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Toys ‘R’ Us Didn’t Have to Die

bloomberg.com

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Re: Toys ‘R’ Us Didn’t Have to Die

#41

Post by duxup »

thisisit wrote: post #8

Retailing 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?

Re: Toys ‘R’ Us Didn’t Have to Die

#42

Post by sitepodmatt »

PhasmaFelis wrote: post #30

The thing that's really lacking to me in online toy stores is, I guess, discoverability. Amazon can give you a list of all the Transformers, or all the Legos, in an instant, and with a bit of prodding it does an acceptable job of showing you the current top-selling toys, but it's impossible to walk down an aisle at Amazon and see something awesome that you've never heard of.

At least with books, Goodreads takes care of that.

Re: Toys ‘R’ Us Didn’t Have to Die

#43

Post by krallja »

PhasmaFelis wrote: post #30

The thing that's really lacking to me in online toy stores is, I guess, discoverability. Amazon can give you a list of all the Transformers, or all the Legos, in an instant, and with a bit of prodding it does an acceptable job of showing you the current top-selling toys, but it's impossible to walk down an aisle at Amazon and see something awesome that you've never heard of.

I went to our neighborhood Toys-R-Us to be a vulture, and discovered quite a few toys I wouldn’t have considered purchasing otherwise. Of course, the 40-70% discounts helped a lot.

Re: Toys ‘R’ Us Didn’t Have to Die

#44

Post by benjaminwootton »

triviatise wrote: post #36

I dont know the economics of our local toy stores, but the ones that seem to thrive allow you to actually play with the toys. If it was more like a theme park or a playground you would get parents to bring their kids in just to play. For example, let kids drive power wheels around a track. Have playscapes that they can play on and buy. And sample toys that kids can play with.

I remember reading 20 years ago how retail stores need to turn into experience destinations. I think the perceived risk at the time was mail order rather than the internet.

However, even with Apple and the Apple Store there for all to see, few retailers still seem to get this. Without the hands on element, they are really fighting a losing battle vs ecommerce.

Re: Toys ‘R’ Us Didn’t Have to Die

#45

Post by yourapostasy »

jaysonelliot wrote: post #10
gkoberger wrote: post #5

I read the whole article, and I didn't really see a convincing argument that it didn't have to die. Sure, it could have eked out a few more years... but it was living on borrowed time. Not only do most people shop online now, most toys are also online. I imagine most parents put money into TV shows, video games, iPhone apps, etc.

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's physical presence only works because they are sole and best-priced supplier of what they offer. Don't build a retail business on the premise that people will want what they handle in the store right now instead of saving a few bucks ordering it online from elsewhere.

The underlying price of the real estate to the revenue brought in by a toys-based sales funnel simply makes these locations untenable to flog products that can be sourced online for cheaper. You need a hell of a lot of sales volume to keep up, and online took away enough volume to starve these models.

The parenting culture is also wise to the models that are built around "hook 'em young and get them to insist on instant gratification". Look inside parenting forums and you'll see a shift in shopping habits, where toy stores are deliberately and consciously avoided precisely because parents are annoyed at the effects.

Personally, I'd rather see more parents teaching children through involvement in daily activities than throwing more toys (including computer and video time) at their children. We're "over-toyed", over-retailed, and "under-practicum'd".

Re: Toys ‘R’ Us Didn’t Have to Die

#47

Post by bunderbunder »

duxup wrote: post #41
thisisit wrote: post #8

Retailing 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?

Wild guess:

Dropping the rents would prompt their remaining tenants to renegotiate their contracts.

Re: Toys ‘R’ Us Didn’t Have to Die

#49

Post by ccozan »

bobthepanda wrote: post #32
ccozan wrote: post #16

Earlier quoted context omitted.

As a, maybe, counter example, in my small bavarian city they opened 3(!) new shopping malls in the last 5 years. Me being more global than the rest of the fellow locals, I was baffled.

The US in general is heavily over-retailed. > By one measure of consumerist plentitude—shopping center “gross leasable area”—the U.S. has 40 percent more shopping space per capita than Canada, five times more the the U.K., and 10 times more than Germany. https://www.theatlantic.com/business/archive/2017/04/retail-...

Ok, that explains the US situation.

Of my local situation, probably the explanation is because on a 30km radius there are not really any other shopping malls ( space being filled with cows on green pastures :) ).

Re: Toys ‘R’ Us Didn’t Have to Die

#50

Post by jwlato »

voidmain wrote: post #6

Despite 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 fund isn't liable for that debt.

3. The PE firm charges millions of dollars in fees for providing management services. This way the PE firm makes money regardless what happens to the business.

Toys R Us was profitable before it was bought and saddled with debt that was essentially used to purchase it's own business.

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