Once the store can’t be relevant, they turn to the hedge funds and VCs who suck any viable path forward away from them. It is also hardly a great time for smaller toy stores as a raft of closures will dampen their entire 2018.

It’s unlikely that Toys “R” Us is going to stay afloat, and this is a big deal for those who follow the recent history of retailing. They were among the first “category killer” stores with broad assortments of a single category in a big-box format. There have been others (Linens ‘n Things, Sports Authority, etc.) but this one stands out. If you see reporting on “the Amazon effect,” it’s more complicated than that.

It’s tough to survive in a highly seasonal business like toys given the growth of e-commerce and the dominance of discounters in the same category. And there has been a generational change, where many of today’s kids are interacting with technology (smartphone apps, streaming video games) instead of the toys of a short time ago.

And one more lesson learned: A mountain of private-equity debt doesn’t help.

The liquidation of Toys “R” Us is the unfortunate but inevitable conclusion of a retailer that lost its way and forgot core retail competencies.

Even during recent store closeouts, Toys “R” Us failed to create any sense of excitement. Moreover, its so-called heavy discounts remained well above the standard prices of many rivals like Amazon and Walmart. Arguably, if Toys “R” Us can’t successfully execute a closeout and stimulate interest, then it has little to no chance of trading under normalized conditions.

Ultimately Toys “R” Us failed from the pervasive arrogance that besieges the retail sector.

No doubt Amazon will be repeatedly mentioned in light of this demise, but Toys “R” Us made their own bed. They have stuck with an outdated retail model at least two decades beyond its lifespan. Rather than investing in technology, elevating the store experience, and offering enough value to thwart competitors, they maintained a discount store atmosphere without the pricing to back it up. That opened the door for — well, everyone knows.

Lesson to be learned: last year’s business tactics no longer cut it in retail. Evolve and think of the customer. Nothing but the customer.

Studies by Bloomberg and others have shown that a number of U.S. retailers have unsustainable levels of debt, some brought on by leveraged buyouts. Others mentioned recently include Bon-Ton, Kohl’s, Claire’s, J. Crew, Nine West and Macy’s. Without the capital to adapt and reformat, it’s tough to survive.

This sad story is another example of when a company gets purchased by private equity. The stockholders make a killing and are thrilled, but the company becomes loaded up with enormous debt, killing it unless miracles take place. Who came out ahead? The stockholders involved in the original sale and the private equity firms. Who loses? All the employees, vendors, landlords and of course the customers. Was it worth it? Well, the few that made millions on the deal will say yes and, for that reason, the trend will most likely continue. Unfortunately we have seen countless times this same scenario. There’s nothing wrong with a company going private for the right reasons — meaning whoever buys them invests in them. Toys “R” Us had every opportunity years ago to crush the competition by becoming the toy store of the future with new store designs that would turn them into a store playground, allowing kids to come in and play with other kids and store associates and most importantly to try out product. What parent… Read more »

This is indeed a sad ending to a once iconic and ubiquitous toy store, and the Toys “R” Us kid in me is mourning its loss. There are many factors leading to Toys “R” Us declaring bankruptcy, which has ultimately led to the company liquidation and store closures. It will not be easy times for the 33,000 employees that will be losing their jobs. It’s easy to just point to Amazon’s online dominance and the changing consumer preferences. However, it’s far more complex than it appears. Change is constant in retail, and the big box toy store concept simply did not resonate with the latest generation, who literally has the world at their fingertips. To a generation of children, Toys “R” Us was the place of dreams where you could spend hours checking out the latest and hottest trending toys. However, the most compelling reasons to go to a toy store these days are to experience, experiment and play with the toys. Perhaps a “brand ambassador” sales associate will be there to provide expert advice… Read more »

While the company started in the late ’40s, the concept we all know took hold in the ’60s. That is a millennium for a retail concept. In fact, few companies, including big ones last that long. The Toys “R” Us concept ran its course while new ideas and new competition (online, Walmart) grabbed the the consumer’s changing behavior and tastes.

And yes, the LBO didn’t help and probably accelerated the decline. LBOs are a very dangerous game and just one hiccup can destroy the debt service projections.

Ah, the end of the toy jail. The entire financial side of the business is completely the reason why they failed, no arguments there. Retailer MUST invest to keep up with the transformation disrupting the industry.

The only thing I’ll add is that it is striking, when you walk into a Toys “R” Us today, just how bad of an experience it is — just how much consumer expectations have evolved from what used to be a totally successful model. If nothing else, the last days of the company should serve as a reminder to everyone exactly what’s at stake if you don’t change.

There’s too much blaming I see around Toys “R” Us that suggests they just didn’t “innovate.”

But clearly market manipulations, like the LBO here, are a major problem in retail. Besides LBOs of retailers, I am very concerned by the M&O fad among manufacturers. It’s nearly impossible for a retailer to carry significantly unique product when, for example, Stanley/Black & Decker and TTI owns so many of the tool brands. Consumers do not like it when all stores and all products (regardless of brand) look basically the same.

