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The Rise and Fall of Toys 'R' Us (2018)
- mjevans 2y agoThe fall isn't covered in very much detail. I think it might be exemplified by a personal example. I went to one near the end to buy a standard, wooden block, JENGA toy for relatives. They didn't have any in stock other than some crummy cardboard sticks version (absolutely unable to stand up to the abuse a child under 12 will dish out). I think I ended up ordering one from Amazon with Prime or hitting up a Target or something... As for the 'category killer' thing, that's probably an example of Market Failure (regulation failure). For a fungible commodity product, there probably should be a requirement to provide access to the same price to all players in the market. That might mean that the price at a generic warehouse in one of the major shipping ports is that price. Stores / groups of stores would still need to leverage shipping and distribution networks, but it'd at least give places a _chance_ to compete.
- jordanb 2y ago> they didn't have any in stock other than some crummy cardboard sticks version Private Equity hates inventory. Their first trick in buying a retail business is slashing in-store inventory. They also treat suppliers like dogshit, playing games with payment terms, etc. End result: stores don't have the products customers want and quality suppliers fire them as customers.
- ferguess_k 2y agoHow do PEs earn money in this scenario? I don't think it can spin off the brand easily? Or by real estate?
- filmgirlcw 2y agoDebt
- variaga 2y agoPrivate Equity playbook: 1) Buy a company from the stockholders by having the company take out loans (secured by future earnings) to pay for the stock. Do not pay for it with more than a token amount of your own money. 2) Slash company expenses in a way that generates short-term returns (but which normal companies don't do because it causes long term problems) like: - don't buy new inventory to replace items sold (mentioned above) - stop doing maintenance (saves money for a while, until everything breaks) - delay paying outside vendors (works for a few months, until they stop shipping you stuff unless they get their money and/or sue you) - sell physical assets (like the stores themselves) to an outside holding company (possibly owned by you) and rent them back, getting short term income for the company from the sale (but collecting the rent yourself, and also retaining the right to sell the real estate later). 3) pay yourself huge bonuses on the basis of your cost savings. 4) When the company is no longer viable, leave the empty husk behind. The company has a bunch of loans it will never be able to pay off (sucks for the lenders) but you keep your paychecks, bonuses and any assets you sold to yourself at below-market prices. 5) move on to the next company. (basically, "the bust out" sequence from Goodfellas)
- syedkarim 2y agoWho are the lenders and why do they keep lending when their is a history of default from the PE-owners?
- variaga 2y agoCommonly, the bank that undewrites the loans will essentially do the same thing - they collect a commission but sell the underlying debt to someone else as (high-yield, because they are high-risk) bonds. If you've heard of "Junk Bonds", this is (one source) of where they come from. It's like a financial game of "hot potato" - you can make money as long as you're not the last person to hold the debt. So the answer to "who lends the money?" is "anyone who thinks they can sell the debt to someone else before it explodes". In the end, a lot of it goes to "unsophisticated" individual investors, who will buy it based on "Sears (or whoever) is a great company, why wouldn't I buy their bonds" without realizing the full extend of what's happening.
- toast0 2y agoSo, some PEs do try to run businesses sustainably. But we mostly hear about the PEs that turn a business that's slowly dying to one that will operate "as normal" until it suddenly dies, usually somewhere around 5-7 years later. The first thing is that, if at all possible, the PE wants to do a leveraged buyout where the acquired company itself has borrowed most of the funds to buy itself. This cashes out the previous investors, but leaves most of the risk with lenders rather than the PE firm. Sometimes the PE may get a cut of the financing revenue. Most of the loan will be sold on the bond market, typically as junk bonds. Junk bonds have high interest rates, because there's a good chance the loan won't be repaid, but maybe you'll collect enough between interest and the bankruptcy settlement. While the company operates under the PE's management, it's getting paid management fees. It's also likely to move valuable assets out of the company; for real estate, sale and leaseback is common; when the company implodes, the PE keeps the land and can sell or lease it to someone else. The sale price was probably under market and the lease over market, so the PE earns money here. Having a high lease payment helps the PE finance the purchase, and may help it finance similar property as well.
