What Happened to Toys R Us

What Was Toys R Us?

Toys “R” Us was more than just a toy store; it was a beloved icon of childhood for generations of kids and parents. This retail giant, founded in 1948, was a one-stop shop for all things related to toys and children’s entertainment.

With a successful business model, Toys “R” Us expanded both domestically and internationally. It became a household name, operating not only in the United States but also in numerous countries around the world. Its prominence in the retail landscape was undeniable, and its annual “Big Book” holiday catalog was eagerly awaited by kids to create their wish lists.

While the nostalgia factor is undeniable, Toys “R” Us was much more than a source of fond memories. It played a significant role in the retail industry, shaping the way people shopped for toys, baby products, and children’s merchandise. Unfortunately, this beloved brand also experienced a decline and eventual bankruptcy, which led to the closure of its iconic stores in many parts of the world.

Toys R Us Timeline in Short

• 1948: Charles Lazarus opened a baby furniture store called Children’s Supermart in Washington, DC.
• 1957: After expanding into toys, Lazarus began using the Toys R Us name on his stores.
• 1966: Lazarus sold his company to Interstate Sales and became head of its toy division, overseeing the Toys R Us stores.
• 1969: Toys adopted Geoffrey the giraffe as its brand mascot.
• 1974: Interstate filed for bankruptcy, and the court put Lazarus in charge of the restructuring. He sold off unprofitable divisions.
• 1978: Toys R Us became a public company, trading on the New York Stock Exchange, and was headquartered in Paramus.
• 1983: The first Kids R Us clothing store opened.
• 1994: Lazarus stepped aside as chief executive, kicking off two decades of frequent management changes.
• 1996: The first Babies R Us store opened.
• 1998: Began selling toys online with the launch of Toysrus.com.
• 2000: Toys R Us entered into a strategic alliance with Amazon.com, launching a joint venture called KidsWorld. This partnership allowed the two companies to combine their online toy and video-game stores.
• 2001: Toys R Us opened its international flagship store in New York City’s Times Square, featuring a three-story Ferris wheel and a 20-foot high animatronic T-Rex.
• 2004: Toys R Us expanded its product offerings beyond toys, including books, movies, and games.
• 2006: Toys R Us was acquired by a group of private equity firms, including Bain Capital, KKR & Co., and Vornado Realty Trust, for $6.6 billion.
• 2009: The company launched its “Big Book” holiday catalog, which featured more than 80 pages of toys and games.
• 2010: Toys R Us acquired the toy retailer FAO Schwarz and opened a flagship store in New York City.
• 2015: Toys R Us closed its iconic Times Square flagship store and the landmark FAO Schwarz store on Fifth Avenue due to high rents.
• 2016: Changes in the company’s management boosted earnings, but the top-line sales growth remained elusive. The company continued to struggle under the debt incurred as part of the leveraged buyout.
• 2017: Toys R Us hired a law firm that specializes in corporate restructuring.
• 2018: Toys R Us filed documents with Bankruptcy Court indicating plans to close 182 stores.
• 2019: PicWicToys replaced the former Toys “R” Us stores in France. Tru Kids announced a partnership with rival Target that relaunched ToysRUs.com ahead of the 2019 holiday season and redirected its shoppers to Target.com once they selected the “Buy” button.
• 2021: Toys “R” Us opened a two-story global flagship store of 20,000 square feet, at the American Dream mall in New Jersey, marking the return of a flagship Toys “R” Us in the U.S
• 2023: WHP Global, the parent company of Toys R Us, Babies R Us, and Geoffrey the Giraffe brands, received strong support from major toy vendors such as Mattel, Hasbro, LEGO, Funko, and Spin Master.

What Really Happened to Toys R Us?

Lets take a look at what happened to Toys R Us on a regional basis

In USA

The stores in the U.S. had a really tough time. They were losing money and just couldn’t keep up with those huge online retailers. So, in January 2018, they had to make a tough call and shut down 182 stores across the country. The last two Toys “R” Us stores still standing, in New Jersey and Texas, too had to close for good in 2021.

In Europe

During 2018, Toys R Us were in the process of closing down all 100 of their UK stores. Unfortunately, this closure led to a substantial loss of over 3,000 jobs. Despite their efforts, the rescue talks that were initiated failed to secure a buyer.

