A new report in Bloomberg says Toys “R” Us is making plans to come back this holiday season Toys “R” Us used to be an icon of American toy retail sales. The company grew out of a furniture chain into it’s modern iteration in June 1957. The company opened more than 1,600 stores in total throughout the next 65 years, with around half in the US and the rest scattered throughout the world.
Things became troubled from 2010 and beyond as increasing competition from more specialty stores and online retailers caused massive drops in retail foot traffic. The company struggled on for a few more years until announcing a full revamp in 2014 that included a ton of changes meant to bring customers back. Stores were decluttered with more focused product lines. Prices and distribution models were made clearer and easier to handle for both store operators and consumers. Toys “R” Us also leaned harder on marketing its online segment.
Despite these efforts, the US branch of the operation continued to struggle. In 2017 the company had been struggling to deal with $5 billion in long-term debt, and since most of the retail toy business is seasonal, they had accrued several billion dollars more in overall debt due to supplier and employee payments that needed to be fulfilled. The existing mountain of debt even made it impossible to execute the needed improvements to compete with rivals, as several hundred million dollars annually was going out the door to pay down debt. Things were so bad that the retail chain had not turned an annual profit since 2013.
Toys “R” Us eventually negotiated a selloff of some existing US locations, while the majority of the Canadian division remained in operation after being sold to a third-party. European operations were also affected. By then end of the months-long ordeal, hundreds of stores would be closed and a massive gap would be left in the US toy retail market throughout 2018.
Now, with this revival, the company will likely push these previously mentioned strategies even harder, while rolling out more condensed and hyper-focused product lines that are aimed at filling gaps left by online retailers. Consumers are still worried about prices, as they often cite cheaper online prices as a primary motivator for moving their shopping online. It will be a very uphill battle for Toys “R” Us to negotiate cheaper prices with their suppliers while also paying decent wages to accrue the best possible workers, but we will just have to see how the whole thing pans out.
The new strategy for the chain involved reopening six physical retail stores and kicking off a full online push. It will be interesting to see how the company competes with the extreme pressure from Amazon and other online-only retailers. We’ve already seen part of this cultural shift in some test markets. The company experimented with in-store interactive exhibits and areas to play with new toys prior to purchase, aimed at bringing more customers through the door.
This approach is very similar to something that GameStop, another struggling retailer, is taking. The push toward a more cultural experience in GameStop stores involves much more generic merchandise than just video games, such as vinyl figures, t-shirts and clothing, pins and other decorative items, and much more.
