Toys R’ Us, the last bastion of the big toy chains in the U.S., may be looking to liquidate its holdings and calling it a day. Should this come to pass, this is a retail closing that won’t only leave us with even more empty storefronts dotting the landscape, but it will also more than likely lead to a lot of smaller toy companies having to close their doors as well.
CNBC reported late on Thursday that sources were saying that Toys R’ Us was examining the possibility of liquidating its U.S. holdings. The situation is referred to as “fluid” at this time, but it isn’t all that surprising. Currently, Toys R’ Us is in the process of shutting down 170 of its locations, which was announced prior to the holiday season. With hopes that the annual buying spree would lift its bottom line, it didn’t come to pass and the company is in danger of faulting on a $3.1 billion loan. Sales and store traffic both fell short of expectations and the company is running out of options.
With the news of the shortfall in the holiday season, some lenders have become aggressive in suggesting it is time for the company to liquidate.
While the news of these potential lost jobs is bad enough in and of itself, what is also concerning is the knock-on effect this will have on the entire toy industry. In after-hours trading on Thursday, Mattel saw its stock dip as much as 7.6 percent and Hasbro also went as low as 4 percent. These are the two largest toy companies in the U.S. and they can absorb Toys R’ Us disappearing – although it may rekindle those merger rumors – but the smaller companies are the ones we have to worry about.
The Art of Browsing is Dying
Having just returned from Toy Fair 2018, I can tell you there are hundreds of small toy companies that make items you won’t see anywhere but in a large destination store such as Toys R’ Us. As I walked the aisles of the Javits center I saw ride-on items, wooden doll houses, companies specializing in play sand, outdoor playsets and so much more. And one thing kept crossing my mind: Where are these companies going to be if there is no more Toys R’ Us?
Walmart has become one of the biggest toy sellers in the U.S., but it only has so much space. One of the other leaders in the category now is Walgreens, which dedicates only about 10 feet or so to the most recognizable brands. These smaller companies are going to find it increasingly hard to find anywhere for their items to be seen as they attempt to grow into a well-known brand.
It’s easy to say, “But there’s online sales,” and this is true, but a lot of these companies rely on you actually seeing their items in person. I know I would be reluctant to order an outdoor item, such a swing set, through an online retailer like Amazon.
And there is also another major issue with online shopping: browsing. Typically when I go to an online store I am there with a specific item in mind. I want or need Product X. I go to the site and I search for Product X. I’m not spending my time browsing and searching completely random items. I’m not going to ‘walk’ by an ant farm and fondly remember something from my childhood and think I should order that for a child I know. That is the type of experience you only get in a retailer such as Toys R’ Us.
They’re Own Worst Enemy
Make no mistake: Toys R’ Us has no one but themselves to blame for what has happened. The company stuck by its old model for far too long and was sluggish in establishing an online presence. And as anyone who has been in one of their stores and seen the “bins” of clearance items, it is questionable how well its ordering department has done in tracking past sales. Toys have sat on shelves sometimes for literally years with little to no reduction in price, or they have been sent to the bins but had too much to make a dent in the inventory.
Toys R’ Us, sadly, has become a dinosaur by its own hand by not just keeping up with changes in technology and trends. As someone who loves the toy industry and finding those hidden treasures, I fear a future of sameness. When I return to Toy Fair in the future, will I see a company specializing in play sand, or will there just not have been enough outlets for their products anymore?
The toy industry is in for a rough ride, and it goes way further than a store with a giraffe as its mascot.