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Many people are wondering if the recent shut down of Toys R Us was due to the competition. We take a look at the company’s history and the events leading up to the closure.
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Introduction
It’s no secret that Toys “R” Us, one of the world’s largest toy retailers, has faced some serious challenges in recent years. The company filed for bankruptcy in September 2017, and in March 2018, it announced that it would be closing all of its stores in the United States. Many people have blamed the company’s downfall on the rise of online retailers like Amazon, which have made it easier for consumers to purchase toys without having to step foot in a store.
However, while it’s true that online retailers have been eating into Toys “R” Us’s market share, the company’s problems go much deeper than that. In this article, we’ll take a look at some of the other factors that contributed to Toys “R” Us’s demise.
The History of Toys “R” Us
In 1948, Charles Lazarus founded Children’s Bargain Town, a baby furniture store in Washington, D.C. In 1957, he renamed the company Toys “R” Us after going public with the company. At its peak in the 1990s, Toys “R” Us was the largest toy retailer in the world with over 1,500 stores across the globe. However, in recent years, Toys “R” Us has struggled to keep up with competition from big box retailers and online retailers such as Amazon. In 2018, Toys “R” Us announced that it would be shutting down all of its stores in the United States.
The Decline of Toys “R” Us
In 2018, Toys “R” Us, the biggest toy store in the United States, announced it would be shutting down all of its stores. This was a huge blow to the toy industry, and many people wondered what had caused the company’s decline.
There are a few theories about what led to the demise of Toys “R” Us. One is that the company was simply unable to keep up with the competition. In recent years, there have been a number of new players in the toy market, including Amazon, Walmart, and Target. These companies are able to sell toys at lower prices than Toys “R” Us, and they also have more convenient shopping options (such as online shopping and in-store pickup).
Another theory is that Toys “R” Us made some strategic errors that hurt its business. For example, the company invested heavily in brick-and-mortar stores at a time when more and more consumers were doing their shopping online. In addition, Toys “R” Us didn’t do a good job of differentiating its stores from those of its competitors—a mistake that likely made it harder for shoppers to justify paying higher prices.
It’s likely that both of these factors played a role in the decline of Toys “R” Us. However, it’s also worth noting that the company was facing other challenges, such as an increasing amount of debt. In the end, these factors may have simply been too much for the company to overcome.
The Competition
In recent years, Toys “R” Us has had to confront new and formidable members in the toy Industry. Target, Amazon, and Wal-Mart all offer stiff competition in terms of prices and product lines. These three companies have also aggressively courted parents and children with loyalty programs and other marketing efforts.
In particular, Amazon has been a thorn in Toys “R” Us’s side. The online retailer offers a wider selection of toys than Toys “R” Us, along with low prices and the convenience of home delivery. What’s more, Amazon often features toys prominently on its homepage and in other sections of its website, making it easy for parents to purchase toys without even thinking about going to a store.
It’s no wonder, then, that Toys “R” Us has struggled in recent years. The company has posted losses for four straight years, and its sales have declined steadily since 2013. In 2017, sales fell by 6 percent compared to the previous year.
The Impact of the Competition
In 2006, Toys “R” Us was the leading toy retailer in the United States with 29% of the market share. By 2017, its market share had dropped to just 10%. So, what happened?
There are a few factors that likely contributed to Toys “R” Us’s decline. First, the company was slow to embrace e-commerce. In 2006, only 3% of its sales came from online orders. By contrast, Amazon was already responsible for 6% of all toy sales in the United States.
Second, Toys “R” Us was saddled with a large debt burden. In 2005, the company went private in a leveraged buyout that left it with $5 billion in debt. This made it difficult for the company to invest in its brick-and-mortar stores or compete with Amazon on price.
Finally, the rise of discount retailers like Walmart and Target also took a toll on Toys “R” Us. These companies were able to undercut Toys “R” Us on price and offer a wider selection of toys.
While competition from Amazon, Walmart, and Target certainly played a role in Toys “R” Us’s decline, it’s important to remember that the company was also burdened by debt and slow to embrace e-commerce.
The Death of Toys “R” Us
In September 2018, Toys “R” Us announced it would be shuttering all of its stores in the United States. This news came as a shock to many, given that the company had been a staple in the toy industry for generations. So, what caused the downfall of Toys “R” Us?
There are a few factors that likely contributed to the company’s demise. Firstly, Toys “R” Us was saddled with a large amount of debt after it was taken private in a leveraged buyout in 2005. This debt made it difficult for the company to invest in its stores and keep up with competition.
Furthermore, the rise of e-commerce threatened Toys “R” Us’s brick-and-mortar business model. Online retailers such as Amazon and Walmart were able to undercut Toys “R” Us on price, while also offering a wider selection of toys. This put pressure on Toys “R” Us to lower its prices, which further squeezed the company’s margins.
In the end, these challenges proved too great for Toys “R” Us to overcome. The company filed for bankruptcy in 2017 and was unable to find a buyer or successfully restructure its business. As a result, it was forced to shutter all of its stores in 2018.
The Legacy of Toys “R” Us
On March 15, 2018, Toys “R” Us announced that it would be closing all of its US stores. This announcement came after the company filed for Chapter 11 bankruptcy in September 2017 and was unable to find a buyer for its US business. The company’s liquidation sales began on March 23, 2018, and the last Toys “R” Us store in the US closed on June 29, 2018.
The closure of Toys “R” Us was a significant moment for the toy industry. For many children (and adults), Toys “R” Us was the go-to store for toys. The company was founded in 1948 and at its peak, operated more than 2,000 stores around the world. In the years leading up to its closure, however, competition from big-box retailers and online retailers took a toll on Toys “R” Us’ business. In an attempt to keep up with the competition, Toys “R” Us made a number of changes to its operations, including investments in e-commerce and store renovations. But these changes were not enough to save the company.
The closure of Toys “R” Us had a ripple effect on the toy industry. Many toy manufacturers that relied on Toys “R” Us for a significant portion of their business were forced to make changes in order to survive. Some manufacturers closed their doors for good, while others adapted by selling their products through other retailers or direct to consumers online. The closure of Toys “R” Us also resulted in job losses for thousands of employees who worked at the company’s stores and warehouses around the country.
In spite of these challenges, however, the toy industry has continued to grow in recent years. This is due in part to strong demand from emerging markets such as China and India, as well as continued innovation from toy manufacturers who are always striving to create the next must-have product. While there will never be another company like Toys “R” Us, the legacy it left behind will continue to shape the toy industry for years to come
Conclusion
After careful analysis, it appears that the main reason Toys R Us shut down was due to the competition from Amazon and other online retailers. While Toys R Us did have high levels of debt, this alone does not seem to be the primary cause of the company’s demise.
