Random Thoughts – Randocity!

Toys R Us: Say Goodbye to an Era

Posted in botch, business, tanking by commorancy on March 14, 2018

tru-logoFor many, we grew up with Toys Я Us as the go to place to find that cool new toy, game, doll, action figure, Teddy Ruxpin, train set, learning toy, crayons, movie or even video games. Times are a changin’ folks and Toys R Us is now finds itself way less than one Barbie away from permanent closure. Let’s explore.

Update from the News Desk — 2018-03-14

Toys R Us headquarters has apparently informed all US and UK employees on Wednesday, March 14th that all US and UK locations would be closed, a move that would lose 33,000 jobs. This would be one of the biggest retailer liquidations. CEO David Brandon intended to file paperwork to begin the liquidation proceedings on Wednesday.

From small to BIG to defunct

In the 70s, I remember toy stores primarily consisting of smaller retailers in malls, usually carrying Lincoln logs, wooden toys or learning toys. While I didn’t mind visiting these places, they felt more like a library than a toy store. They also didn’t carry much of the things that I liked. It wouldn’t be until sometime the mid-70s when a Toy R Us opened near my house. That’s when toy shopping all changed, at least for me.

I’m sure my parents hated taking me to Toys R Us,  just as so many parents do. For us kids, it was like a day at Disneyland: a gold mine, a treasure trove, a place of dreams. Unfortunately, the parents were having none of it… or at least, as little as they could walk out of the store carrying. Good on them, but that didn’t make Toys R Us any less magical to a 8-10 year old. We loved it, we loved going there and we especially loved it when we got to take something home with us.

Geoffrey

I was never a super big giraffe fan, but Geoffrey was a fun and charming mascot constantly pointing out cool new things in the store. I would come to see Geoffrey as cute mascot designed to help me find new stuff. Not always, but a good bit of the time. Sometimes he was just present, like Mickey Mouse. That Giraffe always made me smile because I knew that I was at that magical place, like Disneyland but local. Over the years, Geoffrey began being used less and less by TRU, but he’s still considered their mascot.

Every once in a while, Toys R Us would offer an enter-to-win a fill-your-cart shopping spree. I always wanted to win one of those as a child, but alas never did. To think what I would have filled my cart with. The mind boggles, if only because some of those toys are considered highly collectible today. Though, those toys most assuredly would not have remained closed in their packaging after making their way home.

Growing Up

As I grew into my 20s, got my own car and job, my relationship with Toys R Us changed. No longer was it that magical place, but it now had firmly become a store and I was a consumer. Still, it was a place to go to find that hot new toy that everyone’s talking about. It also became the place to find computers and video games. If I couldn’t find it at Target or Kmart or, later, Walmart, I could almost certainly find it at Toys R Us or Kaybee or Children’s Palace (competitors at the time) and to a much lesser degree FAO Schwarz. Toys R Us was always the first place to go, then the others as they were less reliable.

Dominoes

As the competitors fell over one at a time, first Children’s Palace in 90s, FAO Schwarz in early 00s, then in the middle 00’s, Kaybee Toys, Toys R Us was still standing and, in 2009 would acquire the FAO Schwarz brand, but would sell it off in 2014. It was (and currently is) the place to go to find all things toys. Unlike Target and Walmart that choose to stock limited toy items, Toys R Us (like the previous Children’s Palance and Kaybee) still carries aisle after aisle of wide ranging toys you can only find at Toys R Us. You simply can’t find this selection of toy items at a discount department store. This is why I always ended up at Toys R Us in search of fun, exciting new things.

The Mistakes

Throughout the later years, I’ve grown a love-hate relationship with the Toys R Us chain. Not only because I worked there for a short time while in my 20s, but also because the management does a lot of things that don’t make sense. For example, Babies R Us. For a time, Toys R Us stores devoted half of their space to baby goods. I don’t have a baby, so there’s no interest in that. Yet, Toys R Us decided to kill half of their store space to devote to these products. This meant, less space for toys, games and other items.

I understand that the management wanted to expand their selection into babyland, but it was a mistake to take away valuable Toys R Us aisle space to devote to all-things-baby. This, in my opinion, was one of the biggest mistakes the Toys R Us management foisted upon its stores. That was, until they finally spun Babies R Us into its own stores and gave it its own space.

