8 ms·

I read the whole article, and I didn't really see a convincing argument that it didn't have to die. Sure, it could have eked out a few more years... but it was

I read the whole article, and I didn't really see a convincing argument that it didn't have to die. Sure, it could have eked out a few more years... but it was living on borrowed time. Not only do most people shop online now, most toys are also online. I imagine most parents put money into TV shows, video games, iPhone apps, etc.

ryanisnan 8y ago
I agree. Other than manage its debt more effectively, the authors don't really expound on what Toys R Us could have done differently to right the ship. Was it moving more effectively into online sales? Or alternate business lines altogether?
joe_the_user 8y ago
The company had been paying an unsustainable $400 million a year in interest. Normal intuition would say that maybe the company could enter bankruptcy, wipe out that debt, turn the bond holders into the new owners, have the owners issue stock for a debt free company and sell the stock to pay off a fraction of the money they owed. That would seem like a rational approach that would maximize utility for at least owners and employees. The problem apparently was that bargaining and brinksmanship destroyed the company before such a result could be considered.
- jandrese 8y ago
  Wasn't that debt dumped on the company by the firm that bought them out?
jaysonelliot 8y ago
There's nothing about the brick & mortar toy space that's inherently living on borrowed time. It was Toys 'R' Us' own mismanagement that doomed it. Toy stores can be a destination. Provide a compelling experience for parents and kids alike. It's easy to imagine a space where kids get to play with toys hands-on, and parents get to judge for themselves whether they think they're appropriate in terms of fun and quality—something you can't do online. Make the adult experience a mixture of café and Apple store, and give the kids a safe "penned in" experience like IKEA does in their kids' section. Parents will enjoy the respite, and kids will beg to go. And of course, once they get there, they'll cajole their parents to spend more money. Never underestimate the power of a child in a store. IKEA has nailed the brick & mortar experience, even though most of their products could easily be purchased online. Toys 'R' Us merely had to abandon their hubris and old thinking, and they could have killed it. Instead, they languished with a chain of dirty, disorganized, depressing stores, ill-treated and unmotivated employees, and no vision. They didn't have to die, but their leadership and strategy did.
- pdpi 8y ago
  Hamley's (in London) seems to have nailed the whole "destination" thing, and I think it's largely because it treats the adults as bigger, hairier kids.
  - nindalf 8y ago
    I'm a grown ass man and I'd legit be excited to go to Hamley's.
- tlb 8y ago
  There are a few destination toy stores, but mostly limited to affluent, progressive markets like NYC, SF and Boulder. If your theory is correct, they should be able to scale up nationwide. Why do you think this hasn't happened?
- gkoberger 8y ago
  It's easy to rattle off a list of things on HN, but a lot harder to build. If people were invited to come play with toys, they'd just do it for free, enjoy the day, and buy it online after. Your other ideas just seem like... free babysitting? It's not like parents are going to shop for toys while their kids are babysat for free. I agree the stores aren't great now... but they were working with insane debt and a dying business model. I don't think it's impossible to sell toys (see: Disney), but it's really hard to do it when you're trying to pivot something like Toys 'R Us with no money to spend and nowhere to really go.
  - jiggliemon 8y ago
    The LEGO stores have this exact experience, and they seem to be doing well.
  - emodendroket 8y ago
    I'd argue that a toy store, more than any other kind of retailer, is insulated from that, because the store has an little advocate for spending ten dollars extra to buy the product right now with most shoppers. And going to the toy store itself is kind of an activity that I don't think you can replace with online shopping.
pandapunchpower 8y ago
There is some scope for a brick and mortar toy store provided they are willing to be double as a pseudo-playcenter. Toy aisles and toy stores are frequently populated by exhausted parents standing around while their children entertain themselves checking out the toys. The kids are happy enough. The parents are content just to have a few minutes to themselves. Toy retailers typically try and dissuade this behavior. Meanwhile indoor playgrounds/play centers are a huge and growing business. They are happy for parents to unleash their children while they make their money from entry charges, selling cups of coffee to the parents and snacks for the kids. Despite having a huge inventory of toys play centers never actually sell toys that I have seen. Tearful children have to leave their new favorite ride on racing car (or whatever) behind when they leave.
- _ah 8y ago
  I think there's a pretty good opportunity here for a large format combined playspace/toystore. Build out the toy area around some hands-on demo spaces, and include the normal playspace items nearby with climbing structures and coffee/alcohol for the parents. The key is: charge admission, then credit back the admission price toward the purchase of any new toy. People are terrible calculating sunk cost, and I'm pretty sure that the pre-paid $15 admission credit makes a $29 toy look like a "steal", even if you could buy it on Amazon for $24. In fact, I'll bet most parents would be hard-pressed to leave the experience without buying something for every child.
  - mattkrause 8y ago
    That’s not even really a sunk cost if the experience is worth a bit by itself.
- ben1040 8y ago
  >Meanwhile indoor playgrounds/play centers are a huge and growing business. They are happy for parents to unleash their children while they make their money from entry charges, selling cups of coffee to the parents and snacks for the kids. There's a mom and pop place like this near me. They rented an old dead big box store (I remember shopping there when it was a Circuit City) and filled it with bounce houses and arcade games. They charge $10/kid admission. Adults are not allowed in the bounce houses, and they've got an area set up with tables and free WiFi for the parents. They'll charge you $3.79 for a soda, so overpriced for sure but not quite movie theater or ballpark pricing. My son begged to have his birthday party there this year. The parties have to be the big revenue driver, as it was $300 for twelve kids' worth of Domino's Pizza and use of a party room for an hour.
JKCalhoun 8y ago
Toys 'R' Us had "curated" the vast swath of toys that exist down to a handful of the usual fair. Barbie, the latest Pixar toys, the standard board-games.... Like corporate bookstores, theater chains, music stores you got the same selection at all their million outlets in the country. Perhaps it's just me that was tired of the same-ol' same ol' or maybe the public became tired of it as well.
- _rpd 8y ago
  amazon.com killed them, like it is killing whole categories of traditional retailers. The owners knew it and sold while it was still possible to sell. The buyers gambled that they could cut costs fast enough to compete, but they lost the bet.

