Toys ‘R’ Us to rise from the ashes of bankruptcy, but should it?

Photo: Getty Images
Oct 04, 2018

When iconic toy retailer Toys “R” Us closed its doors earlier this year, it was a sad moment for many who grew up shopping (or begging their parents to shop) at the chain’s stores. While hope seemed lost for those individuals, it now appears that another generation of Toys “R” Us kids may be on the horizon.  

The lenders who were managing Toys “R” Us during its final moments have shifted gears, according to Bloomberg. They are no longer auctioning off the company’s assets and instead hope to reorganize them into a new company that maintains current license agreements and “can invest in new retail operating businesses.”  

But in addition to the challenges of assessing what went wrong with Toys “R” Us and trying to avoid those mistakes, the new chain will have to wrestle back share from a retail industry that moved quickly to fill the void. In the wake of the Toys “R” Us collapse, many other retailers began making moves to attract shoppers who would have otherwise gotten their toys at the chain, especially during the holidays.  

For instance, Target announced that it had increased inventory in both the toy and baby categories in light of the Toys “R” Us closure. The chain reported significantly increased sales in the second quarter for those categories.   

Party City announced in early summer that, alongside its seasonal Halloween City pop-ups, it would open Toy City pop-ups to cater to toy shoppers. 

Even Bed Bath & Beyond got in on the act, giving holders of Toys “R” Us and Babies “R” Us gift cards a brief window to exchange their gift cards from the liquidating retailers for (reduced) store credit at its locations.   

The demise of Toys “R” Us has also provoked some old names to re-enter the toy game. The current owner of the KB Toys brand, Strategic Marks, announced the impending relaunch of the chain. In March, Strategic Marks president Elia Kassoff promised that the company would have 1,000 brick-and-mortar pop-ups in place for Christmas, which will act as a springboard for a full revival.  

DISCUSSION QUESTIONS: How do you see Toys “R” Us reconstituting itself if it attempts a comeback? How likely is a reboot of Toys “R” Us to prove more successful than the retailer that went out of business earlier this year?

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"To me, it’s going to come down to one thing: the experience. "

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22 Comments on "Toys ‘R’ Us to rise from the ashes of bankruptcy, but should it?"

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Mark Ryski

I’m very skeptical about this move. The lenders couldn’t get a price for the assets they wanted, so now they are interested in reorganizing the company to be successful? While I do believe there was a window of opportunity to do this, things move fast in retail, and they have lost valuable time to re-organize the business — they laid off all their employees! I’m not sure what this effort will produce, but the probability of a successful comeback is low in my opinion.

Art Suriano
To me, it’s going to come down to one thing: the experience. If the new owners are planning to compete on price and only price, I see that is being very difficult. However, now that the old Toys “R” Us is behind us, a chain that became a dinosaur, new ideas with new strategies have a chance. If there is a new Toys “R” Us, the store needs to be the toy store of the future, such an incredible place to come and shop. The store has to be all about “experiencing” toys, opportunities to come and play with products as well as with other people, exciting and enticing promotional concepts and anything that will make the new Toys “R” Us stand aside from all toy competition. The new Toys “R” Us should also be a place for vendors to introduce new products and get instant feedback from customers who have come in to see them and try them. There are plenty of opportunities here if done correctly so only time will tell if the… Read more »
Carl Van Ostrand

Good ideas. Maybe take some of the best pages from the FAO Schwarz book.

James Tenser

Defining what constitutes the “toy store of the future” is indeed the core challenge for Toys “R” Us. Big box is over. Customer involvement will be crucial. VR gaming arenas? Collector corners? Children’s play zones? Modelling and craft studios? Suppliers like Lego, Crayola, XBox, Mattel should be tapped to co-create these experiences that mass merchants and Amazon cannot easily match. The brand may still retain some life essence, but it’s quite oxygen-starved, so the new management had better bring a heap of creativity to the operating table.

