After more than 70-years in business, the iconic toy retailer Toys ‘R’ Us will complete the closure of the remaining stores by Friday. This decision by the company marks the end of an era. Toys ‘R’ Us that once had monopoly power in the retail space, struggled for years due to the heavy debt burden. After it failed to find a buyer, the company began liquidating its US stores and has now confirmed that it will close the remaining doors by Friday.
In its final week, the child-friendly retailer began sharing videos that featured interviews with shoppers, on its official Twitter handle. The company rolled out tweets encouraging customers to take advantage of the closing sale. Before going out of business, the toy retailer is offering its customers 50-70% off on all its items.
But according to USA Today, some stores of Toys ‘R’ Us and Babies ‘R’ Us are expected to close for good by Tuesday. It was in September of last year the company took steps towards bankruptcy in order to reduce debt and restructure its failing business. But these efforts seemed futile, forcing the retailer to wind up its US business. In March this year, it planned to shutter 735 U.S. stores.
Apart from the heavy debt, the company found it difficult to compete against other retailers, namely Amazon (AMZN), Walmart (WMT) and Target (TGT). And now with the demise of Toys ‘R’ Us, these big chain companies get a larger market share and stand to benefit the most.
To plug this gap created by the exit of Toys ‘R’ Us, the New Jersey-based retail chain Party City (PRTY) plans to open nearly 50 Top City pop-up stores. According to CNBC, these stores are expected to begin operations in September and continue through the holiday season. The company’s CEO James Harrison plans to expand the online assortment of toys.
Lessons that other toy retailers can learn from the demise of Toys ‘R’ Us
1. Debt has serious downsides too
Debt is good for business at times. If used in a right way, it can offer several benefits to the company. But with no proper planning, excess debt can hurt the business. In case of Toys ‘R’ Us, the company was drowning with approximately $5 billion when it filed for bankruptcy protection. With excessive debt, it gets challenging for the company to raise funds.
2. Know your customers
Toys ‘R’ Us not only failed to innovate itself based on the customers’ needs, but the company’s digital presence was also underwhelming. Amazon and other retailers are focused on boosting customers’ shopping experience. Due to these benefits, the customer retention rate at these companies remains high. Toys ‘R’ Us failed to create such smooth experience for its customers. Lego Group, known for its Lego brand toys, has physical stores with play areas, making shopping more fun for families. Toys ‘R’ Us lacked in customer service and also failed to change its store environment.
3. Evolve with industry trends
Using a 20-year old strategy in today’s fast-changing industry will not yield any profit. This was one of the reasons why Toys ‘R’ Us did not make a full-year profit since 2012. The company failed to adapt to the new industry trends, which finally led to wrapping its business for good.
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