If you grew up in the 80s or 90s, you probably have fond memories of Toys R Us. The beloved toy store was a staple of the childhoods of many, and its jingle, featuring the slogan “I don’t want to grow up, I’m a Toys R Us kid!”, is still instantly recognizable today.
However, Toys R Us has had a difficult time in recent years. The company filed for bankruptcy in 2017 and closed all of its stores in the United States by 2021. But it appears that Toys R Us is not ready to give up just yet. The company has since made a comeback through a partnership with US retail giant Macy’s.
So, what happened to Toys R Us? And how did it manage to make a comeback?
What Was Toys R Us?
Toys R Us was a chain of toy stores that was founded in 1948 by Charles Lazarus. The company quickly became a household name, thanks to its wide selection of toys, its friendly and knowledgeable staff, and its festive atmosphere. Toys R Us was also a major player in the toy industry, and its annual sales were second only to Walmart.
A Brief History of Toys R Us
Toys R Us began as a small baby furniture store in Washington, D.C. In 1957, the company expanded into toys and opened its first Toys R Us store in Queens, New York. The company continued to grow rapidly, and by the 1980s, it had become the largest toy retailer in the world. Here’s a timeline:
1948: Charles Lazarus opens a baby furniture store in Washington, D.C., called Children’s Bargain Town.
1957: Lazarus changes the name of the store to Toys R Us and opens a new store in Rockville, Maryland.
1969: Toys R Us goes public.
1978: Toys R Us opens its first international store in Canada.
1990s: Toys R Us expands rapidly, opening stores in Europe, Asia, and Latin America.
2004: Toys R Us is acquired by a group of private equity firms in a leveraged buyout.
2017: Toys R Us files for bankruptcy.
2018: Toys R Us closes all of its stores.
What Went Wrong With Toys R Us?
There were a number of factors that contributed to Toys R Us’s downfall. One of the biggest factors was debt. In 2005, Toys R Us was acquired by a group of private equity firms in a leveraged buyout. This meant that the company took on a lot of debt in order to finance the acquisition. The debt payments weighed heavily on the company, and it made it difficult for Toys R Us to invest in its stores and its online operations.
Another factor that contributed to Toys R Us’s downfall was the rise of online retailers like Amazon. Amazon was able to offer toys at lower prices than Toys R Us, and it also made it easy for customers to shop online. Toys R Us was slow to adapt to the online retail market, and this gave Amazon a significant advantage.
Finally, Toys R Us also faced challenges from changing consumer habits. In recent years, children have been spending less time playing with toys and more time playing with electronic devices like smartphones and tablets. This trend hurt Toys R Us’s sales, as it made it less appealing to children and their parents.
Why Did Toys R Us Shut Down?
Toys R Us was a beloved toy retailer that had been around for over 70 years. But in 2017, the company filed for bankruptcy and closed all of its stores. There were a number of factors that contributed to Toys R Us’s downfall, including:
- Big box stores like Walmart and Target were able to offer toys at lower prices than Toys R Us. Online retailers like Amazon were even more competitive, as they could offer toys at even lower prices and free shipping.
- Toys R Us was saddled with billions of dollars in debt, which made it difficult for the company to invest in its stores and its online operations.
- Children are spending less time playing with toys and more time playing with electronic devices. This trend hurt Toys R Us’s sales, as it made the company less appealing to children and their parents.
The combination of these factors created a perfect storm for Toys R Us. The company was unable to compete with its rivals on price, and it was also losing customers to electronic devices. As a result, Toys R Us filed for bankruptcy and closed all of its stores in 2017. Toys R Us has since made a comeback through a partnership with Macy’s. The company has opened shops inside some of Macy’s stores, and it is also selling toys on Macy’s website. It remains to be seen whether Toys R Us will be able to regain its former glory, but the company is certainly making an effort to stay relevant.
Competition From Big Box Stores and Online Retailers
Toys R Us faced increasing competition from big box stores like Walmart and Target. These stores were able to offer toys at lower prices than Toys R Us, and they also had a wider selection of toys. Toys R Us also faced competition from online retailers like Amazon. Amazon was able to offer toys at even lower prices than big box stores, and it also made it easy for customers to shop online.
Billions of Dollars in Debt
Toys R Us had accumulated billions of dollars in debt due to a leveraged buyout in 2005. This debt made it difficult for the company to invest in its business and keep up with the competition. In 2004, Toys R Us was struggling financially. The company’s sales were declining, and it was losing money. In order to raise cash, Toys R Us put itself up for sale. A group of investment firms, including Vornado, KKR, and Bain Capital, bought Toys R Us for $6.6 billion. However, they did not pay for the company with cash. Instead, they borrowed the money. This is called a leveraged buyout.
The leveraged buyout saddled Toys R Us with billions of dollars in debt. This debt made it difficult for the company to invest in its business. Toys R Us also had to make large interest payments on the debt, which further drained its cash reserves.
Declining Toy Sales
In addition to the debt, Toys R Us also faced other challenges. The toy industry was changing. This was due to a number of factors, including the rise of electronic devices, the decline of brick-and-mortar retail, and the increasing popularity of online shopping.
The combination of debt and declining sales eventually led to Toys R Us’s closure. The company filed for bankruptcy in 2017 and closed all of its stores in 2018.
How Did Toys R Us Come Back?
So, how did Toys R Us manage to make a comeback? The company’s partnership with Macy’s was a big part of the equation. Macy’s has opened Toys R Us shops inside some of its stores, and this has helped Toys R Us to reach a wider audience.
Toys R Us has also been working to improve its online presence. The company has launched a new website and has been offering more competitive prices. It remains to be seen whether Toys R Us will be able to regain its former glory. However, the company’s comeback is a testament to the power of nostalgia and the enduring appeal of toys.
The downfall of Toys R Us is a cautionary tale for other retailers. The company’s experience shows that it is important to:
- Manage debt carefully.
- Invest in new technologies.
- Adapt to changing consumer habits.
Toys R Us also made the mistake of focusing too much on its physical stores and not enough on its online operations. This mistake cost the company dearly.
The downfall of Toys R Us is a reminder that no company is immune to failure. Even the most successful companies can be brought down by a combination of factors. However, the lessons learned from Toys R Us’s downfall can help other retailers avoid a similar fate.
