The hard lesson to be learned from Toys “R” Us’ (TRU) bankruptcy, and now liquidation, for all those fast-growing businesses that dream of going public or aggressively expanding using private equity is: “Beware!”
Hindsight is always 20/20, but had TRU taken a more conservative growth path, and invested its profits in developing a knowledgeable sales force, remodeling old stores and offering a great in-store experience, TRU would be hugely profitable.
Walmart, Target, Kohl’s, and other big box stores will likely enlarge their toy departments in hopes of picking up the $4 billion in U.S. toy dollars left behind by TRU.
That said, Isaac Larian of MGA Entertainment has started a funding campaign to save TRU and with various investors have contributed over $200 million toward a $1 billion goal to acquire some or all of TRU assets through the bankruptcy process. There still may be hope for the iconic brand.
What is bothersome is Larian’s reason for saving TRU. Larian’s recently stated that, ”If there is no Toys “R” Us, I don’t think there is a toy business.” From a manufacturer’s perspective, Larian’s comment may have validity. However, toy retailers have been in business long before TRU ever opened its doors, and thousands of independent toy and toy/gift retailers continue to thrive today. There will always be a toy business, although it may look different in the future. The toy departments in big box stores will expand and independent stores may add select traditionally “mass market” products to their mix to round out their assortments.
For decades, independent toy retailers have offered an intelligent alternative to aisles of pink or black. Sharon DiMinico, founder and CEO of Learning Express Toys, the largest chain of independent toy stores, explains why mom and pop toy stores have survived throughout the growth of mass market retailers and online shopping. “[Specialty Toy] retailers are able to offer an in-store experience and service that can’t be replicated by “big box” stores. It is the product assortment, service, and experience that has enabled independent toy stores to remain successful for all these years.”
Toys “R” Us is an iconic brand that specialty toy stores have coexisted with for more than 60 years. And while the Toys “R” Us customer will be saddened, they should keep in mind that the toy business is not going anywhere. Thousands of specialty toy stores are here to help pick out the perfect gift while providing a memorable in-store experience.
