The Story of Toys R Us

The Story of Toys R Us

Can you imagine your kids world without the toys?

Of course, nobody will. Without toys, your kids won’t have the opportunity to learn, discover their senses and spark their imaginations. As toys are more than just fun for kids, the absence of toys cannot only make their world dull and unimaginative but also the loose of opportunity to bond, learn and have fun with them at the same time.

On the flip side, the presence of toys brings joy to the kid’s life while helping them learn, grow and develop their imagination, cognitive, motor and hand-eye coordination skills. This significance is something that was a pulling force behind the origination of Toys R Us.

Laid its cornerstone in 1948, Toys R Us Inc. is an international baby furniture product retailer headquartered in Wayne, New Jersey.

Charles Lazarus, the newly returned from World War II was the founder of the baby store. It was in 1948, during the post-war baby boom when Charles Lazarus was hit with an idea of going into business after his instincts told him the timings are right. And his instincts helped him capitalize on the baby boom.

In its modern iteration in 1957, the focus of the store changed so did its name- after expanding into toys, Lazarus named it as Toys R Us. So, once a retail juggernaut, the baby store dominated the toy industry.

With the existence of more than 65 years in the toy business, the company operated around 1600 stores, including 800 in the US and 800 outside the US, but unfortunately, these numbers saw a steady decline with the time.

Why the Toys R Us went into bankruptcy?

Why the Toys R Us went into bankruptcy?

The unexpected implosion of the company came about six months after the company drew an ambitious reinvestment plan to make a comeback by using bankruptcy to get a fresh start.

The company’s sudden turn from reorganization to liquidation was mainly due to the influence of Amazon.

The company was in a 10-year partnership of being an exclusive vendor of Amazon. The company also agreed to give up its online autonomy; with ToyRUs.com redirecting back to Amazon and under this deal Amazon also received $50 million a year plus the percentage of its sales through its site.

But as Amazon wanted more, it effectively took over the whole control and began allowing other toy vendors to sell on its website, breaching the deal. This deal with Amazon resulted in an early blow to the company’s digital efforts, as it was dependant on Amazon instead of developing its e-commerce platform an identity.

Also, when the company was facing the loss, Amazon fueled up discounts on toys during the holiday season. This pushed the company towards an end when it was badly in need to pile up the profits.

Below is a complete illustration of the how Toys R Us went into bankruptcy

U.S. and Canada

complete illustration of the how Toys R Us went into bankruptcy  U.S. and Canada

It was in September 2018, when the company went into bankruptcy. The move was solely the decision of Toys “R” Us Inc., as it filed for bankruptcy thinking that it would give the flexibility to bear the long-term $5 billion.

This debt was the result of the investment in improving current operations and borrowing of $ 2 for the upcoming holiday season to pay to the suppliers. Also, there was a zero annual profit since 2013.

As a conclusion, there was a net loss of US$164 million.
Later on, the company announced that it would liquidate and shut down its 182 stores in the U.S. for restructuring and also convert up to 12 stores into co-branded Toys “R” Us and Babies “R” Us stores. In June 2018, Toys “R” Us closed all of its remaining stores in U.S. locations. [1]

Australia
In June 2018, all the Australian stores of Toys “R” Us are also closed down after an announcement. [2]

Europe
The company reported in December 2017 that it would liquidate and shut down at least 26 stores in the U.K. as part of an insolvency restructuring. [3] It was announced on March 2, 2018, that all U.K. stores are on a liquidation sale, followed by the news of closing all U.K. stores within six weeks.

Asia
The representatives of the Toys “R” Us (Asia) have continually stressed that it’s a separate legal entity from the parent company and it’s not a part of Toys R Us financial restructuring and its store in Asia will continue to operate for business.

The planned bid of US$1 billion was revised and decreased to US$760 million in August and scheduled for September. Toys “R” Us Inc. wanted US court to drop the Fung Retailing (joint venture partner of Toys R Us in Asia) right-of-first-refusal purchase option and also sell its 15% stake in the joint venture.

The Toys “R” Us Inc. had put allegations that Fung Retailing is intentionally delaying the sale by filed court proceedings through Hong Kong Court to scare off rival bidders so that it can acquire Toys’ stake at a lower price. [4]On September 28, 2018, the US bankruptcy court, Eastern District of Virginia issued an order for Fung Retailing to halt Hong Kong Court action.

The idea behind the restructuring

The idea behind the restructuring of Toys R Us

The company in October 2018 issued a court filing regarding its bankruptcy case which indicated that from now on it would stop auctioning its intellectual property. As its controlling lender is planning to revive the business under the brand’s names- Toys “R” Us and Babies “R” Us with the aim of establishing new retail opportunities and maintaining existing licensing agreements.

This happened as after the company did evaluation it realized that selling its brand at auction was not a superior alternative at all.

International flagship store

The Toys “R” Us in July 2001 started an international flagship store in New York’s Times Square. The 110,000 sq ft store is comprised of theme zones like Barbie with a life-size dream house, an amusement arcade, electronics sections like Dance Dance Revolution SuperNova and Skullcandy, Lego, Wonka, signature indoor Ferris Wheel and the Jurassic Park. The store was a center of attraction among thousands of tourists for more than a decade.

In August 2017, Toys “R” Us announced to open a 35,000 sq ft temporary store near the original one to serve tourists around the holiday season.

Different brands of Toys “R” Us

1. Kids “R” Us

Founded in February 1983, Kids “R” Us is a discontinued clothing retailer in children’s discount. The first stores under the name of Kids “R” US are opened in New Jersey, Paramus, New York, and Brooklyn. The chain came to a halt in 2004 after the retailer saw a drastic decline in same-store sales.

