How vulture capitalists ate Toys 'R' Us • Hacker News Board

Re: How vulture capitalists ate Toys 'R' Us

#161

Post by stevenicr » Tue, Apr 24, 2018, 1:35 AM UTC

ams6110 wrote: post #103

replicatorblog wrote: post #93

Earlier quoted context omitted.

This is an excellent point. I don't think I've read an account of the TRU fiasco from the POV of a person with kids. By my read, TRU's problem isn't debt or Amazon, but changing substitutes. E.g.: + YouTube + Amazon: Lets kids see what a toy looks like in HD, whereas previously you'd need to go to a store to see the big images on the box, or to press the "try me" buttons. As you said, the brand drives most of the sal…

The other problem is that Toys R Us was a terrible retail experience. Warehouse-like, dim flourescent lighting, reminiscent of an old KMart. Dirty floors, unattractive steel shelves in narrow aisles for displaying merchandise. Indifferent, bored workers. I think I shopped there twice before giving up.

terrible retail experience, yes and quite standard for retail, especially that that purposefully encourages the whine and cry for things they want at eye level at registers.

I avoid certain stores in order to avoid the whole "I want this, I want, I want, whine whine" in the store and then at the checkout. I understand Toys R Us playing to this, going in you know it's going to happen...

but rather than really trying to increase it with impulse things at the entrance and then at the checkout, especially with things like candy, they could innovate.

Giving the kids a scanner like some of the walmarts have available and letting them zap all their wants, like some stores have with wedding registries, then letting them print a list or send to an app and then be able to sort by most wanted, etc - easy sharing.. could increase sales, and take care of the whining problem for example.

I'd also support a non candy aisle by spending more money if it had fresh fruit / veggy snacks for example, and I think others would as well.

The wall street greed that pushes some of these methods of selling is backfiring in some ways that are uncountable - if your app could detect the times I need something, yet drive by your store because kids and your impulse check out aisles..

Re: How vulture capitalists ate Toys 'R' Us

#162

Post by icelancer » Tue, Apr 24, 2018, 5:27 AM UTC

poof131 wrote: post #96

listenallyall wrote: post #43

TOY shares had fallen from $40 to the low teens by 2004. By announcing a sale of the toy business, the stock rebounded and ultimately the sale to private equity closed at $26.75 per share. That Board knew they had a declining asset on their hands and sold out, at a large premium, rather than watching their equity slowly decline over the next decade. Anyone who despises private equity should be celebrating this story,…

Why do I doubt they are the real losers here? Bloomberg states that they pocketed over $470M in fees.[1] And I imagine they were able to write off losses against wins elsewhere. So the real losers still seem to be the employees and the American people. A few years back I was talking to an east coast banker turned VC and he was pooping on the leveraged buyout industry. He said that all the debt payments are tax deduct…

>> Why do I doubt they are the real losers here?

Because it is fashionable to assume everyone on Wall Street just makes tons of money at the expense of Main Street, which is a gross oversimplification of what is occurring in today's society.

Re: How vulture capitalists ate Toys 'R' Us

#163

Post by lmm » Tue, Apr 24, 2018, 8:48 AM UTC

gowld wrote: post #130

lmm wrote: post #33

Earlier quoted context omitted.

> A slowly dying company is still successfully serving some customers and employing people. An unprofitable company is an overall loss by definition - sure it's providing some value to some people, but it's consuming more value than it produces. Killing the company quickly frees up the things it was consuming to be used for more productive things. Those buildings can be used for better businesses, or replaced with ho…

No, it's not. "Profits" are after money sent to vendors and employees, who are profiting. Only shareholders are losing in an unprofitable company.

Vendors and employees are presumably receiving a fair market value for their services; in a competitive market one buyer more or less won't make a significant difference.

Re: How vulture capitalists ate Toys 'R' Us

#164

Post by emodendroket » Tue, Apr 24, 2018, 1:24 PM UTC

listenallyall wrote: post #43

TOY shares had fallen from $40 to the low teens by 2004. By announcing a sale of the toy business, the stock rebounded and ultimately the sale to private equity closed at $26.75 per share. That Board knew they had a declining asset on their hands and sold out, at a large premium, rather than watching their equity slowly decline over the next decade. Anyone who despises private equity should be celebrating this story,…

I'd say the bigger suckers are all the people losing their jobs.

Re: How vulture capitalists ate Toys 'R' Us

#165

Post by Retric » Tue, Apr 24, 2018, 1:57 PM UTC

lmm wrote: post #163

gowld wrote: post #130

Earlier quoted context omitted.

No, it's not. "Profits" are after money sent to vendors and employees, who are profiting. Only shareholders are losing in an unprofitable company.

Vendors and employees are presumably receiving a fair market value for their services; in a competitive market one buyer more or less won't make a significant difference.

I don't think the toy store market is that competitive right now. Vendors can try to get into a big box stores small selection, but for large toys they are mostly stuck online only.

Re: How vulture capitalists ate Toys 'R' Us

#166

Post by airstrike » Tue, Apr 24, 2018, 4:27 PM UTC

smcl wrote: post #155

airstrike wrote: post #144

Earlier quoted context omitted.

Economics isn't something you can just fabricate an opinion on. There are countless academics who have actually studied the labor market who would correct you if you would spend any time trying to learn rather than pontificate. This isn't subjective.

I know many economists would disagree with me - they're the same who would also be OK with the decline of industry in places like the north of England and the Rust Belt and would point to the overall raise in the GDP per capita and the rise of the service sector and say that this roughly cancels this out. However they can afford to treat the country like a big "system" and can ignore the plight of the individuals who…

> and say that this roughly cancels this out. However they can afford to treat the country like a big "system" and can ignore the plight of the individuals who have been left behind in this system and the communities where they live.

You're missing the big picture. People in e.g. China are better off now because they are enjoying the upside from wage growth. Americans enjoyed this in the 1950s, but the ensuing globalization meant the improvement in wages would go to the lowest paid workers. In theory, once developing nations reach the same minimum wage as the U.S., American workers will start reaping the rewards of increased wages. In the meantime, Americans can pat themselves on the back for having a strong currency, cheap products made with cheap Asian labor, a great justice system, and employment and education opportunities galore.

The globalization genie is out of the bottle. It's not a matter of being able to afford to think the country as a big system -- you're the one who's myopically looking at it from the perspective of a cherry-picked subset of workers.

Americans can either wait until the developing nations catch up or they can invest in education (and write legislation) to bring more workers into the 21st century. Swimming against the tide of globalization is akin to fighting the Industrial Revolution -- I suggest giving up on that idea.

Re: How vulture capitalists ate Toys 'R' Us

#167

Post by lmm » Wed, Apr 25, 2018, 9:40 AM UTC

Retric wrote: post #165

lmm wrote: post #163

Earlier quoted context omitted.

Vendors and employees are presumably receiving a fair market value for their services; in a competitive market one buyer more or less won't make a significant difference.

I don't think the toy store market is that competitive right now. Vendors can try to get into a big box stores small selection, but for large toys they are mostly stuck online only.

Well if Toys R Us were operating at unsustainable cash-burn, it's not surprising that functional businesses weren't able to compete. With them gone, the market opens up for toy stores that charge enough to pay their overheads and operate as viable businesses. (Or maybe customers simply aren't willing to pay the premium that that costs compared to online, because they don't get that much value out of physical stores).

To the extent that vendors were relying on being propped up by an unprofitable Toys R Us who bought their product for more than it was worth, it's the same effect one level up: those vendors were consuming more value than they produced.