sell Toys R Us to another buyer, the company could begin to invest in online sales and updating product lines. The Toys R Us turn-around was not possible as the amount of debt that had been accrued from the sale became insurmountable. Why? Let me give you the other reason people are saying Toys R Us failed. Pricing.
With the explosion of online shopping giant Amazon and retailers like Walmart and Target pricing became ultra-competitive. The holiday time was the most important time of year for any retailer, and especially so for Toys R Us. The majority of the revenue made by Toys R Us was in that last three months of the calendar year. The competitors I named above make their money that time of year as well. The difference between Walmart and Toys R Us is the selection. Walmart has everything, from food to hardware, electronics, toys, and plenty more. Toys R Us has, well, just toys. Pricing wars would break out and Toys R Us could not compete with the price cuts an Amazon, Target, or Walmart could make. Toys did their best to stay competitive by lowering prices to match them. The one thing Toys R Us couldn’t match was the rates/prices at which the other retailers could buy from their vendors.
Heavy debt, inability to keep up with the times, combined with lost revenue. Each of these items on their own can cripple a company. Toys R Us had the bad luck to run into all three. Over 30,000 workers will be displaced and one more option for consumers to shop will be lost. The ability to share the experience you had as a child going into a toy store with your own child is lost.
Toys R Us has not officially stated a closing date. Court documents filed in certain states point to a mid-May time frame. Gift cards are good for the next 30 days.
It is with a heavy heart that I say goodbye to a childhood favorite. I say goodbye to a place I worked for and got paid to play. I say hello to the memories I will keep of World’s Biggest Toy Store. Do you have a fond memory of Toys R Us? Share your comments below.