2. Babies “R” Us

Started in April 1996, the Babies “R” Us the first store in Westbury, New York. The store has grown to over 260 stores in the US before it’s shut down in the late 2010s. This store had a huge collection of products for infants, newborns, and toddlers. The chain of this store is still operating outside of the US.

3. FAO Schwarz

Toys “R” Us, Inc. in 2006 took over toy retailer FAO Schwarz, which included the retailer’s flagship store in New York City and its e-commerce site, FAO.com as well. In 2015, the company closed the FAO Schwarz store in New York due to the rise in rental costs, but it continued to sell FAO Schwarz branded toys in its Babies “R” Us and Toys “R” Us stores until 2017.

4. Toys “R” Us Express

Seeing the 2009 holiday shopping season, Toys “R” Us opened 90 “Holiday Express” stores across the United States and Canada. These stores were smaller than the regular Toys “R” Us stores. Most of these stores were operating from a shopping center and malls. Store chains had vacated these spaces during the recession. It also included stores occupied by KB Toys, some of which were taken over by Toys “R” Us.

The idea of Toys “R” Us’s behind keeping the Holiday Express stores open until early January 2010 and after that shortly shut them. But several stores were kept open because the success of many prompted to do so. Toys “R” Us in 2010 opened 600 Express stores. In summer 2018, like the larger, basic Toys “R” Us stores, the operating stores at these locations were also closed along with some outlet stores in the US.

Expansion in the e-commerce area

Expansion in the e-commerce area

Toysrus.com laid the foundation in 1988 and started to sell its toys online. After a horrible Christmas trading period in 1999, when the company completely disappointed its customers by not delivering the gifts on time, the company signed a 10-year contract with Amazon in 2000 in an attempt to arrive like an exclusive supplier of toys on the website.

As discussed earlier, Amazon reneged on the contract terms, citing Toys “R” Us’s failure to deliver as per the massive demand for goods, which includes the most famous lines.

Toy “R” Us was awarded the 29 positions in the Internet Retailer Top 500 Guide for 2012. Furthermore, Toysrus.com was found to be one of the most visited sites in the category of toy and baby products.

Shipping toys sometimes can be a really big hassle, especially during Christmas time, that’s why we spent some time and did research on the best-wanted toys for Christmas.

In February 2009, the company took over the control of online toy seller eToys.com from Parent Co., which filed for bankruptcy protection. As of today, the company uses Toys.com mainly for listing exclusive and unadvertised deals available on its portfolio of e-commerce websites.

The online sales of the Toys R Us saw a significant surge from 29.9% in 2010 to $782 million from $602 million. While in April 2011, the company announced to open a dedicated e-commerce center in McCarran, Nevada. As a result, there were online sales of $1 billion for 2011 and $1.1 billion for 2012.

Seeing the negative impact of liquidation in March 2018, the site was closed with a brief farewell message, while the international stores continue to sell merchandise online.

Mascot

If in the middle of this post, you would like to check out how the customers now perceive about the brand and its baby products, you can have a look here.

Know little about the Mascot

Know little about the Mascot

Formerly popular with the name of Dr. G. Raffe, Geoffrey the Giraffe became the official mascot of the renamed Toys R Us. The design of Geoffrey’s went through several phases over the last 50+ years before the current iteration was finalized in November 2007.

Then after a decade, company sponsored the live camera broadcast to help support giraffe conservation and awareness. The sponsored video of pregnant giraffe went viral with millions of views across social media platforms and YouTube.

The boom in the sales of Toys R Us

Lazarus captured the consumers with the never seen stores crammed with merchandise and filled with a sense of American abundance after all those years of depression after the war. While other toy stores had beautiful interiors and all, Toys “R” Us only had concrete, or tile flooring with a row of toys laid next to each other, similar to the style of a grocery store.

It came out to be better for the bottom line for consumers, as the store’s simplistic appearance didn’t seem to affect them, who were engrossed by the toys within. Then very soon, the company was given the recognition of the first category killer by the retail historians.

The demand for Lazarus toys was fueled when companies like Mattel started marketing their newest offerings to the kids directly. With the increase in the reach of TV in more and more households, Toys R Us benefitted from advertising and featuring a mascot – a lovely giraffe that soon became a TV commercial staple, along with his wife, Gigi, children junior and baby Gee.

The boom in the sales of Toys R Us:

Everything worked, and the company was soon able to make a turnover of $500 million in 1950 into $12 billion in 1990. The company reached its heights when it took over 25% of the control of the toy’s market and sold 18,000 different toys in 1,450 locations. The retailer company successfully turned everyone into a “Toys R Us kid” by driving its competitors out of existence.

The company saw a significant setback when in 1994 Charles Lazarus left the position of company’s CEO after more than half-century of selling toys to give pleasure to the children. Moreover, the company spectacularly failed in dealing with the challenges like transfer to the company to private hands in 2005, the rise of e-commerce and the change in toy tastes. The store itself also became outdated, and ultimately the company went bankrupt.

A slight increase in toy sales after bankruptcy

As parents and grandparents are sad over losing the Toys “R” Us, this fueled massive sales and toy’s industry sales grew 7% to $7.9 billion in the first half of the year 2018. This sale was bolstered by the purchase of robotic and interactive toys ranging from $5 to 19.99.

Conclusion:

The marketplace suggests that there is a need for a big toy store and it is the right time for bringing Toys “R” Us back. But, it is only possible with the right financial and business plan. Also, it could be quite successful if started with a clean slate. It is ideal to say that the right decision is to bring back the Toys R Us for the betterment of everybody- suppliers, employers and most importantly the customers.

After all, it was neither the fault of the company nor the owner- it was just the bad luck and disadvantage that its competitors took of the Toys “R” Us bad times.


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