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Toys ‘R’ Us Plans Bankruptcy Filing Amid Debt Struggle

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Re: Toys ‘R’ Us Plans Bankruptcy Filing Amid Debt Struggle

#61

Post by bspn »

EnFinlay wrote: post #31
javajosh wrote: post #13

Of all the things in the world, children's toys are THE most amenable to replacement by makers, tinkerers, and other people who want to do something in the real world. (Alas, that's not what's happened. People just buy the cheap plastic crap from Amazon.)

Doesn't Toys 'R' Us sell the same "cheap plastic crap" as Amazon?

Amazon sells a slightly different but much wider range of "cheap plastic crap" thanks to FBA. There's no shortage of budding sellers with an Alibaba account who think they have the next best thing (read: re-labeled, generic Chinese crap) and flood the market with crazy cheap products making it difficult for bricks and mortar retailers to compete.

A store like Toys 'R' Us may have a slight advantage when it comes to licensed merchandise, but I think even most of the big sellers long ago accepted that it's impossible to ignore the Amazon juggernaut and now also sell on the platform.

Re: Toys ‘R’ Us Plans Bankruptcy Filing Amid Debt Struggle

#62

Post by tolien »

CodeTheInternet wrote: post #44
devmunchies wrote: post #8

Earlier quoted context omitted.

A place to try before you buy on amazon.

I used to go to Borders constantly, like a hangout. As Amazon grew, I found myself doing exactly this: going to check out the latest releases, flip through the pages, pull out my phone and check Amazon prices. 99% of the time it was cheaper there. Add the book to a wishlist or my cart, put the book back on the shelf and leave empty-handed. I felt horrible when Borders went under, but I do the same at B&N. If brick-n-…

Where it's impossible to compete on price, bookshops (and other segments of retail) need to compete on features, for example a number of retailers have seen a huge growth of people collecting online orders in retail stores [1]. I've picked up an Apple store order within a few minutes of ordering it online (obviously it depends on stock). Considering how much Prime Now costs, there's evidently money to be had for offering rapid gratification.

Unfortunately a number try to have it both ways with high prices, uninterested staff (not helped by low wages) and terrible service. Little wonder Amazon's eating their lunch.

1: http://internetretailing.net/2017/01/evidence-points-click-c... - "John Lewis has said that 52% of online orders were picked up via click and collect this Christmas, with use of the delivery method up by 14.5% compared to last year"

Re: Toys ‘R’ Us Plans Bankruptcy Filing Amid Debt Struggle

#63

Post by 8ytecoder »

CodeTheInternet wrote: post #44
devmunchies wrote: post #8

Earlier quoted context omitted.

A place to try before you buy on amazon.

I used to go to Borders constantly, like a hangout. As Amazon grew, I found myself doing exactly this: going to check out the latest releases, flip through the pages, pull out my phone and check Amazon prices. 99% of the time it was cheaper there. Add the book to a wishlist or my cart, put the book back on the shelf and leave empty-handed. I felt horrible when Borders went under, but I do the same at B&N. If brick-n-…

This is not true any more btw. Amazon has lost a number of advantages after they started increasing the number of warehouses and placing them close to consumers. The only advantage they retain is that because their distribution is a warehouse instead of store, they can stock and restock any time they want - and not have to pay the additional labor cost of restocking during after-store hours, and also to keep the place functional but not necessarily presentable. Don't forget that shipping costs are not neglible and Amazon also provides free returns ...etc.

Stores can try a new model where they charge a little extra for customers who want it right away and then aggressively price match online for those who don't mind receiving the item in a day or two. That way, they can keep their labour cost low, and operate like a showroom. However, they need to really aggressively market their touch and feel factor at the same cost as online.

Re: Toys ‘R’ Us Plans Bankruptcy Filing Amid Debt Struggle

#64

Post by tlb »

mywittyname wrote: post #47
mbesto wrote: post #30

Earlier quoted context omitted.

Fairly typical large cap PE strategy. Load the company up with debt then sell it off and let the company figure it out after. Note - not all PE firms do this (big or small) but it is a common strategy that does earn them money.

How is this not fraud?

It's possible there was fraud, if the investors were given false statements. But most likely, they made an educated bet and lost.

The people who issued the debt (made loans to the company to buy back its outstanding shares) are sophisticated investors who saw the balance sheets of the company and thought they were likely to get paid back. If things had worked out, they'd have made an above-market interest rate. They also knew what would happen if things didn't work out (the present situation is a typical downside for LBO capital). They didn't lose all their money -- they made 7.375% interest for 15 years. If they get 50% of the capital back through bankruptcy, that's a total return of 160%. Not the worst investment over the last 15 years, though obviously Apple would have been better.

