Last year, we looked at how Toys ‘R’ Us filed for bankruptcy after struggling for more than a decade with increasing competition and crushing debt. And while its future didn’t seem particularly bright at the time, the retailer at least had a plan in place to stay afloat in the short term. Along with taking out a massive loan to buy stock for the Christmas season, the company also claimed it had no plans to close any stores.
This relatively optimistic era has ended, however, with Toys ‘R’ Us announcing on Wednesday that it will close or sell its 800 U.S. locations as soon as possible. The retailer failed to find a buyer willing to purchase both the company and its massive pile of debt, which currently totals nearly $8 billion. Although Toys ‘R’ Us told its American employees that the closings would be done gradually, the decision could ultimately affect as many as 33,000 jobs. The retailer’s British staff are on edge as well after the company announced the shutdown of its U.K operations yesterday. Meanwhile, a toy firm called MGA Entertainment is in talks to purchase the 82 Toys ‘R’ Us stores located in Canada.
In fact, MGA also submitted a bid to buy as many as 400 Toys ‘R’ Us locations slated for closure in the U.S. “There is no toy business without Toys ‘R’ Us,” said MGA CEO Isaac Larian. “It’s a big deal and I’m going to try to salvage as much of it as possible.” The company accounts for 15 percent of toy revenue in the country, after all, which should make it an appealing investment opportunity for many firms. Despite this commanding market share, though, Toys ‘R’ Us hasn’t been able to match the low prices or convenience of competitors like Amazon and Walmart. Plus, the company’s enormous debt obligations meant it rarely had enough money left over for innovation. If potential buyers like MGA want to revive Toys ‘R’ Us, they’ll need to create a unique retail experience that is irresistible to shoppers.
“We know that customers are willing to pay more for an enjoyable experience — just look at the lines at Starbucks every day — but Toys R Us has failed to give us anything special or unique,” said brand management professor Kelly O’Keefe. “You can find more zest for life in a Walgreens.”
Questions:
- Do you think the growth of e-commerce sites like Amazon will cause more brick and mortar retailers to shut their doors?
- If MGA Entertainment purchases any Toys ‘R’ Us locations, what must the company do to revive the failing brand?
Sources: Abha Bhattarai, “Toys ‘R’ Us to Close All 800 of Its U.S. Stores,” The Washington Post, March 14, 2018; Kirsten Korosec, “Toys ‘R’ Us Has 15% of the Toy Market And It’s Still Going Under. Here’s Why,” Fortune, March 9, 2018. Photo by Raysonho.
