End of an Era: Toys R Us Closing

The last few years have been difficult for Toys R Us. The giant toy-store chain was already in the process of closing one-fifth of its locations after filing for bankruptcy protection last year. This week the company announced that it plans to sell or close all 800 of its U.S. stores after nearly seven decades in business. Deal-savvy consumers may be disappointed to learn there is no timeline yet for going-out-of-business or liquidation sales – but this will likely happen in the coming months.

The rise of retailers like Amazon may have hurt the business of Toy R Us and contributed to the chain’s demise. Kelly O’Keefe, a professor of brand management at Virginia Commonwealth University, said:

“Target, Walmart, Amazon — they’ve smelled weakness for some time, so they’ve stepped it up in their toy selection. There’s no question that they’re going to benefit from Toys R Us’ failure. I mean, think about it: Why would anyone go to Toys R Us, when they can go to Target and Walmart and buy toys at the same time they buy pantyhose and celery?”

Online sales of toys have picked up in recent years, as Amazon, Walmart and others have expanded their selections. According to a 2017 report by Coresight Research, online sales of toys has doubled to 14.7 percent from the 7.3 percent of consumers who bought toys online in 2012. Toys R Us, meanwhile, has been slow to adapt to their online shopping experience. The retailer offers free shipping on orders over $29, but analysts say the site feels dated and clunky. The data shows they have failed to reap the benefits of the move towards online shopping – Statista data shows that Toys R Us only generated $912 million in online sales of toys in 2016 – compared with Walmart’s $1.285 million and Amazon’s $2.163 million in 2016 online toy sales.

Changing trends in toys and entertainment may also have been a factor – as video games, smartphones, and tablets came to play a greater role in childhood entertainment than traditional toys, outlets like Toys R Us took a hit.

According to the Washington Post this news comes six months after the retailer filed for bankruptcy. The company has struggled to pay down nearly $8 billion in debt — much of it dating to a 2005 leveraged buyout — and has had trouble finding a buyer. There were reports earlier this week that Toys R Us had stopped paying its suppliers, which include the country’s largest toymakers. The company told employees closures would likely occur over time, and not all at once, according to a source who spoke on the condition of anonymity because they were not authorized to discuss internal deliberations.

CEO of Toys R Us David Brandon told employees Wednesday the company’s plan is to liquidate all of its U.S. stores. Brandon said Toys R Us will try to bundle its Canadian business, with about 200 stores, and find a buyer. The company’s U.S. online store would still be running for the time being. It’s likely to also liquidate its businesses in Australia, France, Poland, Portugal and Spain, according to Bloomberg. It’s already shuttering its business in the United Kingdom.

Toys R Us states it will close about one-fifth of its 880 U.S. locations, including a dozen stores in its home state of New Jersey, 15 in New York and 27 in California Closures are slated to begin in early February and continue until mid-April. Other locations will be rebranded to include both Toys R Us and Babies R Us selections under one roof.

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