The Rise and Sudden Closure of Biggest Toy Manufacturer, Toys R US

As we know Toys R Us have selling toys in store for almost 70 years however as the technology changes over the years, toys industry trends also changed. The arrival of PC games and apps indirectly compete with the toys in the store. This is because the PC games can be downloaded through internet and it cost cheaper than the toys in the store and some of them are free. Same goes to the apps that provide several choices of games where it can be downloaded in our smartphones and most of them are free. The ease of downloading and cost effective of this existence of PC games and apps really make people change to this. The toys in store no longer bring excitement to them as these technology bring a new era in the society. Thus, the arrival of PC games and apps indirectly compete with Toys R Us where nowadays people chose to follow the trends around them.

Toys R Us are selling variety of toys with more choices from several vendors which quite expensive to carry on because they have to pay the vendors or the creators of the toys. As there are many toys from many different vendors or creators, they have to pay for different amount for each toys and because of financial problem, it quite hard for Toys R Us to maintain the business as they are focusing on selling toys. As they unable to pay the creators of the toys, many of the creators were suffered from this.

Toys R Us known with hundreds store worldwide and this business model need big retail spaces and staffing. This is because the toys provided in Toys R Us in many sizes and some of them required large spaces to display. As the store is big definitely it need more workers to provide services at the store. These requirement need more investment from Toys R Us to the store however Toys R Us did not have enough money to invest for this anymore. Hence, one of the potential reasons of Toys R Us bankruptcy probably because of the staffing and retail spaces costly for them.

Toys R Us target market were kids and when they used TV media and advertising as medium to reach their target audience, it did not really reach its market because kids did not really bother with the advertising unless it really attracted to them. Therefore, Toys R Us did not reach their target market and the kids become unaware of the promotion and the customer traffic in the store decreases over time.

As the technology changes, kids nowadays have several choices such as YouTube and Social media and that makes the popularity of toys in kids generation decreasing. This is because most of the parents are giving their children to watch YouTube at young age. Therefore, kids preferred watching YouTube and Social Media that give them more choices and it can be stream freely without spend much money compared buying a new toys.

Toys can be divided into several types of categories such as action figures, animals, cars, games and many more. Hence, kids have more choices of toys, they can choose to play games instead of playing physical toys. As video games more awesome than toys, the interest to play toys become faded. This is because the video games can be play for weeks, months even years before they getting bored by it compared to the figure toys the excitement only last maybe for weeks.

After operating almost 70 years, Toys R Us only made little improvement in their stores experience. In order to gain the customers satisfaction and loyalty Toys R Us should improve their services in stores however due to financial problem they cannot afford to do that, all of their money are only to pay their debt over the time and does not enough money to invest necessary needs in the stores. This is because they cannot afford to hire more staff as it need more budget to hire even for one person. Thus, their customers only experience the common services that they can get in any toys stores.

Other than Toys R Us store, there are other toys stores and retailers trying to make their stores as stopping place and make shopping more exciting. As we know most of the Toys R Us branches are usually isolated in one place rather than being next to other stores. Hence, this make the other retailers make their stores as stopping place because it more convenience to visit one place that have several stores to shop. They can shop toys and at the same time shop other things too. Retailers such as Walmart and Target really plays their roles to compete with Toys R Us where they make their in-stores experience more exciting.

On 2000s, the dot.com era come out of nowhere, the arising of this e-commerce have shaken Toys R Us. Therefore, for quick strategy Toys R Us choose to sign up with expensive partnership e-commerce Amazon. After 10 years partnership with Amazon, there were sudden attack where Amazon selling third party items which direct competition with Toys R Us. This makes Toys R Us bring Amazon to court to get out from the contract. After that, Toys R Us make it own website and selling their products through their own website and indirectly Toys R Us have to compete with Amazon and other e-commerce in terms of the online shopping. However, it does not going well after terminate the partnership with Amazon, the sales of Toys R Us became decline. This is because one of the reasons of Toys R Us website. The website clunky, very hard to operate and not easy to navigate compared to Amazon which more quick and easy for customers to shop online. Toys R Us did not have enough money to do investment for their website infrastructure, the ease and the features of the website.

Other retail stores such as Walmart and Target become direct competitors to Toys R Us because they are also selling toys in the market and use the discounting strategy to loss lead and win the traffic. Thus, this make Toys R Us products more expensive than other toys and retailers stores. As reportedly, the toymakers such as Mattel and Hasbro sold about $1 billion their toys at Walmart which twice than their sales through Toys R Us and Target sold just same as Toys R Us. This shows that Toys R Us have lost their sales with the retail stores such as Walmart and Target which offer better price and better in-store experience.

In 1998, Walmart become number one toys in the market because of its huge number of stores. Besides that, Walmart offered the same toys product as Toys R Us with cheaper price, therefore it became competition to Toys R Us where their customers preferred to shop at Walmart at the same time they can shop for other things as it more convenience for them rather than shop at one shop for only one purpose. That was one of the reasons Walmart became number one toys stores and win the customers’ heart.

After all the potential factors, one of the reasons why Toys R Us closed its business because the company have high level of debt. The company has struggle with high debt before all the e-commerce era arise even before Amazon stand out. In 2005, Toys R Us fall into high debt from the leverage buyout which cost $6.6 billion by private equity firms Bain Capital and KKR & Co. The company try to recover their stores by operating Toys R Us express during the holiday break. These stores smaller than the actual branches and have limited choices but due to high much debt these stores cannot recover Toys R Us company. The debt stopped the company make the necessary investment for their stores. They started to loss their share in the market and their sales decline over the years.

In 2005, Toys R Us appoint Credit Suisse to find a buyer. The stock market was taken off and it transform to private company that bought by Bain Capital and KKR Co and Vornado through leveraged buyout. These firms only have around $1 billion cash and the remaining amount over $5 billion were borrow. These firms promises to make an improvement in Toys R Us to compete other big retailers such as Target and Walmart as well as ecommerce such as Amazon. However, this investors failed to achieve their goals and struggled to pay its debts. Years by years, the sales of Toys R Us declined as they did not have enough money to do necessary investment. Leveraged buyout strategy that used by the firms did not a good idea when they do not have permanent financial sources to pay the debt. Thus, Toys R Us have filed for bankruptcy when they do not have enough money to pay its debt.