Toys R Us latest retailer filing for bankruptcy
NEW YORK — In filing for bankruptcy, Toys R Us joins a list of dozens of store chains that have done so already this year as online leader Amazon increasingly exerts its influence over a huge part of the retailing world.
The toy chain, hobbled by $5 billion in debt and more intense competition, filed for protection from its creditors ahead of the key holiday season. Like so many retailers that find it harder to coexist with Amazon, analysts say Toys R Us needs to improve its online services and offer special experiences in the stores.
For Toys R Us, that might be game demonstrations or hosting birthday parties. It says it’ll keep its 1,600 Toys R Us and Babies R Us stores open, and keep serving customers while in bankruptcy. Still, the chain faces hurdles — price is a big issue for shoppers, and Toys R Us acknowledges that it can’t compete there.
“We will go to Toys R Us to check out the current toys, and while we are at the store, we will be looking up prices on the phone on Walmart.com and Amazon,” said Randy Watson of Fort Worth, Texas.
He used to pick up items at Toys R Us for his kids. But for his grandchildren, he uses the store to see what’s available and then shops elsewhere to get lower prices.
The bankruptcies of nearly three dozen retailers since the beginning of the year — many of them very small companies, but also well-known names like Payless Shoe Source, Gymboree Corp. and True Religion jeans — has resulted in job losses and store closings. Toys R Us didn’t say if it would trim its workforce of nearly 65,000 employees worldwide.
Credit Suisse believes that there could be 8,640 store closings this year, which would surpass the 2008 peak of 6,200. In 2008, the number of bankruptcies was at a historic high of 569, according to S&P Global Market Intelligence.
Amazon, meanwhile, has been using its $99-a year-Prime Membership as a way to gain fierce shopper loyalty as it adds more perks like same-day delivery Amazon Now for a growing number of markets. It’s also making partnerships with brands like Sears and Kohl’s.
“Amazon has the level of convenience that so far surpasses the ability of traditional retailers can offer,” said Karl Havard, a retail industry expert for PA Consulting Group, a global retail consultancy. “There’s a lot of inertia in the retail boardroom. They’re not prepared to take the risk.”
Toys R Us was a major force in toy retailing in the 1980s and early 1990s, and was one of the first of the “category killers” — retailers that focused on one merchandising category and offered low prices. That combination hurt mom-and pop shops that couldn’t compete on breadth of inventory or price.
But like its peers, the now-defunct Sports Authority, Borders and Circuit City, Toys R Us started losing shoppers to discounters like Walmart and Target, and then to Amazon.
GlobalData Retail estimates that about 13.7 percent of toy sales were made online in 2016, up from 6.5 percent five years ago. And Toys R Us has also been hurt by children shifting to mobile devices as playthings.
But the toy industry still needs Toys R Us, says Jim Silver, editor in chief of the toy review website TTPM. He cites the fact that it sells toys all year, rather than just at the holidays, and has helped launch toy crazes such as ZhuZhu Pets during the downturn.
“If toy companies lost Toys R Us, it would be a hardship for a lot of companies,” said Silver.