Fast forward to 2022, and Toys R Us Iberia faced a financial crisis. They filed for bankruptcy during this year. However, their stores in Spain and Portugal were still in operation. The company actively sought investors to provide the necessary support to keep the business afloat.

In Canada

Initially, it was suggested that Canadian operations might be spared from the bankruptcy. Eventually, in April 2018, the Canadian division was sold to Fairfax Financial for approximately $234 million and continued to operate under the Toys “R” Us name.

In APAC

In 2018, Toys”R”Us, Inc. announced the merger of its Toys”R”Us operations in Japan with those in Greater China and Southeast Asia, forming a combined business with over 600 stores in 16 countries. This joint venture was primarily owned by Toys”R”Us, Inc. (85%) and Fung Retailing Limited (15%), and it had its headquarters in Hong Kong with a regional office in Kawasaki, Japan

Where Did Toys R Us Go Wrong?

Excessive debt from leveraged buyout.

In 2005, Toys R Us was acquired in a leveraged buyout by private equity firms Bain Capital, KKR & Co., and Vornado Realty Trust. The group planned to purchase all outstanding shares of the company for $26.75 per share and also take on the company’s debt.

It left the company with a debt load of around $5.3 billion in the succeding years.  Following the leveraged buyout (LBO), the company was paying a significant amount of its earnings just to cover the interest on the borrowed money. This eventually meant leaving less capital for other essential operations and investments. Toys “R” Us attempted to raise money through sale-leaseback deals involving its real estate assets. Unfortunately it failed to reach agreements due to accounting issues and a tight timeframe.

Fierce competition from big-box retailers.

The 1990s brought with it a new age of competition. With the rise of Walmart and Target, Toys R Us found itself struggling to keep up. And who could blame them? These retailers had two things they couldn’t compete with. Lower prices and one-stop-shop convenience.

Although they tried many things, Toys R Us couldn’t find that sweet spot. They tried and tested how their store worked for shoppers, tweaked their product offerings to be more appealing, and even created loyalty programs. Unfortunately, none of it worked. In the end, they were compelled to permanently shut down their operations.

In the chaos that followed two winners emerged — Target and Walmart. Walmart managed to snag 26% of the customers that used to go to Toys R Us. Target wasn’t far behind with 14% of the market share.

Inability to effectively compete with online retailers.

In the early 2000s, Toys R Us found itself in a tough spot when it came to e-commerce. They were a bit slow to dive into the world of online shopping, and when they finally did, they made a series of strategic blunders. One noteworthy misstep was their partnership with Amazon to sell their products on the Amazon website. Moreover, this led to Toys R Us to give up on selling things through their own website.

But, Toys R Us was not only competing with Amazon but also a bunch of other online sellers right on Amazon’s own turf. This led to Toys R us sueing Amazon in 2004, which Toys R Us ultimately won in 2006. This victory granted them the freedom to cut ties with Amazon and launch their own website.

Even though Toys R Us had various websites like toysrus.com, babiesrus.com, and toysrus.ca, they struggled to keep up with Amazon’s unbeatable combo of rock-bottom prices and free shipping.

Toys R Us did got serious about its online presence in May 2017, when they decided thier website needs a major makeover. But the damage was already done. The company had missed out on a lot and other players like amazon, ebay and best buy had already had a significant presence online which made it difficult for Toys R.

Shifting consumer preferences towards digital entertainment.

Just because of the reason stated above, shoppers no longer needed to visit physical stores to purchase toys; they could now access an extensive range of products with just a few clicks. This convenience gave rise to a decline in foot traffic to brick-and-mortar toy stores, including Toys “R” Us.

Video games and mobile apps have become an integral part of children’s lives. The engagement and interactive nature of digital entertainment surpassed that of many traditional toys. While digital entertainment creators consistently engaged with their audiences, Toys “R” Us was unable to replicate this level of interaction. They failed to leverage digital content, influencers, and marketing strategies that appealed to the new generation of children.

Failure to attract millennial parents.

Millennials, often known as “digital natives,” grew up in the internet age and now make up the largest generation of parents. They have different spending habits and values compared to previous generations.

New-age brands that sell directly to consumers and online marketplaces have offered millennial parents fresh, socially responsible shopping choices. These alternatives offer personalized experiences that resonate with this demographic’s values. Unfortunately, Toys “R” Us couldn’t effectively compete with these options, resulting in a loss of market share.

