End of the line for Toys “R” Us?

Big retail news of the day (as discussed at RetailWire) is the announcement that Toys “R” Us is throwing in the towel. Here’s my post-mortem:

It’s unlikely that Toys “R” Us is going to stay afloat, and this is a big deal for those who follow the recent history of retailing. They were among the first “category killer” stores with broad assortments of a single category in a big-box format. There have been others (Linens ‘N Things, Sports Authority, etc.) but this one stands out. If you see reporting on “the Amazon effect,” it’s more complicated than that.:

It’s tough to survive in a highly seasonal business like toys given the growth of e-commerce and the dominance of discounters in the same category. And there has been a generational change, where many of today’s kids are interacting with technology (smartphone apps, streaming video games) instead of the toys of a short time ago.

And one more lesson learned: A mountain of private-equity debt doesn’t help. On this point, an added thought from a more recent RetailWire discussion:

TRU was partly the victim of private-equity debt burdens, but also made its own mistakes. This is an example of a big box store with too much square footage — in a seasonal business facing robust competition from discounters and Amazon — failing to adapt.

There is probably enough brand equity remaining to salvage the business, provided that Storch and team rethink the model. (And get rid of that debt load.) Maybe an online-only play is the place to start, instead of trying to recapture the past.

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