The Story Behind Toys ‘R’ Us and Its Bankruptcy

iStock 000014217415 ExtraSmall - The Story Behind Toys 'R' Us and Its BankruptcyWhat happened to Toys ‘R’ Us?

The retailer recently filed for bankruptcy protection. However, it intends to keep its stores open for the holiday season. The company hopes to use bankruptcy to restructure its debts, totaling $5 billion. Chairman and CEO Dave Brandon said that the financial flexibility afforded by bankruptcy will help the company strengthen its competitive position.

Is it just Toys ‘R’ Us, though? Or is the potential failure of the big box toy giant a sign of things to come?

Is the Retail Industry Dying?

News stories were being written as early as February of this year pointing to Toys ‘R’ Us as the next potential victim of the fall of retail. That month, news came out that the company laid off between 10 and 15 percent of its corporate employees. Overall toy sales during the holiday season fell 2.5 percent in the U.S. and 4.9 percent nationally, adding to the company’s ails.

Other companies that supply Toys ‘R’ Us, such as Mattel, also suffered lower overall sales.

This decline has been attributed to the rise of digital shopping. Toys ‘R’ Us has always been known to be ahead of the curve. After all, the original store opened as a result of the founder predicting trends. In 1948, Charles Lazarus returned from World War II and heard all of his war friends talking about getting married. He opened a store selling baby carriages and cribs – just in time for the Baby Boom.

Soon after, Lazarus struck gold again, predicting the rise of toy advertising as television became popular. Those toys, he discovered, encouraged more repeat buyers than baby cribs and accessories did. Thus, Lazarus shifted his company’s focus to toy-stocked superstores.

Toys ‘R’ Us now must play catch-up after failing to foresee the rise of mass merchants like Wal-Mart and e-commerce.



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