Because they faced economic challenges like the Great Recession during their formative years, they are generally price-conscious and value-driven consumers. Toys “R” Us struggled to provide competitive prices and value, influencing many millennial parents to choose more affordable alternatives on online marketplaces with a wider range of options and better deals.

Loss of customer trust due to bankruptcy.

The loss of customer trust, primarily stemming from the bankruptcy of Toys “R” Us, played a pivotal role in the company’s downfall. The uncertainty surrounding its financial stability eroded consumer confidence, leading to decreased foot traffic and sales. One major consequence was the fear that gift cards or warranties might become worthless, discouraging many potential customers. For instance, parents hesitated to purchase gift cards from the retailer, and this hesitancy extended to other transactions.

Moreover, suppliers and toy manufacturers began to lose faith in the company’s ability to pay its bills, which led to difficulties in restocking inventory with the latest and most popular toys. This resulted in empty shelves and a less appealing shopping experience.

Is Toys R Us Coming Back?

Did Toys R Us Return in the USA?

Toys R Us announced that it will open 24 new brick-and-mortar stores in the United States. The first store is expected to open in November at Dallas/Fort Worth International Airport, and other stores will be located in airports, cruise ships, and other locations.

In 2022, the company opened a flagship location in New Jersey and 452 locations inside Macy’s stores. The new flagship stores will be standalone and are expected to open in 2024. The company also has over 1,400 stores and e-commerce sites throughout 31 countries.

Did Toys R Us Return in Europe?

Toys R Us is reopening in the UK, with nine stores opening within WHSmith branches.

The new stores will have a life-sized Geoffrey the Giraffe sculpture and will sell toy brands including Barbie, Fisher Price, Lego, Marvel, and Peppa Pig.

Toys R Us also has a new jingle, which has mixed reviews from fans.

Did Toys R Us Return in Canada?

In 2021, the owner of Sunrise Records, Doug Putman, announced through his company Putman Investments that he would acquire Toys “R” Us Canada, which had 81 locations at the time, from Fairfax Financial.

Did Toys R Us Return in Asia?

In 2019, Tru Kids, the company that bought Toys “R” Us in a 2018 liquidation sale, announced plans to open 70 Toys ‘R’ Us and Babies ‘R’ Us stores in Asia before the end of the year. The company has continued to expand in the region, with Toys “R” Us Asia launching a new store concept in Hong Kong in 2022.

Toys “R” Us Asia is backed by Hong Kong tycoon Victor Fung Kwok-king’s Fung Retailing Group, and aims to expand in the region after separating from its American parent. The company operates more than 550 stores across the region, with 182 stores in mainland China.

Did Toys R Us Return in Australia?

Toys R Us is planning to return to Australia with a 3000sqm retail centre in Victoria. The centre will combine Toys R Us and Babies R Us, and will also include a cafe, children’s activities, and a robot-driven warehouse. The store is expected to deliver $7 million in annual trading.

Toys R Us is planning to open a new store in Clayton, Melbourne, Australia. The store will be 3000 square meters in size and will combine Toys R Us and Babies R Us brands. The new store will include designated areas called the “Robot Factory” and “Geoffrey’s Playhouse” when it opens late in 2023.

And there you have it!

In the end, the story of Toys R Us is one of a former category killer that failed to evolve with changing times. Though it dominated toy retail for decades as the top mass-market destination, Toys R Us did not adapt quickly enough to new competition and shifts in shopper habits. Steadily losing market share to discount chains and ecommerce, the once giant chain filed bankruptcy in 2017 when saddled with crippling debts.

After shuttering all 700+ US stores in 2018 despite efforts to refresh its model, Toys R Us sold overseas assets. While easy to view its journey as a cautionary tale of reinvention gone wrong, Toys R Us is still attempting comebacks, opening a few new US retail locations to customer excitement. And the Toys R Us name still reignites happy childhood nostalgia for generations today. Though the brand as we knew it remains expired at home, the remnants of its magic live on abroad and in our collective memories.

With sustained determination and by leveraging its heritage brand equity, Toys R Us potentially has a future opportunity to rebuild domestic operations and open a new profitable growth chapter in the US retail space at some point.