Published in · 5 min read · Feb 27, 2021
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In March 2018, Toys ‘R’ Us announced that they were permanently going out of business and closing all 800 of their stores in the United States, as well as the 800 more around the world (Verdon 2018). From being in business for more than 65 years, the children’s company’s tragic death brought lots of nostalgia and sadness to the public. So how did one of the world’s biggest empires, that was once worth $12 billion at its peak, end up at bankruptcy (Blakemore 2019)? And will Toys ‘R’ Us be brought back from the dead?
A Rundown of the Company’s Timeline
Like most successful companies, Toys ‘R’ Us came from humble beginnings. After returning from World War II, Charles Lazarus opens Children Bargain Town in 1948 located in Washington, D.C. Due to the emerging “baby boom” era, Lazarus’s store focuses on baby products. Children Bargain Town starts selling toys soon after as Lazarus realizes that customers didn’t come back to buy more products such as strollers when they had their second child. The toys prove to be popular and in 1957 the company officially becomes Toys ‘R’ Us which includes the famous backward “R” to give the impression that a child wrote it. Toys ‘R’ Us was a supermarket-style toy store, distinguishing it from every toy store that had ever existed. Customers were immediately interested and hooked on this never-before-seen approach. For the next two decades, iconic toys such as Barbie and Mr. Potato Head were made popular by Lazarus’s company. In 1966, Lazarus sells his company to Interstate Sales to help him nationally expand and oversee the stores (Biron and McDowell 2021). Shortly after, the lovable Geoffrey the Giraffe becomes the official mascot and furthers advertisem*nt. In 1974, Interstate Sales goes bankrupt, making Lazarus work to keep the company afloat. He is successful and Toys ‘R’ Us becomes a public company. A clothing store spinoff named Kids ‘R’ Us opens in 1983 and is also a success (Biron and McDowell 2021).
In 1994, Lazarus steps down as chief executive after two decades which leads to a series of difficulties. Another spinoff, Babies ‘R’ Us, is later opened after the success of Kids ‘R’ Us. In the early 2000s, Toys ‘R’ Us opens the biggest toy store in the world in Times Square that has a Ferris wheel in it (Verdon 2018). The company also begins to see competition from Walmart and Target which later leads to the closure of Kids ‘R’ Us. In 2005, with the plan to boost sales, three private equity firms buy Toys ‘R’ Us for $6.6 billion while returning the company back to being private (Biron and McDowell 2021). Four years later, e-commerce is flourishing and the company responds by buying Etoys.com and Toys.com. At the same time, they also buy FAO Schwarz and KB Toys. Even though Toys ‘R’ Us seems to be thriving, sales start to drop again.
Fast-forward ten years later in 2015, after a high turnover rate for CEOs, former Domino's Pizza CEO Dave Brandon takes on the same ongoing goal to pick up the company but ends up failing. For the years leading up to the bankruptcy, Toys ‘R’ Us is struggling and loses to major e-commerce empires like Target, Walmart, and Amazon. In September 2017, the company files for Chapter 11 bankruptcy protection but can not pay off the more than $5 billion debt it had been struggling with since the buyout in 2005 (Blakemore 2019). Finally, after many challenging years, in March 2018, Toys ‘R’ Us starts the process of closing all their stores and their website. The founder of Toys ‘R’ Us, Charles Lazarus, died only a week after the announcement. By the end of June, all Toys ‘R’ Us stores were officially gone.
Mistakes Took a Toll
Though hidden quite well, Toys ‘R’ Us clearly went bankrupt for multiple reasons. The company had suffered from major debt for a long time. Shifts in leadership, poor customer and employee experience, and private equity, all added to the increasing debt. One of the biggest reasons was that Toys ‘R’ Us simply could not keep up with the changing world as efficiently as other big companies. The rise of online shopping like Amazon, drew customers to lower prices and assortments, and Toys ‘R’ Us couldn’t compete. The toy industry had also declined in general with children becoming more interested in digital products. Holiday sales at Toys ‘R’ Us were not pulling in as they used to and the company greatly relied on the profit from the holiday weeks. About 40% of its annual revenue alone came from the weeks before Christmas. Towards the end of its time, Toys ‘R’ Us also started rapidly cutting employees and maintenance of the stores (Unglesbee 2018). The remaining employees were given long work hours and little to no employee benefits. Weekly unexpected changes in schedules and paychecks hurt the employee experience. To save money, stores also went from cleaning floors every week to once a month (Unglesbee 2018). Finally, the Toys ‘R’ Us leveraged buyout by three private equity firms could be seen as the key tipping point, given the multi-billion dollar debt load it left on the company’s books.
The Future of Toys ‘R’ Us
In February 2019, Tru Kids Brands purchased the rights to Toys ‘R’ Us and later announced that they would open a series of holiday pop-up stores that would sell popular toys under the Toys ‘R’ Us name (Biron and McDowell 2021). The company was also back online, ironically with a partnership with Amazon. You could not actually buy directly from Toys ‘R’ Us though but instead, the website would bring users to the Amazon website. So the big question is “Is there a future for Toys ‘R’ Us?” With COVID-19’s challenges to the retail industry, chances seem slim. But e-commerce does lack in one subject- memories of an in-person experience. Every child’s dream is to walk into an entire store of the hottest toys and Toys ‘R’ Us makes that dream possible. With this in mind, there is a chance Toys ‘R’ Us might launch off this opportunity and come back to make their stores as memorable as possible.
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