- markus_zhang 2y agoQuestion is, why do lenders lend money to them? Maybe they can get the principles back somehow?
- sct202 2y agoThey got 13 years of payments which might have been enough to make it worth it for the lenders depending on the premium they were getting on loaning the money. Sears and Joann's also took about 13 years from buyout to bankruptcy. Party City only took 6 years.
- toast0 2y agoThe interest rates are high, and the lenders likely will sell off the loans in a few years. If the company sticks around for a few years and looks ok, they might even be able to sell the loan for more than they lent out. Especially if the corporate numbers look good because of short-term changes, they may be able to get out. When the company goes bankrupt, the lenders have first priority for remaining assets, sometimes lenders will takeover a business and run it away from the shore and earn a profit that way, too.
- b112 2y agoCompare this to the other trend I noticed the other day, JIT delivery beyond excess. Was in Walgreens, and a woman was restocking the shelves. She had a series of reusable plastic boxes, but they were all labelled by isle. So she'd take the box to isle 5 or whatnot, and there'd be 5 products in it. Literally the products sold the day before. EG, one box of toothpaste, one brush, that sort of thing. Asked her about it, and she loved it. Said before, she had to walk all over the store to restock, but not now. Later that week, I was in again and noticed a van unloading about 10 of the same reusable boxes. Definitely a powerful way to keep stock levels down, even if not working towards a squeeze to close-out path. I wonder on the comparative on daily van delivery costs vs say.. a larger truck once a week, along with stock levels. Some very interesting math there, including regional supply depots stock levels, maintenance costs of larger trucks versus a van, and so on.
- adfm 2y agoThere’s a special place in hell reserved for private equity firms. I hear it’s for sale.
- gosub100 2y agodo you think that had PE not been involved, Toys would be the same as it was in 1991 [1]? Glass cases with RC cars and hovercraft? Glue-together models, Hot Wheels? The times change, even though I agree with you that PE sucks. Besides, if it were merely PE then wouldn't that create new opportunity for people to start their own local toystores? If it were merely PE then the market to buy toys would remain unchanged, wouldn't it? 1. https://youtu.be/KsebX5Gd2Ao?si=YPbNBW_Xw3dHmcQw https://youtu.be/KsebX5Gd2Ao?si=YPbNBW_Xw3dHmcQw
- rediguanayum 2y agoProblem is PE stresses a company out such that they don't have runway to adapt. In the end, the consumer is still less well served by fewer choices and higher prices.
- gosub100 2y agoif the market existed, then a new toy store would appear. I'm saying the market for what TRU provided had disappeared.
- jtuple 2y ago> I'm saying the market for what TRU provided had disappeared The market still exists, doesn't it? Kids still exist, kids still play with toys. People simply buy toys from Amazon now, not TRU. Just like people buy electronics from Amazon, not Best Buy/Circuit City. And shoes from Amazon/Zappos, not Payless. Seems like most retail markets still exist, they've just been cornered by the giant "Everything Store". IMO, physical toy stores should be competitive to e-commerce with the right strategy. Simply going to the store could be an exciting adventure into itself, with higher fidelity discovery than a screen provides. Esp. post-COVID where people are opting more for analog/offline options after online/lockdown burnout. Claiming TRU's market disappeared feels similar to claiming the bookstore market disappeared, yet Barnes and Noble had a well documented and surprising comeback by shifting strategy: https://news.ycombinator.com/item?id=34165960 https://news.ycombinator.com/item?id=34165960
- emkoemko 2y agowe still have these stores in Canada, where they not the same business? https://www.toysrus.ca https://www.toysrus.ca
- toast0 2y agoWikipedia says the Canadian company was owned by the US company until its bankruptcy, when the Canadian company was sold. Very likely, it had operated with separate finances from the US parent, and didn't have the same sort of loans and extraction activities. So when the US firm went bankrupt, there was interest from multiple bidders for the Canadian assets.