Any Toys “R” Us analysis also needs look at how the toy business changed since their heyday. When we were first buying toys for my kids, Toys “R” Us was the place. But over time Target, Walmart, Fred Meyer and many other stores dramatically expanded their toy departments. Then these other stores locked up exclusives, etc.

It’s hard to blame Toys “R” Us when the channel around them evolved rapidly in a way that eliminated the unique reasons to go shop there.

One reason Toys “R” Us failed is that they focused on price. It was all about low prices. The moment another company (as in Amazon — or any other competitor) offered a lower price, the customer left. When a customer is loyal to a company because of price, it’s just a matter of time before they shift their loyalty to a different company.

One other comment on this topic is that this may not really be the end of Toys “R” Us. It wouldn’t surprise me to see Toys “R” Us come back in the future.

Super warehouses of things — toys in this example — can’t compete with Amazon and others. Without a compelling reason to physically go to Toys “R” Us, why get out of your chair? Very sad indeed. Shareholder greed paralyzed Toys “R” Us to death and 33,000 people are losing their jobs. Very sad.

There were several factors that contributed to the demise of Toys “R” Us. Obviously, their debt situation was a significant challenge. The other big challenge was the nature of their business of selling “commodity items” that can be purchased many places which results in price pressures and disintermediation by online retailers (e.g. Amazon).

Survival of retailers selling commodity merchandise requires new approaches that differentiate your brand with personalized services and experiences. Maybe Toys “R” Us would have been more successful if they would have made their stores a destination by creating interactive experiences and events in the store. People enjoy the theater of shopping and that is the value of the physical store. Their online experience is very good … simple and easy to use as is their BOPIS but too little too late. Walmart on the physical store side, Amazon on the e-commerce side and the heavy debt load pushed them beyond the point of no return.

Excellent input by all. While I believe their debt load was the largest contributing factor (that led to their inability to invest) to their demise, it’s not the only thing. Certainly changing tastes among their core demographics (to anything electronic — games, social media, etc.), lack of vision and core business model contributed as well. To me there are few formats more conducive to winning than an amazing in-store experience — but clearly Toys “R” Us didn’t have that nor have the vision or resources to create one.

Combination of the the inability to pivot to consumer needs and the need to service the high debt load killed the company. In this case, the brand still had some cachet so perhaps parts of it can be saved, but at this point liquidation and sale is the only way to reset the business and cut the debt load.

I was wrong! Thought they could make the year. Classic case of being too much of a corporate hairball to move to next. Hopefully many lessons learned for other “box”/commodity concepts.

It’s always a shame when a retailer leaves the market. But a lot of Toys “R” Us’s issues come down to experience. Unlike a lot of retailers, they were selling products (toys) that easily lend themselves towards fun, interaction and engagement, but there was very little of that in their stores. There was no reason to go there specifically. If Lush, for example, can make soap and personal cleaning products fun and offer an enjoyable in-store experience, then a toy retailer should be able to.

Let’s take these questions one at a time. Why did TRU fail? The easy answers are too much debt, too much competition from digital retailers, poor management decisions, insufficient capital supplied by the wrong kinds of investors, etc., etc. But the real answer is that TRU and those that advised and ran it confused cost cutting with a survival strategy, failed to innovate as times and tastes changed, and lacked a cohesive creative vision of the future. Without those things, a series of cutbacks, restructuring and rounds of capitalization just add up to a death by a thousand cuts. As for what it means for the category, let’s look at what the failure of Borders and the weakening of Barnes & Noble has meant for books or what the collapse of Virgin Records, Peaches, etc., et alia, has meant for books and records. Most of the middle tier retailers collapse and creative independents survive and often thrive. I expect we will see the same pattern in toys. The answer to the last question is sort… Read more »

This is a very sad ending to a 70 year run for an iconic retailer. The child within us all must now say “farewell” to everyone’s favorite giraffe. Personally, I remember visiting Toys “R” Us as a child with my parents and the excitement it brought to wander the aisles seeing interesting toy after interesting toy. However, it’s that old experience that resulted in Toys’ “R” Us’s downfall. What I remember from those childhood days is exactly the same in-store experience I would have today, decades later The difference is that this experience could be had just as easily in Walmart or Target’s toy department. Pair that with the online Amazon experience and wrap it in an LBO bow, and you have the end of yet another famous retail brand. This is a prime example of a retailer that didn’t see the writing on the wall and failed to adapt to the changing retail scene demanded by shoppers. They relied on price to save them until shoppers realized they didn’t have the lowest price anymore.… Read more »

This is a sad day we all have to admit we saw coming for a long time. Sadder even for those of us having friends working there as I do.

But the handwriting has been there for a long time. Too much competition offering the same plus more products for far less. They were never able to stop the bleeding. And today begins the end of the end.

The private equity firms simply loaded them up with too much debt to have any flexibility to make changes in the face of a rapidly changing marketplace. This bankruptcy is not a failure of brick and mortar retail; rather, it is a failure of a financing strategy.

The big box closings of TRU unfortunately will flood the real estate market which is already facing a glut of big box closings. Unfortunate.