From The Wall Street Journal:
The liquidation of Toys “R” Us Inc. has sent the toy industry reeling, leaving Mattel Inc., Hasbro Inc. and other manufacturers without a large chain devoted to selling games and dolls and forcing them to scramble to secure other outlets to carry their items.
Toys “R” Us, which had more than $11 billion in revenue in its last fiscal year, is part of a group of chains that were once seen by vendors as “category killers” and have emerged as crucial checks on the power of Amazon.com Inc. Stores like Best Buy Co. and Barnes & Noble Co. provide electronics manufacturers and book publishers with vast networks of physical showrooms.
The likely death of Toys “R” Us, which early Thursday filed plans to liquidate the U.S. operations and other businesses, means the $27 billion U.S. toy industry will no longer have a national partner to showcase their wares year-round, test experimental products and find the next Shopkins or Zhu Zhu pet.
It was a quick unraveling for Toys “R” Us since its September chapter 11 bankruptcy filing. In a call with employees Wednesday, Toys “R” Us Chief Executive David Brandon described a cascading series of events, starting with what he described as a “devastating” holiday season that led to plans to close more stores and then to exit from the baby-products business to focus on toys.
“The hole that we dug in the holiday season put us in a position where our lender became justifiably nervous as the company was continuing to consume cash,” Mr. Brandon said.
Ultimately, the company is expected to liquidate its entire U.S. operation, a decision that would impact 33,000 jobs. The company also is liquidating operations in other countries, and plans to sell its business in Canada, Central Europe and Asia.
. . . .
“This industry has been devastated,” said Tom Murdough, founder and CEO of Simplay3 Co., which makes plastic play sets and ridable vehicles. “This is a major, major hit to the industry.”
. . . .
The toy-industry growth rate could slump going forward too. Toys “R” Us was primarily responsible for uncovering what would become the next big thing, since it took chances that other retailers avoided. “There aren’t going to be as many breakout hits, not as many new items that can blossom,” said BMO Capital Markets analyst Gerrick Johnson. “Toys ‘R’ Us was a testing ground for a lot of things.”
Link to the rest at The Wall Street Journal
PG notes the mention of Barnes & Noble as playing a similar role in the book world as Toys R Us does in the toy world (although as he mentions in the WaPo item below this post, Toys R Us sells childrens books and major publishers have taken and will take a hit from the loss of this customer).
Ah, good ol’ Bain de-Capital.
The executive consulting industry — a business model that takes people in their early 20s who know how to dress and carry a briefcase, works them to death over a few years, and then jettisons them for the next batch.
It’s a great industry — it’s always their customers who go belly-up, and rarely themselves.
Some 20-year-olds are quick studies and can point out obvious problems to the management of their customers, typically 30 years their senior, but not very many, and none with sufficient gravitas.
Good stories for after hours, in the bar, later in life.
Another article on Toys-r-us and Amazon is not to blame. 🙂
http://www.news.com.au/finance/business/retail/the-real-reason-toys-r-us-went-bust/news-story/6f5c0fcf51ae5de220d282ed815b2f3f
11 billion dollars to be had and they couldn’t make it work. Now that’s sad.
http://money.cnn.com/2018/03/15/news/companies/toys-r-us-closing-blame/index.html
my young grandkids still prefer boxes, pref refrigerator sized
SF writers in training! 😀
lol felix
i hope so
The last few holidays we’ve basically been unable to purchase toys for our 8-year-old. He doesn’t want them. Instead, he wants virtual merchandise from the various online games he plays, both by himself and yes, with friends. I do buy him scholastic books for his Kindle Fire, but we have to set aside specific times for reading. At least we’ve gained some traction there, having found some series that he likes.
I predict that Amazon will be selling even more toys, stuffed animals, yada, in the future than they are already in the present. 🙂
If the toy makers are that dependent on one retailer…maybe they should co-op that retailer out of BK.
Or not put so many eggs in one failing basket.
Dan
I’ve worked at several companies whose policy was to have as few customers as possible; preferably, just one. It saved all the hassle of dealing with the public, scouting for other distributors, etc., and simplified the bookkeeping enormously.
I got the managerial stink eye each time I mentioned anything about that being a risky business model.
“You don’t know anything about how to run a business. And it’s not your job to make that sort of comment.”
Yep, you guessed it. Their upstream customer(s) went with different suppliers, or kept leveraging prices down until there were no profits left and the companies hemmorhaged money until they died. One of them went through a whole chain of management consulting firms, trying to figure out what the problem was.
Oddly, the management consultants couldn’t seem to find any problems either… having seen the consultant thing play out, it’s now a flashing light and warning siren to abandon ship NOW.
“…have emerged as crucial checks on the power of Amazon.com Inc.”
Ah, nothing like the smell of journalistic objectivity in the morning!
But at least their executives got holiday bonuses! Woo!