Charles Dimov

First, the new Toys “R” Us needs to make it a place that kids want to visit to try out the toys. More open box displays and play areas are a good idea. Make sure the employees want to engage the children (I know this can be challenging). Then make sure the omnichannel strategy works well. Brick-and-mortar must complement online, mobile and other digital sales channels. Then when the customer comes to pick up an item — they don’t want to stand in the cashier lineup. Make it quick and easy.
This is a second chance at making a well-known brand come back to life. Fingers crossed for the team!

Chris Petersen, PhD.

Toys “R” Us making a comeback will be a very tough slog, especially if it is carrying significant debt. In today’s “phygital” world, success requires substantial online presence, seamless integration with stores, and click and collect. Will Toys “R” Us have the capital to compete in an omnichannel world? Given the rapid expansion of other retailers in the toys and baby categories, Toys “R” Us will need to differentiate an experience in stores. Tough to do especially if you are strapped for cash. What about pop-ups? They will be everywhere this holiday. In the age of e-commerce giants and BOPIS it is very tough to be a “category killer” in a limited range of products.

Brandon Rael

While the sentimentalist and eternal Toys “R” Us kid in me would welcome this comeback, the practical business strategist side simply doesn’t see the point of the company making a comeback. The tragedy of all of this is that the opportunity to streamline and reorganize the company has long passed, and the company laid off their 30,000-plus workforce.

To simply reopen the stores with the same format and strategies is doomed to fail as the brand has long lost its luster, and the magic it once had in the hearts of minds of kids.

David Weinand

If they can start with a clean slate and build the chain in the mode of modern retail – I still believe there is a market for them. If they scale differently (e.g. grow more conservatively and let operating margin vs. pure debt help fuel growth) they could have success. Also, a fresh start technology-wise can help them become more nimble and efficient. I would suggest a smaller footprint as well with an emphasis on digital excellence but the right leadership could make this exciting to watch.

Bob Phibbs

Sorry, I just don’t get this new wave of buying out-of-favor retailers assets and then co-opting them to say you’re bringing it back. I don’t expect FAO Schwartz or whoever they are or Bon Ton or Toys “R” Us to be successful because they don’t come from anything. They’re opportunists full of hubris thinking people who actually worked and sweated and made those companies great were just naive.

Neil Saunders

I have mixed views on this.

On the one hand, I am not keen on reviving old brands. Most of them died for a reason and I think it is better to focus on bringing something new to market. This is especially so given that the retail environment is so competitive.

On the other, if Toys “R” Us is revived in a different format and rethinks its proposition it could have a chance. Many of the issues with Toys “R” Us were related to its debt, so without this and with a new offer it could succeed. But it should be under no illusions: the market is still highly competitive and those who have mopped up Toys “R” Us’s share will not cede it without a fight.

Jeff Sward

If Toys “R” Us can execute a Explore + Experiment = Experience model they have a shot, even if they only have half the locations. There should be so much for kids to experience. Make it a playground. Make it a must-visit (grand)parent/child experience. The whole debt equation may make this impossible but I think the brand can be updated and viable again, albeit on a smaller scale.

Carol Spieckerman
Carol Spieckerman
President, Spieckerman Retail
3 years 10 months ago

Although there are plenty of examples of retail revivals gone wrong at the ready, all are not created equal. In fact, one of today’s RetailWire discussion focuses on Eloquii, a brand that was shut down, then revived and subsequently bought by Walmart. Relaunches can take many forms these days and Toys “R” Us has left a big void in the toy and juvenile products space, one that many suppliers are still trying fill. Digital-only, shop-in-shops, co-located stores — all are possibilities and suppliers will be eager to support whatever is “next” for Toys “R” Us. Toys “R” Us is a globally-recognized brand. I wouldn’t bet against it.

Phil Chang

The Toys “R” Us name has some value to it, but re-constituting the brand isn’t going to equal success. I think the question is, who is resurrecting the this retailer and why? What is the new business model? We’re long past the name of a retailer making it successful — there are literally hundreds of thousands of words here on why the new retailer needs to be a different shape from what it used to be.

If it’s the same name and the same game — good luck. If it’s the same name but a different game — do you need the name?

Ed Rosenbaum

I wish my answer could be different; but I just can’t see it. If Toys “R” Us had any hope of relevance they would still be open and viable. I feel like we are revisiting a “David vs. Goliath” scene. But this time the Goliaths, in particular Amazon and now Walmart, will crush David (Toys “R” Us). The slingshot will not work this time. RIP Toys “R” Us!

