Bankruptcy to Resurgence? What’s Next for Toys ‘R’ Us
The rise of ecommerce has proven to be the worst nightmare for countless retail stores. In 2016, it was recorded that 79% of consumers shopped online. That stat was up from 22% in 2000 (Perez). Although there are many benefits to e-commerce such as accessibility and convenience, it comes at a cost. Brick-and-Mortar stores have been hit hard by the rise in popularity of e-commerce. Toys ‘R’ Us is a prime example of this increasingly common epidemic. The toy company filed for bankruptcy in 2017, which led them to close down all 735 of their retail shops in the United States. A newly formed company, Tru Kids, recently purchased the assets for the Toys ‘R’ Us, Babies ‘R’ Us, and Geoffrey products. They plan to rejuvenate the brand with new ideas and strategies to help them overcome the struggles presented by online retail.
A major goal for this new company is to promote the ideal “omni channel” experience. Basically, what this means is that they want to establish a solid online platform as well as the opportunity to go to a location if the consumer feels the need to do so. They will attempt to slowly add retail stores back into circulation in the United States. Richard Barry, the company’s new president and CEO, believes that there is still much to offer in terms of physical stores. The group looks to create a new platform that has not yet been disclosed to the public. Barry stated, “We're working 24 hours a day, 7 days a week to bring it to life. At this point we're not ready to commit to what that might look like (CNN).” Barry also revealed that they are talking to many retailers and tech companies about possible alliances in the future, to help maximize their profits.
Ironically, Toys ‘R’ Us still operates over 800 stores outside the United States. The company plans to open another 70 international stores this year alone (Associated Press). The fact that there are still so many retail stores open outside the United States suggests that shopping habits differ internationally. In 2018, the United States spent in excess of $504 billion while online shopping. Canada, by comparison, generates only $40 billion in e-commerce sales (Duncan) and currently has over 80 Toys ‘R’ Us retail stores in operation generating over $1 billion in sales. With the United States doing over 12x as much online shopping as Canada it is not hard to understand why the Toys ‘R’ Us management team has decided to choose the stores outside the US to remain open. It will be interesting to see how the rise of Amazon and other mass online retailers affects the decisions that their management team will make.
Toy suppliers, such as Hasbro and Mattel, took some of the biggest hits from the collapse of the Toys ‘R’ Us company. Mattel was forced to cut 2200 jobs last year, and they claimed that the demise of the major toy chain was the culprit. In the 3rd quarter, when Toys ‘R’ Us completed their process of eliminating stores, Mattel saw a 14% decline in sales, equating to a $841 million decline in revenue (Horowitz). When the final revenue results came in for 2018, they saw a drop of almost a half a billion dollars from the previous year ($370 million). These numbers demonstrate that the decline of Toys ‘R’ Us has a far-reaching impact. These toy companies relied on the retailer to promote their products and suffered a domino effect when the retailer failed.
What Should They Do Next?
Technology is having more and more of an impact on everyone’s daily lives. Each year we see ways that companies use technology to cut costs and make it more efficient for the consumer. The ultimate reason for the demise of Toys ‘R’ Us was a failure to recognize market trends and keep up with times. As they attempt to reinvent their business and open up new stores in the United States, they must provide an incentive for customers to enter the stores and not shop online. The new stores should add interactive options and other promotions to make consumers want to go to the store. Food courts, toy sampling, and even birthday parties should be investigated by the new investors. If the investors can manage to provide an incentive for the parents and children to want to go to the brick-and-mortar store rather than buying online, it may turn out to be a profitable business decision in the long run.
Associated Press. “Toys R Us Plans to Relaunch through Tru Kids.” FOX59, FOX59, 17 Feb. 2019, www.fox59.com/2019/02/17/toys-r-us-plans-to-relaunch-through-tru-kids/.
CNN. “Toys 'R' Us Wants to Return to the United States.” WTVA News, 2019, www.wtva.com/content/news/505681382.html.
Duncan, Eric. “Topic: E-Commerce in Canada.” Statista, Statista, www.statista.com/topics/2728/e-commerce-in-canada/.
Horowitz, Julia. “Mattel Is Laying off More than 2,200 Workers after Toys 'R' Us Went Bankrupt.” CNNMoney, Cable News Network, 2018, www.money.cnn.com/2018/07/25/news/companies/mattel-layoffs/index.html.
Perez, Sarah. “79 Percent of Americans Now Shop Online, but It's Cost More than Convenience That Sways Them.” TechCrunch, TechCrunch, 19 Dec. 2016, www.techcrunch.com/2016/12/19/79-percent-of-americans-now-shop-online-but-its-cost-more-than-convenience-that-sways-them/.