Today Is A Sad Day If You Were A Toys ‘R’ Us Kid

If you were a “Toys ‘R’ Us Kid” and fondly remember Geoffrey the Giraffe, this will be really bad news. Toys ‘R’ Us, the once-iconic, go-to toy department store for families, just closed its two remaining stores.

Toys ‘R’ Us was an innovator when it first opened. It was one of the leaders in the big-box retail movement. This trend focused on capturing a segment of the market by opening a huge warehouse-type store with all of the products that you could ever want. This concept was called a category killer, as smaller mom-and-pop shops couldn’t compete against these behemoths.

Over the years, the toy store grew complacent. It ignored ferocious competitors that emerged on the scene. The New Jersey-based chain had to compete with the powerhouses of Amazon, Target, Walmart and online shopping. Its physical locations became a liability. Toys ‘R’ Us had to pay expensive rent for enormous stores, required to hire lots of workers and bear all the associated costs with a nationwide chain of stores.

Private-equity firms Bain Capital and Kohlberg Kravis Roberts, along with the real-estate firm Vornado Realty Trust, took over Toys ‘R’ Us in 2005. The company took on $5 billion in debt, stopped innovating and began its slow slide into demise. It finally filed for bankruptcy protection in 2018 and laid off thousands of workers.

During its bankruptcy liquidation, Tru Kids acquired Toys ‘R’ Us’ intellectual property. The company opened two smaller-format stores in New Jersey and Houston, which are now closing down.

The blame is put on the pandemic, as people couldn’t—or wouldn’t—go to malls and stores to shop in-person when they are safer purchasing toys online. It’s not just the toy store, about 10,000 store closures were announced by retailers in the U.S. this year, which would set a record.

The pandemic isn’t the only villain. Companies need to keep innovating and moving forward. They can’t stay complacent in our ever-changing economy. Taking on large private equity debt is an anchor many corporations can’t withstand.

Toys ‘R’ Us once had the chance to be Amazon’s default toy store on its platform, but the company took a hard pass. Bad mistakes, too much debt, arrogance, lack of embracing new technologies or pivoting to a better business model contributed to the company’s failure. The Covid-19 outbreak was just the straw that broke Geoffrey’s back.