Lee Peterson

If Toys “R” Us came back as a showroom store where you got to play with all the fun toys and then had them shipped to your home, I think there’s a lot there. They were smart to keep that IP, which I bet Walmart and Amazon were licking their chops for. A showroom/experience store is such a no-brainer, it’s a classic retail oversight that no one (including both of the two aforementioned behemoths) hasn’t at least tried it yet. I guess “fail fast” skipped the toy business.

Ananda Chakravarty
Despite all the negative feelings on a re-emergence of the brand, there is a great opportunity to bring back the brand in a very different form. Imagine a Vermont Teddy Bear style company selling online with a limited assortment and focused e-commerce plus a small number of new format experience stores carrying the brand. Stores like that can fetch a premium and command enormous value if they can capture their real market — kids. The new brand owners will need to find a very different type of business that goes to the origins of Toys “R” Us, as if it was a startup being bootstrapped. The debt being eliminated, it goes to the power of the Toys “R” Us brand — which I have no doubt has continued value. Parents would want to check out and find out more about the new Toys “R” Us — especially if their kids are clamoring about it. The alternative suggests that these brands carry no ongoing value in the market, which would mean marketing teams are failing at… Read more »
Shep Hyken

This is America. This is how business works. Toys “R” Us gets another shot at making it. This time, they’ll be able to go into business understanding the new landscape, which is a balance between online and on-site. They will not be strapped by low-performing stores. It’s almost like starting over, except they have a brand name they can take advantage of. I can’t predict the success of this “reboot,” but will hope the team is smart enough to know how to leverage the brand to its potential in today’s modern retail environment.

Michael La Kier

There is latent value in the Toys “R” Us brand, but it will come down to assortment and experience. People know they can get whatever toys they want almost wherever they want online. So, what will separate Toys “R” Us? If the answer is “what they did before” then this reboot should be booted!

Cate Trotter

The Toys ‘R’ Us brand name still has some power among consumers. If the company was to relaunch in a completely new way and learn from the mistakes made previously, shoppers may be won over. But if it’s going to be as it was before, then it’s a pointless endeavour. As the piece mentions, the competition is already massing — it doesn’t even mention Amazon’s toy catalogue plan — and Toys ‘R’ Us would have to pull something radically different out the bag to regain its position.

Min-Jee Hwang

Shoppers are smart, and I’m not sure they’ll be flocking back to the Toys “R” Us brand so soon. The only way this could work is if the company revamped the entire customer experience, and doing that with a limited budget, no store associates — the list goes on. If they do come back, they cannot have a similar experience to what they just were.

Ellia Kassoff
It will be interesting to see what happens. Still many scars from the BK and lots of bad memories for employees. I think they had to do something as the banks couldn’t get sufficient revenue from the assets they were trying to sell. They had pushed the asset sale back too many times and it was getting obvious. We at Kay Bee Toys have a full marketing plan to bring fun back into the toy industry and we spent time listening to consumers. While both KB and TRU lived together for about 80 years, I don’t think TRU can be considered a FUN place anymore. We still welcome them, as national toy retailers are needed for the industry — a place where small toy manufacturers and larger ones can showcase their products, place where kids can see, touch, play. The temp stores and national retailers are not in it for the long haul and will have little or no experiences for kids. Just remember one thing; toy retailing was very strong. It was private equity… Read more »
Kai Clarke

Toys ‘R’ Us does not have the demand or “need” in place to truly rise from the ashes of bankruptcy. The model it had is no longer applicable, and the cost to put in place anything even close to this model would be a poor use of funds. Add to this the already short time between now and the holidays (when the largest sales occur in this category), and we have more reasons why this company and its old model should remain in bankruptcy than why it should emerge from bankruptcy. Add further to this the recently burned suppliers who have no reason to support this model (except for a cash on delivery model), and getting aggressive pricing on new toys would seem to be almost impossible for this defunct retailer.

"To me, it’s going to come down to one thing: the experience. "

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