What Happened to Toys R Us? 3 Reasons Why They Failed

Toys R Us created magic for children. In the 80s and 90s, they made children's wishes come true. It was nothing short of an ultimate childhood dream. Such great memories! But today, the 'then' beloved brand is nothing but a faded picture of its prime, glued to the wall. Their glory is long forgotten! The news shared the rise and fall of the retail giant. The industry was a close witness to the struggles of Toys R Us over the industry. After facing quite some trying situations, the store finally decided on global closure in 2021.

No matter how they shaped the childhoods of millions of kids, nostalgia was not enough for its survival. The changing landscape of the industry and customer preference made things difficult for the once-celebrated retailer. Toys R Us had a public downfall from closing stores to operation liquidation.

Toys R Us: Once a Successful Retailer
The Demise of an International Retailer: When Did Things Take a Turn?
Three Reasons for the Downfall of Toys R Us
What Is Next for Toys R Us?
Revival of the Brand by WHP Global

Toys R Us: Once a Successful Retailer

Not every success story lives forever. Some enjoy the rise, bask in its glory, and hit rock bottom after quite a run. Toys R Us had the same fortune. 

Charles Lazarus was an American entrepreneur. In 1948, he established this retail business which became one of the top players in no time. The industry glorified the company and considered it a ‘category killer.’ No one else lived up to the standards Toys R Us set for its customers. Children loved the toys that this retailer sold.

However, in 2018, almost seven decades later the company fell prey to a string of unfortunate events. It filed for bankruptcy. And finally, the day came when it had to close business worldwide. But how did a retailer mammoth, a category killer, burn to ashes after such a magnificent run? 

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The Demise of an International Retailer: When Did Things Take a Turn?

Most bankruptcies are the result of years of debt, fast-slipping sales, and poor management. So what went wrong with Toys R Us? Well, everything. A company that once reigned over the toy industry fell prey to bad sales and mounting debt. 

Everything needs to adjust to changing times. However, Toys R Us could not grapple with the changing industry market space. Moreover, there are platforms like Amazon and retailers like Target and However, that added to its suffering. But the company’s management also needs to shoulder the blame.

They could not read changes in consumer behaviour. Consequently, they failed to adjust their business model and use new technology wisely.

However, a $7.5 billion buyout stalled the inevitable downfall of Toys R Us. In 2005, a few investors delayed the global demise of the retailer. However, the already piled-up debt was too much to handle.

Unfortunately, the retailer had to announce 180 shutdowns out of its 800 US stores. It also closed all its stores in the UK, moments before liquidating its operations. 

Three Reasons for the Downfall of Toys R Us

1. The Infamous Deal With Amazon

The company entered a decade-long partnership with Amazon in 2000. The deal set Toys R Us as an exclusive Amazon toy seller. The contract promised the company $50 million per annum from Amazon along with a commission from the sales.

Seeing the successful venture, Amazon decided to expand its toy category. They included direct competitors of Toys R Us. This brought trouble for the company. So they sued Amazon, won the lawsuit, and terminated their deal. 

However, the loss incurred due to their co-existence with competitors on Amazon’s e-commerce platform was huge. And the amount they won after suing Amazon did not cover their losses.

Even after the setback, they tried to create their online presence independently. But unfortunately, it was too late. The site had technical errors which frustrated the customers. 

2. From Being the ‘Category Killer’ to ‘Becoming Clueless’

In 2001, Toys R Us had its New York Square flagship store. It was undeniably a great attraction for all children. Kids enjoyed the different theme zones that Toys R Us had. It won hearts with amusement arcades, animatronic T-Rex, other Jurassic Park attractions, Barbie dream houses, Wonka, legos, and so on. Sounds like a total childhood dream palace, right? 

However, the store shut down in 2015. They wanted to cut down on expenses. The big mistake? They compromised on management costs. The company cut down on staff. They let experienced employees go. This was a blunder. In no time, they drowned in their surplus inventory. 

The company unknowingly chased away potential customers. Retail needs better store management and customer interaction. Without proper management, they failed to deliver the basic service needs.  

3. Did Their Business Model Aggravate Their Downfall?

None can escape the wrath of time. Either you give it your all and adapt to the changing times, or you quickly become irrelevant. Whether it be, on an individual level or industrial level, we all need to adjust. Toys R Us failed to do what time demanded of them. They could not innovate and adjust to the changing landscape. 

The world is moving online. But so many big companies stayed the same when this change began. Similarly, Toys R Us failed to see what lay ahead, failing to fathom that e-commerce is the future.

They could not use technology to their advantage. And when they finally did, it was already too late. The retailer could not engage with the changing consumer behaviour. The inability to predict customer preferences threw them off the wagon. This slowed down their business which was a great disadvantage. 

Businesses always need to stay ahead of time to survive. Only constant innovation can make them sustainable. 

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What Is Next for Toys R Us?

Toys R Us is not just a retail company in the toy industry. For so many people, this is a sweet childhood memory. 

• Although it did close its stores in 2021 after filing for bankruptcy, the story is not over yet.
• It intends to rebrand itself. The retailer announced the development of businesses under a new parent company. Today, Toys R Us is a part of Tru Kids. 
• It enjoyed successful launches in both the US and UK. 
• Optimistic about 2024, the company plans on expanding into Australia as well. 
• In 2019, Tru Kids rebranded Toys R Us and relaunched its previously failed website. 
• This venture came in partnership with a major competitor, Target. This competitor retailer acted as a fulfilment partner.
• However, the deal did not settle well. It ended before any fruitful accomplishment.
• Eventually, Tru Kids made a deal with Amazon. 

Although Toys R Us saw its fair share of rise and fall, it is trying to emerge from the ashes again. The question, however, remains: Will it be successful with the efforts of a new parent company? 

Revival of the Brand by WHP Global

Almost three years after filing for bankruptcy, Toys R Us was revived by WHP Global. WHP Global acquired a controlling stake in Tru Kids in 2021 giving it enough power to open stores.

As a plan, WHP Global is working on expanding the reach of Toys R Us across the globe. Currently, the brand has around 1400 stores and an e-commerce site with access to around 31 countries. With all this change, we can assume the brand has revived in 2023 against all the odds.

Conclusion

The last decade was a major turning point for all retailers. People shifted to e-commerce platforms rather than visiting stores. Then why did Toys R Us leadership not see the flaw in their business model? The reason for their demise is not on Amazon or changing consumer attitudes. However, the story is about the company’s failure to make concrete financial decisions with better foresight. 

One can have vision. But the resources to execute the same are important. From debts to poor management decisions, Toys R Us gives all businesses great examples of what not to do. The company flourished, it was a big player until it wasn’t. If businesses do not play the way time demands, you know what the consequences will be! 

FAQs

Who was Toys R Us's biggest competitor?

Some of the biggest Toys R Us competitors were Carter, Walmart, Staples, Amazon, etc.

What year did Toys R Us open?

Toys R Us was opened in 1948 by Charles Lazarus.

Is Toys R Us a dead brand?

No, Toys R Us has been revived by WHP Global which made it come back to the market with its e-commerce site and 1400 stores across multiple locations covering 31 countries.