ryanisnan 8y ago

I agree. Other than manage its debt more effectively, the authors don't really expound on what Toys R Us could have done differently to right the ship. Was it moving more effectively into online sales? Or alternate business lines altogether?

joe_the_user 8y ago

The company had been paying an unsustainable $400 million a year in interest. Normal intuition would say that maybe the company could enter bankruptcy, wipe out that debt, turn the bond holders into the new owners, have the owners issue stock for a debt free company and sell the stock to pay off a fraction of the money they owed. That would seem like a rational approach that would maximize utility for at least owners and employees. The problem apparently was that bargaining and brinksmanship destroyed the company before such a result could be considered.

jandrese 8y ago
Wasn't that debt dumped on the company by the firm that bought them out?

jaysonelliot 8y ago

There's nothing about the brick & mortar toy space that's inherently living on borrowed time. It was Toys 'R' Us' own mismanagement that doomed it. Toy stores can be a destination. Provide a compelling experience for parents and kids alike. It's easy to imagine a space where kids get to play with toys hands-on, and parents get to judge for themselves whether they think they're appropriate in terms of fun and quality—something you can't do online. Make the adult experience a mixture of café and Apple store, and give the kids a safe "penned in" experience like IKEA does in their kids' section. Parents will enjoy the respite, and kids will beg to go. And of course, once they get there, they'll cajole their parents to spend more money. Never underestimate the power of a child in a store. IKEA has nailed the brick & mortar experience, even though most of their products could easily be purchased online. Toys 'R' Us merely had to abandon their hubris and old thinking, and they could have killed it. Instead, they languished with a chain of dirty, disorganized, depressing stores, ill-treated and unmotivated employees, and no vision. They didn't have to die, but their leadership and strategy did.

