One of the more interesting theories I've heard is the link between the housing crisis and the retail crisis. When you live in a tiny shoebox, the last thing you need is more stuff. Back in the days people had comparatively huge houses all to themselves, and could buy crap to their heart's content.
Toys ‘R’ Us Didn’t Have to Die
131–140 of 226 posts
Re: Toys ‘R’ Us Didn’t Have to Die
#132The article mentioned the Irish chain Smyths. This is a company that has grown from one store in a small Irish city to expanding in to and dominating the UK market in just over 30 years. Having shopped in both I can see the difference.
Toys 'R' Us felt like it wanted to be part of the toy experience with their whimsical logo, mascot, jingle and colourful in-store decoration.
Smyths on the other hand is just a toy warehouse. They forego the mascot, jingle and colorful stores instead focusing on making sure they always have what the children want. In other words Smyths knows that the toy is the experience, not the store.
Re: Toys ‘R’ Us Didn’t Have to Die
#133Earlier quoted context omitted.
Wild guess: Dropping the rents would prompt their remaining tenants to renegotiate their contracts.
Maybe. It's just strange as I've seen large % of commercial areas stay empty, they keep up the place, but almost nothing in the spaces, for years.
RTP in Durham, NC--there are so many office parks that were just 80-90% empty after 2001. I have a hard time imagining that any of them have any decent occupancy even now. That whole area must be commercial RE hell for some investors somewhere. When Nortel tanked they took down a good portion of the local economy. Sad.
Re: Toys ‘R’ Us Didn’t Have to Die
#134Earlier quoted context omitted.
> Toys R Us was profitable before it was bought “In 2004, after years of flat sales and falling profits, the Toys R Us board of directors put the company up for sale” [1]. Then, over “the next five years, sales at Amazon quadrupled to $34 billion”. Toys ‘R’ Us was bought as meagre profits fell and right before Amazon went for them. Blaming this outcome on the debt load is inaccurate. [1] https://www.google.com/amp/s/…
The article you reference blames the debt load. > To compete, Toys R Us would have had to invest significantly in its website and stores. But the retailer was using most of its available cash to pay back its debt. Yes, profits were falling crazily, but the company was still profitable. Without the debt load, they could've spent some time losing money while they pivot to a new business strategy. The debt load really p…
> they could've spent some time losing money while they pivot to a new business strategy
There is zero evidence, in the history of Toys 'R' Us or their failed competitors, that another strategy would have worked. More likely? It would have limped along until the next recession. In any case, I see no reason to blame capital structure when a simpler explanation abounds: Amazon taught people to buy toys online.
Re: Toys ‘R’ Us Didn’t Have to Die
#135Earlier quoted context omitted.
In a few years strip malls will be occupied only by food businesses, pharmacies, check cashing places, and urgent care clinics.
you forgot "internet cafes" - meaning gambling storefronts.
Internet cafes/PC baangs never really caught on in the US -- home connectivity spread much faster and supplanted the need for such businesses in wealthier areas, and shared resources like public libraries serve less well-heeled areas.
Re: Toys ‘R’ Us Didn’t Have to Die
#136Despite the title and the focus on the form of financing, none of the facts in the article even suggested to me that the company would be in any better shape if it had used equity financing rather than debt. It sounds, rather, like an unprofitable business that no one in their right mind would give any more money. If someone thinks they can figure out how to make a workable business out of big box toy stores, it soun…
You're missing the key piece: Toys R Us didn't go into debt for any good business reason, it was bought by a private equity firm and loaded with debt it didn't need. This is how private equity works: 1. A PE firm uses a combination of other people's money (limited partners a.k.a investors) and debt to buy a company. 2. The PE transfers the debt to the company's books. This way, if the company goes bankrupt the PE fun…
I don't understand why people keep repeating this story. Bain Capital had to provide huge amounts of collateral (upwards of a billion dollars), all of which was lost in the bankruptcy. Do people really believe that PE firms will write of a loss of hundreds of millions in order to make a few million in management fees?
Re: Toys ‘R’ Us Didn’t Have to Die
#137Earlier quoted context omitted.
It's easy to avoid taxes by not making money, but as someone states in the third article you link to: "A wise colleague told me that until effective income tax rates reach 100 percent, a dollar of income is worth more than a dollar of deduction". That's just the apparently-not-so-well-known First Law of Tax: It is always better to have more money than less money.
This is only true if there is only one type of tax and it's non-negotiable and immutable over time. For little people like you and me, taking rent is a simple income and forgoing it would be a simple loss. As you say, it wouldn't make any difference for our net taxes. When you own thousands of square meters of [what will be] prime brownfield development space, leaving it unoccupied just hastens the local government t…
I understand that there are many reasons why it may make sense to leave a building unnoccupied, I just don't think that "dodging taxes" (because losing money reduces your tax bill) is one of them.
A job-seeker may pass on an offer that he considers too low (because he's confident he will find something better later), no one would say he's doing so to avoid paying income taxes.
Re: Toys ‘R’ Us Didn’t Have to Die
#138Retailing seems to be dying in US irrespective of the company: https://www.bloomberg.com/news/articles/2018-04-17/retail-st... Couple of years ago, one of my friends bought a store at a strip mall. The store was making a loss. And the previously owners were an elderly couple. So my friends thesis was that they weren't exactly tuned into the digital presence business and it was still entirely possible to run a store i…
What I don't get is there are a lot of empty storefronts and places moving that I see... and retailers say the rents are still sky high for those storefronts. Is it really worth the property owners keeping them empty?
In the UK if you occupy the space you have to pay business rates (a local government tax) which are not cheap - of the order of £1000/week. Unless you are a charity shop which are able to get freebies. Hence a lot of bust businesses get replaced by temporary charity shops.
Re: Toys ‘R’ Us Didn’t Have to Die
#139Earlier quoted context omitted.
I'd argue that a toy store, more than any other kind of retailer, is insulated from that, because the store has an little advocate for spending ten dollars extra to buy the product right now with most shoppers. And going to the toy store itself is kind of an activity that I don't think you can replace with online shopping.
Anecdote time: I took my cousin (12) to a toy store once. First it was difficult to get him out of his iPad and get out of home. Second he was completely indifferent to anything in the store. We ended up buying some card games and credit for mobile games. + There aren't many kids anymore.
That's on the older end of the customer demographic, though. My kids (oldest is seven) would have a blast, and would definitely be begging to bring something home.
Re: Toys ‘R’ Us Didn’t Have to Die
#140Earlier quoted context omitted.
There's nothing about the brick & mortar toy space that's inherently living on borrowed time. It was Toys 'R' Us' own mismanagement that doomed it. Toy stores can be a destination. Provide a compelling experience for parents and kids alike. It's easy to imagine a space where kids get to play with toys hands-on, and parents get to judge for themselves whether they think they're appropriate in terms of fun and quality—…
IKEA doesn’t work online because of the cost of shipping on a per unit basis.
Ikea works well online for me and several people I know.
The main factor is that we live in city centre and don't own cars, so 40 euro (or whatever it is) for shipping compares favourably to getting a taxi or a short-term car hire like car2go, gocar, etc.
TBH I even like visiting Ikea sometimes but ordering online solves the whole "this is going to chew up a whole Sunday afternoon" problem too.