- emkoemko 2y agooh that makes sense
- dannyphantom 2y agoThey used to be connected; it was split in ~2017(ish) with the Canadian division having been bought while the US stores closed all locations. Doug Putman bought it in 2021 and I saw an article about 3 or 4 months ago that Putman took on ~$120M in debt financing to scale out the org.
- pelagic_sky 2y agoI have quite a few very fond memories of Toys R Us. My Aunt and Uncle would come visit us and part of the ritual was to take my sister and me there and we got one toy each, under a certain budget. I typically got Muscle Men or GI Joe. I can still smell that store in my mind...38 years later. And I can still visualize the GI Joe Aircraft Carrier that was holy unobtainium for me and my families budget. All of this to say...I am thankful I never witnessed the fall. I hit an age where we stopped going and I just never went back.
- bluedino 2y agoI remember the GI joe aisle, remote control car aisle, and of course the video game isle with the tickets you had to take up to the cage at the front of the store.
- OccamsMirror 2y ago> GI Joe Aircraft Carrier Amazing toys like this just don't exist anymore. It's really sad. The 90s was peak toys for boys.
- crooked-v 2y agoThe one you're talking about is from the late 80s.
- deleted 2y ago[deleted]
- testing22321 2y agoMy nephews are pining after the paw patrol home base thing, which is pretty big.
- vanattab 2y agoThey still exist it will just set you back a cool 50k. https://www.ebay.com/itm/116028880794?_skw=gi+joe+carrier+flagg+in+box&itmmeta=01JSM60XJBHAD61X1Z8Y73T7SA&hash=item1b03dc379a:g:FUYAAOSwNuhlleJj&itmprp=enc%3AAQAKAAAA4FkggFvd1GGDu0w3yXCmi1cG3YJOZNwwM1Pflnn8W700hKRJryfbw6MORUeEn93umhGN3KDk8RbAHboT99jUd7%2FTfc%2Bu2RmHP5WtWZImFzx814AGv4GaOCxYvpdpta0nUgBC3rWRMJTKbu9%2FyP9AiS1scPgzafh473CI2r%2BVQWKC6lt1uxA7efABUfWkQKmbm109Zu2cHj2U3tHJkWBANvdVWCYYnLdmD3XUkbL9wUK28E8LF94048oMjEAR2KJ81f5LdPzPm%2BvLY4jmtPe3E0kW64sFdtSKB0Xgf22IGZ97%7Ctkp%3ABk9SR6bag4bNZQ https://www.ebay.com/itm/116028880794?_skw=gi+joe+carrier+fl...
- devrandoom 2y agoI personally stopped shopping with them because they stopped selling toys and sold only crappy expensive garbage.
- sepositus 2y agoThat 1996 picture brings huge nostalgia for me. I still remember being an excited 11-year-old carrying my Pokémon badge book on Saturday, ready to compete in the TCG championship.
- thakoppno 2y agoIn college I had the opportunity to ask the CEO how the company intended to compete with online retailers and he responded dispassionately, “with loyalty cards.”
- orup 2y agoWorth I guess mentioning that ToysRUs (and also BabyRUs) are still very much operational and present in Japan (In most large shopping malls). I assume the company split at some point from the US part.
