Children of the '80s and '90s will miss Toys R Us

The iconic brand is closing all its US stores.

In the ‘80s and ‘90s, Toys R Us was the closest a kid could get to stepping inside Willy Wonka’s chocolate factory. The place was massive—thousands of brightly-lit square feet dedicated to a consumer toy appetite that could never be satiated.

Now, the company is bankrupt and is closing all 740 of its U.S. stores. There are a number of reasons for the demise of Toys R Us

  • Digital competition—namely Amazon, and the company’s own inability to capture e-commerce dollars.
  • Bricks and mortar competitors such as Walmart and Target who discounted the price of toys to a price Toys R Us couldn’t match
  • The move to electronic games, everyone has a mobile device these days, watch the kids, they are playing electronic games, not playing with toys or watching TV
  • Mismanagement is also to blame: Toys R Us is saddled with billions in debt through corporate financial restructuring

And on top of this Amazon, Walmart and Target dealt the death blow to Toys R Us by deeply discounting products when the ailing chain was at its weakest point, the liquidating retailer said Thursday in court filings.

Toys R Us blamed its archrivals for helping to seal its fate during the crucial 2017 holiday season. The company said its holiday profit fell a quarter-billion-dollars short of its expectations. 

Amazon, Walmart and Target priced toys "at low-margins or as loss-leaders" during the holiday shopping season and offered aggressive online shipping options, Toys R Us attorneys said early Thursday in a court filing.

The retailer said it simply "could not compete" with those prices because it relies "exclusively on toys for profit."

However it’s not just Toys R Us, more than 8,600 retail stores could close this year in the US — more than the previous two years combined, Meanwhile, e-commerce pure plays are riding the rise of digital commerce to success — none more so than Amazon, which accounted for 53% of online sales growth in the US last year.

Brick-and-mortar retailers are caught on the wrong side of the digital shift in retail, with many stuck in a dangerous cycle of falling foot traffic, declining comparable-store sales, and increasing store closures.

In response, many brick-and-mortar retailers have started to leverage their store locations and in-store inventory in order to better compete in e-commerce. This multichannel approach to sales that seeks to provide the customer with a seamless shopping experience whether the customer is shopping online from a desktop or mobile device, by telephone or in a bricks and mortar store, including ship-from-store and click-and-collect, can help retailers manage the transition to digital by:

  • Increasing online sales by offering cheaper, more convenient delivery options for online shoppers.
  • Limiting the growth of shipping costs as online sales volumes increase by leveraging store networks for delivery.
  • Keeping stores relevant by turning them into fulfillment centers that pull customers in to pick up online orders.

While these companies have spent years automating their supply chain for delivering goods to their stores or directly to customers’ doorsteps, most have yet to figure out how to profitably bring their store locations into the e-commerce delivery process.

  • Brick-and-mortar retailers must cut delivery times and costs to meet online shoppers’ expectations of free and fast shipping.
  • Omnichannel fulfillment services can help retailers achieve that goal while also keeping their stores relevant. 
  • However, few retailers have mastered these services, which has led to increasing shipping costs eating into their profit margins.
  • In order to optimize costs and realize the full benefits of these omnichannel services, retailers must undertake costly and time-consuming transformations of their logistics, inventory, and store systems and operations.