Business

Toys 'R' Us Still in Play, Despite Bankruptcy Liquidation

The Toys ‘R’ Us empire may still be in liquidation, but that does not mean it’s over for the iconic retail chain.

Toys R Us may no longer exist in North America but its Asia business may continue on for a long time. This particular store is located in Cebu City, Philippines, with a look very familiar to North American customers. Photo: Trillions

It turns out Amazon.com may not have killed off all of Toys ‘R’ Us after all. News broke on April 13 that the founder of MGA Entertainment Inc. and its Bratz line of dolls, Isaac Larian, wants to buy the company’s North American assets. Its Asian stores also look like they will be acquired, intact, with rights to the store name and even the assets currently owned by that part of the chain.

The retail chain, founded in 1948, was the original “big box” store, specializing in one category of product and built on a gigantic scale so it could stock far larger quantities of just about anything. It was the place you wanted to go if you were parents looking for the ultimate birthday or Christmas gift for your child. It was also the place to go if you were a child who had saved up money in his or her piggy bank, and wanted to go out and buy something amazing. Because if Toys R Us did not have it, the smaller stores would almost definitely not carry that toy of your dreams.

Before the bankruptcy filing, Toys ‘R’ Us had almost 1800 stores worldwide.

That formula worked so well that companies like Staples brought the same idea on an even bigger scale for the office supplies industry. They thrived by offering one-stop-shopping for all one’s office needs, from paper to pens, coffee, file folders and even office chairs. They also were the place to go when personal computers first became ubiquitous, with the lowest prices and sales people who could explain them to anyone.

Both Staples and Toys ‘R’ Us were hit financially when ecommerce became big business. Both also made the decision to adapt to that new world.

Staples created its own online office supplies business as an adjunct to its stores as one part of its strategy. That company also learned to walk away from online computer sales when it became evident others were going to dominate it for the long term. They also kept their stores relevant to local customers, who seemed still interested in just stopping in to buy ‘a few things’. They have also tested concepts such as providing coworking spaces for on-the-go business people, which had the advantage of providing incremental revenue as well as drawing in customers of precisely the right category who would likely buy other products.

Toys ‘R’ Us did something different. They partnered with Amazon.com, a company which no one could have realized at the time was going to take over so much of retail sales everywhere. They created an internal Toys ‘R’ Us branded section within Amazon, with them getting a percentage of the sales. In the process, they taught their existing customers that there was a far easier way to shop for toys at times like Christmas. People did not need to wait in line for that ‘must have’ toy for their son or daughter. They could buy it online.

By doing so, they drew away many of their customers from the brick-and-mortar stores. Unlike Staples, they came up with no means to keep the stores relevant. Over time, sales plummeted and there was just less and less reason to come in. Then, when their deal with Amazon ceased, Amazon just picked up the pieces and took away most of the rest of the Toys ‘R’ Us’s former loyal customers.

When Toys ‘R’ Us filed for bankruptcy in September 2017, then, most observers saw the suggestion that the company might restructure to survive as just a highly unlikely wish. In March 2018, Toys ‘R’ Us stopped looking for suitors to save it and began court-approved liquidation of its assets. The goal was to find a way to pay off some of the $5 billion in debt it had accumulated. The liquidation was not a surprise to anyone.

That Toys ‘R’ Us’s Asia stores might be sold off and keep the brand name was not much of a surprise either, though the amount being offered for it is. As of this writing, several offers of over $1 billion have been made to buy the chain. Considering that the world of ecommerce has not taken hold the same way in most of Asia, compared to the way it has in North America, the idea of a good-sized toy store still has relevance to those markets. So that made sense.

What was a surprise, on the other hand, was Isaac Larian coming out of nowhere at the last minute to make two different plays for the company. First, he offered a partial investment that would be supplanted by a GoFundMe crowdfunding move. When that ended up bringing in almost no money, he pitched a bid of $675 million for the U.S. stores and $215 million for the Canadian outlets.

Since that deal just happened, the story of what will happen to Toys ‘R’ Us next is still up in the air.  It is clear that if the brand lives on, especially in North America, it will not do so by continuing business as usual.

It probably will also have a lot more Bratz dolls in its stores, too.