Re: Toys ‘R’ Us Plans Bankruptcy Filing Amid Debt Struggle

#65

Post by agumonkey »

bduerst wrote: post #53
bodz wrote: post #25

Earlier quoted context omitted.

There's something to be said for getting rid of excessive waste and unnecessarily large warehouses of "cheap junk", but it's also worth remembering that toys play a very important part in teaching children fundamental skills like hand-eye coordination, simple problem solving, fostering imagination, etc. It's a game of "what-ifs", but I'm fairly confident in saying I wouldn't be pursuing the career I am now if I had n…

Same - except for me it was also Capsela (now called IQ Key), a bunch of cheap plastic crap that let you engineer modular machines. I think the medium that kids play with 'toys' has changed with tablet and phone devices. Now they're solving puzzle apps and building Minecraft cities - whether or not that's a good or bad thing, I'm not sure, but it doesn't bode well for toy stores.

Oh I remember seeing these on rare occasions. They felt very sciency, I would have enjoyed throwing my brain on them as a kid.

Re: Toys ‘R’ Us Plans Bankruptcy Filing Amid Debt Struggle

#66

Post by rb808 »

atourgates wrote: post #58
product50 wrote: post #39

Though this may have something to do with Amazon (and retail generally trending online), it does appear that the big culprit here were Bain Capital (and its partners) who took it private in 2005 via leverage buyout and ladened Toys r Us balance sheet with untenable debt from thereon. Apparently, they were paying $500M in interests alone per year vs. reinvesting capital in growth of their offline stores or online reta…

Toy stores are a _great_ example of opportunity for brick and mortar. Just like book stores, they operate in a space where curation, discovery and the physical experience adds real value. The town I grew up in has a great independent toy store, and I make it a point to shop there every time we're in town. Every time I find something unique that I would have never looked for on Amazon, and often I'm hooked by the tact…

>Every time I find something unique that I would have never looked for on Amazon, and often I'm hooked by the tactile act of playing with something that couldn't be fully replicated online.

You're absolutely right. The result usually is though that the kid finds a toy they like then puts in on their Birthday/Christmas wishlist from where the Santa buys from Amazon. I like to think I never do this, but if the price is much higher even I have a limit.

I think that manufacturers should sell to physical toy stores at a lower price, and actively make sure online price is the same or higher than instore. but I dont how easy this is to police or even if is legal in some countries.

Re: Toys ‘R’ Us Plans Bankruptcy Filing Amid Debt Struggle

#67

Post by xadhominemx »

the_evacuator wrote: post #60
mbesto wrote: post #55

Earlier quoted context omitted.

What's fraudulent about it?

I'll give you one thing: the assets of the company are pledged to the senior bond holders, but then after the bonds are sold the PE company generally disposes of the assets, leaving nothing backing the senior debt. The junior debt, of course, has nothing pledged to back it at all. Junior debt in leveraged buyouts is pure gambling.

This is in the territory of not even wrong

Re: Toys ‘R’ Us Plans Bankruptcy Filing Amid Debt Struggle

#68

Post by svantana »

product50 wrote: post #39

Though this may have something to do with Amazon (and retail generally trending online), it does appear that the big culprit here were Bain Capital (and its partners) who took it private in 2005 via leverage buyout and ladened Toys r Us balance sheet with untenable debt from thereon. Apparently, they were paying $500M in interests alone per year vs. reinvesting capital in growth of their offline stores or online reta…

> a lot of smaller toy retailers (both online and offline) will spring up to take Toys r Us' space

Why would anything take its space? It's still a highly valuable brand, that I'm sure the next owner(s) will want to leverage to the fullest.

Re: Toys ‘R’ Us Plans Bankruptcy Filing Amid Debt Struggle

#69

Post by rb808 »

pm90 wrote: post #56
product50 wrote: post #39

Though this may have something to do with Amazon (and retail generally trending online), it does appear that the big culprit here were Bain Capital (and its partners) who took it private in 2005 via leverage buyout and ladened Toys r Us balance sheet with untenable debt from thereon. Apparently, they were paying $500M in interests alone per year vs. reinvesting capital in growth of their offline stores or online reta…

I just don't understand the people/institutions that give loans to such entities when a simple analysis would show how burdened by debt they are... are these investors really that stupid to loan money at unsustainable rates?

2005 was a different age, both in the shopping world and finance.

Re: Toys ‘R’ Us Plans Bankruptcy Filing Amid Debt Struggle

#70

Post by martinald »

Crontab wrote: post #17

I have come to the conclusion that it is very hard for a specialty businesses to survive in the era of Walmart and Amazon - which does not bode well long term for places like Barnes & Noble and Gamestop. I hope I am wrong.

I imagine GameStop does very well out of their trade in business. Does Amazon do that in the US?
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