Later, the management decided to do away with separate Babies R Us stores and chose to abut the two stores together for one seamless one-store experience. That was at least better than taking away shelf space from an already cramped toy store, but even that was unnecessary and, in my opinion, a mistake. They can be next to each other, but walled off and separate stores with separate stock and separate staff. I know why they did chose to hook them together. They did it so they could use one set of checkout lanes, one set of cashiers and one set of staff to stock both stores.

The X

At around the time that Babies R Us was coming into its own as a separate store chain, Toys R Us decided to change its shelving layout. Instead of the more logical long rows running from the front to the back of the store (with middle store aisle breaks) which made it easy to find everything, the store layout designer decided to change the aisles to be side to side and then create X shaped rows in the middle of the store. Not only were these rows much harder to navigate, the layout of the aisles were crippled as a result. This layout made finding things incredibly hard and it seemed like they had less shelf space.

Not only was everything now moved around haphazardly, it made finding what you’re looking for overly hard. Meaning, now you had to navigate the whole store looking at everything just to find that thing.

Maybe the designers thought this was a good idea? It wasn’t. This is the second mistake from Toys R Us management.

Overbuying and Stocking the Wrong Toys

I don’t know how many times I visited Toys R Us in the 90s only to find the same toys every time I visited, sometimes months apart. These we affectionately call peg warmers. This mistake continues to plague Toys R Us to this day. Not only did Toys R Us have incredible buying power way back when, they just didn’t use it to their advantage. Instead, they would continually overbuy on dud toys and not buy enough on the hot toys.

You can’t sell toys that you don’t have in stock. For example, Cabbage Patch kids. When that craze hit, they couldn’t keep them on the shelves. You’d think Toys R Us could have negotiated with the manufacturer and buy 10x the amount they originally bought… simply so they could fill the demand. Sure, there might be a drought while the manufacturer created more, but eventually they would have enough stock quickly to satisfy demand. Alas, they didn’t and the shelves remained bare until the toys were so cold you couldn’t even give them away. Too little, too late.

Further, Toys R Us needed to let the local managers order stock for their specific location to stock toys that are regionally hot. Not every toy sells the same in every store, yet Toys R Us felt the need to send cookie cutter stock out to every single store. If you walked into a Toys R Us in any state, you’d see identical stock. Each store manager needed to be given free reign to specifically order stock in sizes that made sense for amount of local demand they were seeing for a given toy item. If they couldn’t keep a specific skateboard stocked, then the manager should be able to order the proper amount to cover the local demand from their store. In fact, stores that couldn’t sell the item should have shuffled the stock over to stores where the demand was high. That’s smart inventory management. Nope.

Store managers should also be able to nix slow selling items from their shelves and replace it more hit items. Why continue to carry that obscure toy that you can’t even clearance out when you can sell 100x as many Tickle Me Elmos? Having great selection is fine as long as you’re not stocking 50 of an item you can’t even give away. Again, smart inventory management people. Stock them in small quantities, sure, but not in the quantities that each store was getting. Shuffle extra stock to other stores that have none. Remember, I worked there, I saw the stock amounts in the stock room.

Nope. Toys R Us continued to make this mistake year after year.

Over-expansion

Nearly every business thinks they should open as many stores as physically possible. But, you can’t do this when most of your stores are operating in the RED. Toys R Us was no exception. This chain continually felt the need to open new stores rather than trying to shore up their existing stores and get them each to an individually profitable status. If the management had stopped their expansion plans and, instead, focused their efforts on making each store profitable by the end of Q1 each year, Toys R Us would not be in this predicament.

Dated Store Displays

Not too long ago (perhaps early 00s), Toys R Us did away with the X aisle layout and converted them back into horizontal rows once again. However, the aisles now run left to right in-store rather than the original front to back design (which was arguably its best floor plan). Unfortunately, their fixtures are all incredibly dated pegboard and 70s style metal fixtures. They look like they’re straight out of a 70s store… even when the store is brand new. Maybe these are the cheapest fixtures they can buy? No idea, but they don’t look modern.

The store is also incredibly jam packed with stuff. The shelves are always full of stock yes, but it doesn’t help when the stock is old and is sitting on dated shelving units lit by 70s style fluorescent lighting fixtures.

