Why did Toys R U.S Go Out of Business?

The very first question that comes to our mind is, what exactly is “toys​ R U.S..”​ and Why did Toys R U.S Go Out of Business? It is a kid’s store offering all kinds of toys, learning games, dolls, video games, blocks, clothing, and other baby products. The company came into being in 1948​ , and​ several branches were opened(approx. 800) both in the U.S. as well as outside the U.S. Although the company had several stores and an online site, the business turned out to be a complete disaster.

Unfortunately, the season of 1999 and 2017 proved to be disastrous for the company. The number of competitors had increased at a fast pace, which led to the company’s downfall. These outlets decreased with time, and the company lost its hold in the toy market  because of several reasons:

1 – Rise of a heap of merchants:

Although Toys R was the best toy store of its time, several new stores emerged as competitors with time. People loaded with new ideas regarding video games, online games, etc., emerged in the market.

With the emergence of these new retailers, it became difficult for the company to maintain its British stores and the U.S. So the first step that was taken was the closing of all the British outlets. This happened in ​ April of 2018 while​ the U.S. locations were closed in June​ of​ the same year. The same happened with the locations in the Australian wing in August.​

2 – Increase in online retailers:

The world has turned into a Global village where people are connected using the internet. It has made shopping easy for people from around the world. With just one click, you can get things at your doorstep.

With the increase in this trend of online purchasing, people have quit going to physical outlets. With the increase in online retailers, there was a decrease in the number of people visiting toy stores. These online retailers had given a setback to the toy R store because the store had physical outlets and not online stores.

3 – The debts of the company were unbearable:

Toys R Us was loaded with the heavyweight of debts. The company’s debt increased when

Along with other firms, Bain Capital had taken over the company and labeled it as private in 2005.​ These firms were held responsible for the bankruptcy that the company faced in 2017​ , having​ liabilities of $5 billion. Douglas Bernstein’s remark about the toys R store is worth mentioning. He said,” starting at an inherent disadvantage because of the debt load.”

4 – The timing was terrible.

It was complete lousy luck for the company when it didn’t file for bankruptcy soon after the holiday shopping season. The company filed its case in September, which resulted in a disastrous outcome. The bankruptcy case turned out to be a wild charm that distracted the company from focusing on the upcoming holiday season that would have earned them billions. It badly affected not only the employees or the owner but the public too.

Although multiple companies file bankruptcy every year and survive these bankruptcies, Toys R filed the case at the wrong time. It was the season of gift-giving and taking, and they had severely affected their customers. In the meantime, people had no other option as Christmas was near, so they started shopping from other options available. To file a case after the season would have been a reliable and better decision.

5 – Increase in competition:

Retailing can be called a “brutal business,” in which there is a lot of competition. When Toys R was in crisis, its competitors smelled the blood in the water. They started looking for the means to take over the position previously held by Toy R Us. In a court filing by Toy R, it was mentioned that companies such as Walmart, Amazon, etc., made progress by giving toys discounts.

This discount affected Toy R badly when it needed to pile up the profits. It was mentioned in the court filing too that the companies had offered aggressive shipping across the nations. And so the retailer of Toy R could not earn any profit, and its sale was too low. Putting in the words of Debtwire analyst Joshua Friedman “The holiday season was disastrous.”

Why did Toys R U.S Go Out of Business?

6 – The time was not the same as it used to be

Every year, Toy R used to sell millions of products, but 2017 was different from others. It was a high time for other companies but not Toy R, as it was severely stricken by bankruptcy. Had it been the start of the year, the country wouldn’t have faced such a terrible loss, but the owners took the right decision but at the wrong time. The company couldn’t bear the loss and so had to face the music. Toys R Us said, “this time was different.”​

Several reasons had led to the downfall of Toy R Us. It was one of the biggest retailers of toys, clothes, and other such children’s equipment. But the wrong decision of the owners who were running the stores had led to disastrous outcomes. Due to the increase in the toy market competition, the company couldn’t stand firm.

The monopoly of the competitors has played the leading role in the downfall of the Toy R company. Several stores were being closed because of the poor management and the private owners of the store chains. Even the Toy R store had mentioned that with the decrease in the toys’ production and sales, it was easy for the competitors to target the company. The company had to sell out the products at low rates with sale tags to earn at least half of what they had spent.

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