Professional Documents
Culture Documents
Prepared for
Professor Janell Barnard-Keller
COM 338 Instructor
Prepared by
Chelsea Beal, Andrea Jacobs, Hannah Kniss,
Lauren Moloney, Paul Richardson
Here is the research based analytical report you requested on Toys “R” Us.
The purpose of our research was to identify the factors which lead to the success of Toys “R” Us,
explore the company’s expansion from a small store to a world-wide franchise, understand the
chain of events and environmental market changes contributing to the downfall of the company,
and also analyze the future of the business. In preparing the report, our group researched
business news articles and market studies that provided insight into company history, practices
and trends.
While conducting our research, we concluded that while Toys “R” Us was the innovator and first
of its kind, it was also the master of its own demise. Company leadership failed to recognize and
react to market changes. Failing to remain relevant in a world turning to the ease and
effectiveness of ecommerce, the company would spiral further into debt with no way to dig itself
out. In the end, the void in the toy market would be quickly filled with retail competitors who
had been waiting for the chance to branch into the toy business themselves.
Overall it may be said that my group members put great effort towards conducting research and
putting together the following report. Chelsea Beal discussed employee layoffs and Geoffrey the
Giraffe while also constructing the table of contents and reference pages. Andrea Jacobs put
together the outline for the final report, wrote about the history and success of the business, as
well as conducted the final editing process for the report. Lauren Moloney touched on failure
factors, bankruptcy, and store closings as well as composing the title page. Paul Richardson gave
the report its necessary conclusion and organized the pages for the title fly, appendices, and
illustrations. As for myself, I wrote of the success in other countries, effects on toy shopping at
Christmas time, and this memo of transmittal.
We appreciate the support and instruction you have given us during the construction and
completion of this research report. This opportunity has given us the necessary push to work on
our group skills which will benefit when advancing into the business world. If you should have
any questions or comments, please let us know.
H.K.
Table of Contents
Introduction……………………………………………………………………………………......1
Conclusion……………………………………………………………………………………….10
References……………………………………………………………………………………….12
LIST OF ILLUSTRATIONS
FIGURES
1. Toys “R” Us Ad Campaign Featuring Mascot, Geoffrey the Giraffe, 1981 ..………………..2
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3. Globalization of Toys “R” Us Locations……………………………………………………...8
4. Toys “R” Us Tweet featuring Geoffrey the Mascot back from “Vacation”……………...….10
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THE RISE AND FALL OF TOYS “R” US
INTRODUCTION
Despite maintaining viability and success for several decades as one of the world’s largest toy
store chains, Toys “R” Us filed for bankruptcy in 2017. Last ditch attempts to cut costs and
reinvigorate the failing business ultimately fell flat, with all store locations across the United
States and Britain ultimately closing their doors in 2018.
This report seeks firstly to identify the factors which lead to the success of Toys “R” Us, and the
company’s expansion from a small store to a world-wide franchise, secondly to understand the
chain of events and environmental market changes contributing to the downfall of the company,
and lastly to observe the outcomes and future progression as the company transitions from the
impact of this major adverse event.
In preparing the report, our group researched reputable business news articles and market studies
that provided reliable insight into company history, practices and trends. Insights related to our
findings are reported herein.
Toys “R” Us, like most successful businesses, can trace its roots back to humble beginnings. In
1948, just at the start of the baby boom in America, company founder, Charles Lazarus, opened a
baby furniture store in Washington D. C. Lazarus discovered that, although the crib business
did not prove to be lucrative, toy sales at the small store were quite successful (Verndon, 2018).
Ten years later in 1957, Lazarus opened the first official Toys “R” Us storefront dedicated
entirely to toys. The store itself was “modeled after a supermarket, with items stocked high on
shelves and a wide assortment of choices,” (Horowitz, 2018). This turned out to be a welcomed
innovation that the market quickly responded to.
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2
Figure 1: Toys “R” Us Ad Campaign Featuring Mascot, Geoffrey the Giraffe, 1981.
http://360.advertisingweek.com/wp-content/uploads/2017/10/geoffrey_giraffe_childrens_bargain_town.jpg
In addition to niche merchandizing and strategic marketing, Toys “R” Us was also an early
adapter of technology, using computerized systems to monitor sales and products. According to a
1985 Wallstreet Journal article “One thing that sets Toys “R” Us operation apart is that Mr.
Lazarus knows precisely what his customers are buying. Each product is tracked by computer,
and that helps the chain spot hot-selling items weeks before most competitors do," (as cited by
Horowitz, 2017). In today’s world, this type of computerized product inventory is second nature,
however in the mid-1980s, this technology was cutting edge, and not readily embraced by all.
Another way in which the company put itself ahead of competitors is by adapting electronic and
video games into the array of merchandise in the late 1980s. This served to not only keep the
company in-step with the current toy evolution, but also attracted a teen and young-adult market
segment that had not been captured previously, adding to already bursting revenue streams.