The Business

Here’s Toys R Us’s primary operational problem and the problem that ultimately leads to where we are today. Toys R Us always relied on the holiday shopping season to pull its stores into the black. Meaning, Toys R Us always operated its stores in the RED through 80-90% of the year hoping for the holiday season to pull each store up and out and operate in the black for that year. This was the chain’s primary mistake. This operating model had been ongoing since the 80s. This was the way that TRU intentionally chose to operate its stores. This was also entirely their biggest operating failure and it’s the mistake that is now what’s threatening closure and costing TRU its business.

In addition to operating in the red, Toys R Us also didn’t wield its buying power to get the best possible credit terms, the best possible deals and the best possible return arrangements. If a toy doesn’t sell, package it up, send it to another store that can sell it or send it back to the manufacturer for full or partial credit. Let the manufacturer deal with that stock rather than trying to organically clearance out items on the shelves years later. No, get these old toys off of the shelves to make way for new toys. Fill the shelves with toys that can sell and that will pay the bills.

If you can’t pay your bills, you can’t stay in business. Business 101. Yet, Toys R Us management felt that they were above these rules. The management team felt they could continually run their stores in the red without ramifications. Well, fate has now caught up with you, Toys R Us.

Being Acquired by Private Equity Firms

Because of the way Toys R Us chose to operate its stores, it could not support being acquired in this way. This acquisition was entirely shortsighted on the part of the private equity companies involved and they (and us consumers) are the ones who are now paying the ultimate price.

In 2005, Toys R Us was acquired by a set of private equity firms. These firms included KKR & Co., Bain Capital and Vornado Realty Trust in a $7.5 billion buyout deal. These three companies (and their investors) sank $1.3 billion of their own funds into the purchase, leaving the rest of the purchase price of $6.2 billion to be made up in loans. These loans saddled Toys R Us with an over $6 billion debt burden. A debt that, because of the rather nonsensical business model that the stores had been following since the 80s, could never be recouped. All of this leads to…

Bankruptcy

In late September 2017, Toy R Us filed for bankruptcy protection against its creditors. This means that its creditors can no longer go after Toys R Us for not paying bills. It also meant that the loans left over from that terrible 2005 buyout deal could no longer collect on those loans. Of course, in return for this court issued bankruptcy protection, the company has chosen Chapter 11 to work through a plan to reorganize in a way to get themselves back to profitability and pay their creditors over time before time runs out. For the Toy R Us management, that meant finding a suitor to buy the business… because, of course, they couldn’t be bothered with actually trying to restructure the stores in a way to make them profitable. Oh, no no no.. that’s just too much work.

What? Are you kidding? Are you really expecting some well funded company to swoop into this ailing business holding onto a mountain of debt and offer to buy you? Really? The way that TRU operates is textbook operating procedure for failure. It cannot continue to operate in the way that it does. Even closing half of the stores may not be enough to solve this operating problem. It’s only surprising that it took this long for this toy chain to make it to this point. I expected this day to come a lot sooner.

Toy Collectors and Toys R Us

I full well expected to see Toys R Us fail in the 90s.  However, Star Wars saw to it to keep Toys R Us in business. The Star Wars collectors came out in wild abandon to snap up tons of revamped Star Wars merchandise for not only the previous trilogy (including the Orange and Green carded Power of the Force series). These toys still remained hot even after 1983’s Return of the Jedi cooled down. It all heated up again when the Prequels began in earnst in 1999 (toys beginning to appear in stores about a year earlier). Toys R Us got a reprieve from their red ledger problems due primarily to Star Wars collectors, Hasbro and a few other unrelated hot toys during the 90s (Tickle Me Elmo). Almost every year, there was some new fad that kept Toys R Us’s year end strategy in check. Though, this strategy would ultimately fail them when, in the last 10 years or so when there just haven’t been those must-have toys or collectible Star Wars toys. Even the Zhu-Zhu pets weren’t enough. Even the latest Star Wars trilogy from Disney has not had the merchandising power that the 90s saw. Though, Disney isn’t crying over what they have sold.