pdpi 8y ago
Hamley's (in London) seems to have nailed the whole "destination" thing, and I think it's largely because it treats the adults as bigger, hairier kids.
- nindalf 8y ago
  I'm a grown ass man and I'd legit be excited to go to Hamley's.
tlb 8y ago
There are a few destination toy stores, but mostly limited to affluent, progressive markets like NYC, SF and Boulder. If your theory is correct, they should be able to scale up nationwide. Why do you think this hasn't happened?
gkoberger 8y ago
It's easy to rattle off a list of things on HN, but a lot harder to build. If people were invited to come play with toys, they'd just do it for free, enjoy the day, and buy it online after. Your other ideas just seem like... free babysitting? It's not like parents are going to shop for toys while their kids are babysat for free. I agree the stores aren't great now... but they were working with insane debt and a dying business model. I don't think it's impossible to sell toys (see: Disney), but it's really hard to do it when you're trying to pivot something like Toys 'R Us with no money to spend and nowhere to really go.
- jiggliemon 8y ago
  The LEGO stores have this exact experience, and they seem to be doing well.
- emodendroket 8y ago
  I'd argue that a toy store, more than any other kind of retailer, is insulated from that, because the store has an little advocate for spending ten dollars extra to buy the product right now with most shoppers. And going to the toy store itself is kind of an activity that I don't think you can replace with online shopping.

pandapunchpower 8y ago

There is some scope for a brick and mortar toy store provided they are willing to be double as a pseudo-playcenter. Toy aisles and toy stores are frequently populated by exhausted parents standing around while their children entertain themselves checking out the toys. The kids are happy enough. The parents are content just to have a few minutes to themselves. Toy retailers typically try and dissuade this behavior. Meanwhile indoor playgrounds/play centers are a huge and growing business. They are happy for parents to unleash their children while they make their money from entry charges, selling cups of coffee to the parents and snacks for the kids. Despite having a huge inventory of toys play centers never actually sell toys that I have seen. Tearful children have to leave their new favorite ride on racing car (or whatever) behind when they leave.

_ah 8y ago
I think there's a pretty good opportunity here for a large format combined playspace/toystore. Build out the toy area around some hands-on demo spaces, and include the normal playspace items nearby with climbing structures and coffee/alcohol for the parents. The key is: charge admission, then credit back the admission price toward the purchase of any new toy. People are terrible calculating sunk cost, and I'm pretty sure that the pre-paid $15 admission credit makes a $29 toy look like a "steal", even if you could buy it on Amazon for $24. In fact, I'll bet most parents would be hard-pressed to leave the experience without buying something for every child.
- mattkrause 8y ago
  That’s not even really a sunk cost if the experience is worth a bit by itself.
ben1040 8y ago
>Meanwhile indoor playgrounds/play centers are a huge and growing business. They are happy for parents to unleash their children while they make their money from entry charges, selling cups of coffee to the parents and snacks for the kids. There's a mom and pop place like this near me. They rented an old dead big box store (I remember shopping there when it was a Circuit City) and filled it with bounce houses and arcade games. They charge $10/kid admission. Adults are not allowed in the bounce houses, and they've got an area set up with tables and free WiFi for the parents. They'll charge you $3.79 for a soda, so overpriced for sure but not quite movie theater or ballpark pricing. My son begged to have his birthday party there this year. The parties have to be the big revenue driver, as it was $300 for twelve kids' worth of Domino's Pizza and use of a party room for an hour.

JKCalhoun 8y ago

Toys 'R' Us had "curated" the vast swath of toys that exist down to a handful of the usual fair. Barbie, the latest Pixar toys, the standard board-games.... Like corporate bookstores, theater chains, music stores you got the same selection at all their million outlets in the country. Perhaps it's just me that was tired of the same-ol' same ol' or maybe the public became tired of it as well.

_rpd 8y ago
amazon.com killed them, like it is killing whole categories of traditional retailers. The owners knew it and sold while it was still possible to sell. The buyers gambled that they could cut costs fast enough to compete, but they lost the bet.