What killed Toys “R” Us? It wasn’t Amazon.
I don’t wanna grow up, I’m a Toys R Us kid. They got a million toys at Toys R Us that I can play with! From bikes to trains to video games, it’s the biggest toy store there is! I don’t wanna grow up, cause maybe, if I did, I couldn’t be a Toys R Us kid…
I wanna be a Toys R Us kid!
Every month, we’re hearing of another major retailer suffering some form of death by Amazon’s hand. Oh, Bezos, you cruel monster! Must you not destroy every symbol of our adolescence! Allow us some preservation, but I still want my Amazon Prime!
Its sale-prediction technology is the queen, and its logistics infrastructure, proudly the king. Sooner or later, every seller of fungible goods will die by the Sword of Bezos!
Recently, my #millennial generation’s beloved Toys “R” Us formally announced its liquidation. Poof. As quick as the snap of a finger, my childhood memory felt a pain. The childhood memory becomes an adulthood memorial, almost immediately.
How could Toys “R” Us have failed us so dramatically?
Above all, they were the biggest toy store there was! After reaching epic levels of success and brand identity awareness in the adolescent commercial market, what were the odds they would have gone bankrupt?
They had everything.
During their height, they had it all:
- Power Wheels
- killer bikes
- remote-controlled cars
- battery-powered trains
- awesome action figures
- bouncy balls
- board games
- video games
- sports gear
- practically anything a kid would want to put on his wish list for Santa!
They owned the toy market. In fact, their reason for existence was to be the one-stop shop for anything a kid’s heart desired. In likely consequence, a parent of young children could literally clear an entire holiday shopping list with a single visit.
In the end, they had nothing.
As soon its benevolent owners had encumbered its balance sheet, Toys “R” Us had no shot. When Toys “R” Us needed liquid capital for a large-scale war against Amazon, they fought a war equally against the phantom weight of debt interest.
Eventually, their time was up.
Now, Toys “R” Us and its owners have reduced itself merely to a brand identity. Today perhaps it’s so fortunate and that its name and logo survive the sale of everything else.
I was incredulous.
Amazon can’t be so good.
They can’t be this cruel!
Is this really another #deathbybezos ?
It isn’t actually an Act of the Amazon, but it certainly feels like one.
The very long, tortured demise of Toys “R” Us began many, many moons ago. To tell this story, we must go way back in time… to the summer of 2005.
The Golden Years for sure, amirite?
Ahhhhh yeahhh, the year two thousand five. 13 years ago, baby.
Well… I mean, you know… except for full-scale invasion and occupation of the Middle East, and the full amount of that tab to be borne by our posterity.
But don’t forget! We also were looking on the bright side:
- the Dot-Com Crash was behind us
- the Housing Bubble was reaching all-time highs
- Credit was a chocolate stream
- Economy was booming!
While the internet continued its global crusade of technological progress, more humans used the medium for social communication. More sales were going online.
Amazon Prime was only a few months old. But it wasn’t a known thing to most shoppers yet, because social media (and two-day shipping) was a very new thing in 2005. The digital sales days were still in infancy. As gorilla-sized, niche-occupying retailers like Toys “R” Us each proved a fresh retail boutique sales model, they collectively were given a new moniker: They now were known category killers. Who among them was to worry? What possibly could retailers awash in cash really have to worry about? They were busy slaughtering their competition’s year-end figures — with ease! They were riding high!
They clearly were nowhere near the entrance to a sad realm of torturous pain and worry and financial dire straits.
… or were they? …
Enter three companies:
- Bain Capital
- Kohlberg Kravis Roberts
- Vornado Realty Trust
What do they all have in common?
If you really want to know what’s responsible for killing Toys “R” Us, I can explain it in two words: Leveraged buyout.
That Wall Street trio sucked the value completely from Toys “R” Us’s balance sheet, as it took a long, final ride, to the bottom. From the moment they closed their $6.6 billion debt deal, Toys “R” Us was destined for Chapter 7.