- deleted 2y ago[deleted]
- CSMastermind 2y agoI feel like Company Man on Youtube covered this well back in 2017: https://youtu.be/4JYUo9WKkao https://youtu.be/4JYUo9WKkao And then he did a follow up at the same time this article was published: https://www.youtube.com/watch?v=A8OPvx1nhSM https://www.youtube.com/watch?v=A8OPvx1nhSM
- embedded_hiker 2y agoThe only thing I ever bought from Toys R Us is a ROM cartridge for the C64 with an assembler and debugger. This must have been it: https://www.cbmstuff.com/downloads/hesmon64.pdf https://www.cbmstuff.com/downloads/hesmon64.pdf
- maguay 2y agoFun fact: The Asian arm of Toys 'R' Us never shut down, and while it's far from the most popular retailer (and, IMHO, broadly overpriced), it's maintained a retail presence in Thailand, Singapore, Malaysia, and more. There's an interesting tradition of dead American brands getting a second life in Asia. Swenson's, Sizzler, Dean & Deluca, and Mr. Donut in Southeast Asia, Tower Records and Kinko's in Japan, even 7-11's outsized popularity in Asia versus its more moderate presence in the States. Yahoo! Japan almost counts as well.
- HeWhoLurksLate 2y agointerestingly, 7-11 is doing quite well in Texas, where it operates under the brand Stripes. They also have kitchens in some called “Laredo Taco” that sell primarily Mexican food and are quite beloved, esp. by blue collar workers
- huhkerrf 2y agoThis isn't entirely true. 7-11 bought and maintained the Stripes brand, but they still operate 7-11 branded stores in Texas.
- zeroonetwothree 2y ago7-11 has ~12k locations in the US so it's not exactly dead?
- maguay 2y agoNo, absolutely, just the concentration in Asia generally and Thailand/Japan specifically makes it a far bigger deal. That was a bad example to include versus Toys R Us.
- jerlam 2y agoSizzler is still around in the US, and emerged from bankruptcy in 2023.
- 2y ago
- PhilipRoman 2y agoI'm mildly confused, the link redirects to https://www.hearstnetworks.com/ https://www.hearstnetworks.com/ which is some kind of TV broadcaster's homepage?
- probably_wrong 2y agoIn my case it redirects me to https://history.de https://history.de, where I learned that, if I turn on my TV, I could be watching the highly-regarded documentary series "Ancient Aliens". I think the website redirects you to your "local" version of the site, content be damned.
- floucky 2y agoSame for me, I can't go to history.com. Might be an European thing, I see they own the history channel: https://www.hearstnetworks.com/brands/cee/history https://www.hearstnetworks.com/brands/cee/history
- mst 2y agoI got redirected to history.co.uk/ (the root, so lol, no article for you) There's a (just about readable, the background is greyed out due to a popup) archive at https://archive.ph/3HvjM https://archive.ph/3HvjM - far from perfect, and I understand if people would rather not bother than deal with the low contrast ick of the archive, but I found it interesting enough to maximise my screen brightness and read it anyway.
- relwin 2y agoWorked there for several years in the 80's -- prime time Coleco Adam, VIC-20, TI-99, Atari 800, Vectrex, Star Wars action figures, Strawberry Shortcake dolls, Cabbage Patch Kids -- none of these I could afford making $3 an hour, although we made 1.5x on Sundays. Still have the orange vest with Geoffrey Giraffe on the back. Fun times!
- JumpCrisscross 2y agoI’d honestly love a meta commentary on Toys ‘R’ Us articles. It seems something important happened, but I can’t piece it together beyond the fury at a short list of totems.
- mst 2y agoLots of people not in the US saying they got redirected to various places due to (I guess) some sort of GEOIP detection rubbish, me included. There's a (just about readable, the background is greyed out due to a popup, although thankfully the popup doesn't cover any of the text) archive at https://archive.ph/3HvjM https://archive.ph/3HvjM - far from perfect, and I understand if people would rather not bother than deal with the low contrast ick of the archive, but I found it interesting enough to maximise my screen brightness and read it anyway.
- tetris11 2y agoThe article does not seem to exist?
- morgango 2y agoIt isn't Toys R' Us -- it is Toys R' Me. https://www.youtube.com/watch?v=GU-2C8Ec6co https://www.youtube.com/watch?v=GU-2C8Ec6co