In fact, I’d venture to guess that the 90s collectors have all but stopped collecting and have moved on with their lives… which put a huge crimp in the Toys R Us budget. In fact, during the collector heyday of the 90s, Toys R Us did their very level best to chase away the collectors. Much to their own chagrin, they succeeded in doing so by the mid-2000s. It also doesn’t help that collectors can now buy full cases directly from places like Entertainment Earth, which no longer meant the need to scour the pegs at Toys R Us in the wee hours of the morning. You could order cases directly from the comfort of your own home, then see them delivered to your doorstep.

Amazon and Online Shopping

Because of the power of the Internet, Amazon and eBay, it’s pretty easy to find that hot toy at more reasonable prices. Yes, Toys R Us is still a staple in the current shopping landscape. When it closes, both Amazon and Entertainment Earth will simply pick up where Toy R Us left off without missing a beat. If anything, I’d suggest that Amazon pick up the Toys R Us branding at a fire sale during liquidation and rebrand the Amazon toy section to Toys R Us. Keep the TRU brand alive, but not with all of that bloated store baggage. Then, dump the Babies R Us brand entirely. You can still sell baby things, but branded as Toys R Us.

Toys R Us Closing

As I said, I have a love-hate relationship with Toys R Us. I do enjoy visiting and seeing what’s new, but every time I walk into a store, I’m confronted with the dated shelving and decoration, the continual nagging reminder of just how careless the management is and how much of a wasted opportunity that Toys R Us had to be the become the biggest profitable toy chain in the world. Yet, they’ve failed.

If Toys R Us can manage to pull a rabbit out of a hat at the last minute and keep the lights on, I’ll be fine with that. Sadly, I think this is likely where it will all end for Toys R Us.

Gift Cards or Rewards — Use em’ or lose ’em

toys-r-us-gift-cardIf you have any remaining unused gift cards from Toys R Us, be sure to visit a store now and use them immediately. Don’t wait until after Toys R Us begins closing its stores.

Likewise, if you have any rewards points left on your rewards card, log into Toys R Us Rewards, issue certificates and use them up now. Same for Babies R Us Cashback Endless Rewards program. Otherwise, forfeit your chance to convert those points into dollars. Representatives for Toys R Us have said that they will honor gift cards, rewards points and cashback programs for 30 days. The 30 day clock likely began on Wednesday March 14th, when they filed their liquidation paperwork with the court.

I guess in an odd way, I do kind of get that shopping spree after all, and many years later. I just found that I have over 2500 points in my rewards account. That equates to a $100 shopping spree.

For my $100 in rewards points, I got a Nintendo Monopoly set, a Care Bear Grumpy Bear, Two Schliech Geoffrey branded figurines, 5 different Halo Hot Wheels, a Pit Amiibo, a Pain-Yatta Skylander, a Playmation Vision figure and two Geoffrey branded reusable shopping bags. I ended up paying $9 to cover the tax. I also bought a $5 Geoffrey gift card and immediately used it to get dock protector straps for a Nintendo Switch. I wanted the Geoffrey branded gift card as a souvenir. I’d also previously purchased the day before, two Geoffrey 18″ plush and one Geoffrey plush gift card holder, which I’ll put that used Geoffrey gift card in.

Returns and Exchanges During Liquidation

Check any purchased merchandise thoroughly for defects the same day you buy it. If there are any problems, return it the same or next day and exchange it. Don’t wait even a few days to exchange as you may not be able to find the same item. According to Toys R Us representatives, all sales are final. This means, no refunds. However, they may continue to honor exchanges for a period of time. If you’re uncertain of any of this, ask for details at the service desk before you buy.

If you’re thinking of shopping for gift items, you might want to buy elsewhere. Buying a gift for someone could mean the gift recipient can’t return or exchange the item. You don’t want to force a gift onto someone when it’s not something they want only for them to find they cannot return it.

Be that Toys R Us Kid one last time

If you grew up visiting and are as fond of Toys R Us as I am, I’d suggest for you to take a few minutes out of your day and visit your local Toys R Us to reminisce about the good ole days. Once the liquidation sales start, they’re quickly going to look like half-filled shells of a store. Note that the deadline for Toys R Us to find a buyer is early April of 2018, so visit them quick. You have less than a month.

You might even want to pick up a souvenir, such as a plush Geoffrey, to remember what was Toys R Us and what it meant to us as kids. If you want a plush Geoffrey, ask at the Customer Service desk. It seems they keep them there for some reason.

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