Changes R Us

Another sad chapter for both American retail and American culture is upon us, as today is the last day of operation for ToysRUs.

Perhaps one of the saddest pieces of commentary is Rene Johnpiere's viral photo of Geoffrey the Giraffe walking out of an empty ToysRUs store with his roller suitcase.

Did Amazon kill ToysRUs? No, not really.

Was it a shadowy act of Burgermeister Meisterburger?

Not likely.

We know he wasn't a fan of toys, as noted in his famous anti-toy song in Santa Claus Is Coming To Town:

Burgermeister: It's a difficult responsibility

That you accept from the number-one lawmaker, me

Have it known throughout the land from sea to sea

There'll be no more toymakers to the King...

But there will be toy sellers, won't there be? Won't ToysRUs always be here, like Benny's in New England and Sears nationwide?

https://www.youtube.com/watch?v=VJJ-ZLdrTwY

This final chapter of the retailer, whose origins date back to 1957, and whose growth was spearheaded by Charles Lazarus (who passed away this past year, probably of a broken heart) has been as gray as the monochromatic Burgermeister.

• So whose difficult responsibility was it to turn ToysRUs around?
• Why will we be left with this toy and game-shopping void?
• Is it actually a void?
• Other than nostalgia, will the market really miss ToysRUs?
• What led the company here?
• What happened?

In 2005 when Amazon was a fraction of it's current size, ToysRUs was taken private, or essentially recapitalized, in a deal sponsored by KKR, Bain Capital and Vornado. The $6.6 billion purchase left it with $5.3 billion in debt secured by its assets and it struggled under the weight of margin and liquidity pressures trying to service it's debt. Simultaneously, pressure increased as Walmart, Target and other regional retailed added more stores and an aggressive online business to sell toys, games, e.g. head-to-head with ToysRUs.

Walmart's total toy sales eclipsed ToysRUs.

Major toymakers Hasbro and Mattel sold much more inventory through Walmart and Target than through specialty reseller ToysRUs.

Retail customers continued to shop in stores but pull the trigger on their purchases online, taking advantage of fresher inventory, lower prices, free shipping, and user-friendly shopping portal and apps, giving Amazon and others traction to further erode TRU's market share in its native segment.

"Listening to the customer is probably the best thing in the world. Almost all that we have here and now, and how we expanded the business came from the customer saying 'I need.' or 'I want."- Charles Lazarus

In September of 2017, Toys "R" Us filed for bankruptcy under the weight of $5.3 billion in debt which retired debt service payments exceeding $420 million a year. The sharks that circled weren't the cute stuffed animal kinds from the fuzzy toys aisle.

Because TRU was so debt-laden, it didn't have the discretionary budget, cash flow and liquidity to keep stores up to date, improve supply chain issues, and spearhead a competitive online presence worthy of customers' attention.

Customers voted with their dollars and our beloved Geoffrey will need to find another role.

Sad, very sad.

It would have been a great turnaround and underdog story if ToysRUs had survived, given the importance of the brand in the hearts and minds of the countless children for whom the retailer was a friendly institution.

Only retail Darwinism can explain the demise of this beloved retailer and while the TRU jingle and fond memories will remain forever in our hearts, ultimately the giraffe's business model was too much of a dinosaur.

Charles Lazarus himself said, "Listening to the customer is probably the best thing in the world...Almost all that we have here and now, and how we expanded the business came from the customer saying 'I need.' or 'I want."

In the end, change was inevitable and like Sears, which at one time had pioneering, innovative strategies, the "I don't wanna grow up" approach to ignoring customers and trends, proved to be a difficult responsibility.

In a fun and whimsical way, ToysRUs posted a final message on it's web site, toysrus.com, which reads:

Thanks to each of you who shared your amazing journey to (and through) parenthood with us, and to every grandparent, aunt, uncle, brother, and sister who's built a couch-cushion rocket ship, made up a hero adventure, or invented something gooey. Promise us just this one thing: Don't ever grow up. Play on!

Article Copyright 2018, Paul Fioravanti, MBA, MPA

#ToysRUs #retailapocalypse #retail #toys #turnaround #restructuring #PaulFioravanti