Though the company enjoyed decades of success, all but dominating toy sales through
innovation, marketing and, for a many years, being the proverbial one-stop-shop for all things
toys, the sales environment would soon change. New businesses, such as Best Buy and Walmart
would compete for market share in toys and video games, while new ways of shopping online
would prove detrimental to longstanding and well known storefronts. Subsequent report
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segments seek to understand these changes and outline the factors leading to the company’s
downturn following its steady rise to the top.
https://www.statista.com/chart/7060/online-toy-retailers-in-the-us/
Toys “R” Us’ sales continued to fall, causing further worry for investors who had hoped that the
sale of the company would remedy the situation (Hartung, 2018).
Its failure to assess the growth of ecommerce would not only negatively affect Toys “R” Us’
sales, but also its property and store values. The rise of ecommerce in the market would also
mean a dip in the US retail real estate value. Less physical store locations were needed as
demand for online shopping grew. The company had reached a critical point where the internal
value of its assets was higher than the amount which it would actually receive on return, thus
adding to its growing lump of debt instead of relieving it.
The company was finally forced to file for Bankruptcy in September of 2017. It was time for
Toys “R” Us to take serious action, if it was going to remain in the market.
to change its business structure or repay their debt. All of the oversights by the company
contributed to the dire position it found itself in. There could be no doubt: Toys “R” Us was a
sinking ship (Hartung, 2018).
Any hope that the company would be making a comeback was dashed by the 2017 holiday
season. During the traditionally booming Christmas shopping season, Toys “R” Us experienced
a significantly less profitable quarter than was anticipated. This was due to the fact that instead
of focusing on holiday sales, the company applied all of its efforts toward the then ongoing
bankruptcy case, announced previously, in September 2017. This not only diluted the attention
that should have been spent to bolster sales in what was arguably Toys “R” Us’ most critical
hour, but also positioned the company poorly in a market where a large chunk of sales were
generated from gift cards. With whispers of bankruptcy looming, skittish consumers avoided
making their Christmas purchases at Toys “R” Us. Additionally, in years past Toys “R” Us had
been able to rely upon a surge of last minute shoppers who depended on the toy store to make
11th hour Christmas Eve purchases. Ecommerce, again, proved to be the Achilles heel, steering
these customers to the ease of online home shopping, two-day shipping, and a more reliable
stock of “hot” items (Bomey, 2018). This sadly marked the end of the company (Bomey, 2018).
At the beginning of 2018, lenders decided after the new year that the company would close all of
its U.S. stores (Isidore, 2018).
specifically in China and Southeast Asia. While the retailer has ceased all function in the United
States and declared bankruptcy, there are quite a few Toys “R” Us stores that will remain open
globally. Many are making public announcements wanting to let the world know that their stores
are still alive and thriving.
Once news of bankruptcy became reality, Fairfax Financial Holdings based in Toronto, bought
82 stores throughout Canada and plans to leave them operational under the Toys “R” Us brand
name. As of now the Toys “R” Us chain of stores in Canada is listed as the second largest toy
retailer with sales that bring in roughly $762 million annually (Pymnts 2018). President Paul
Rivett is hoping to continue the success of the Canadian chain, and in doing so will bring them
into the era of modern retail by making necessary updates. Over the next year, millions of dollars
will be spent to renovate the physical stores across the country while also remaking the chain’s
image to appeal to customers by giving them a sense of community. This chain of stores will
employ many and save jobs in these communities to show that they are willing to reinvest and
give back. Rivett expresses interest in placing importance on updating and improving the
physical retail experience to keep up with online competitors such as Amazon (Pymnts 2018).
Using mobile payment methods and giving tech savvy customers the option to pick up their
online purchases in-store are just some of the ways he’s planning to get ahead. (Bhattacharyya,
Bodley, & Joseph 2018).
Smyths Toys has acquired the retailer’s 93 stores located in Germany, Switzerland, and Austria.
Unlike Fairfax Financial Holdings, the Toys “R” Us stores bought by Smyths Toys will not
remain operational under the original brand. Smyths Toys will start rebranding but for vastly
different reasons. With this acquisition, Smyths Toys has grown its own brand by becoming one
of the largest toy retailers on the European continent with 200 physical stores. This number
includes the recently purchased Toys “R” Us stores (Verdon 2018).
The United States chain continues to permeate news with their unfortunate tale. At the same time
Canada has taken steps in order to rebrand their Canadian based Toys “R” Us company to make
an image for themselves as an entity who will care for their communities while evolving with the
times and creating shopping experiences to keep up with online competitors. Smyths Toys has
placed themselves ahead in the game with their acquisition of stores and continuing their
successful climb staying one of the largest European toy retailers. Success for the Toys “R” Us
company has come in many different forms for the countries who have been able to pick up the
pieces and continue to thrive in what was once considered uncertain circumstances.
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https://image.slidesharecdn.com/globalizationwithtoysrus-150516163443-lva1-app6891/95/globalization-with-toys-r-us-15-
638.jpg?cb=1431796025
also wants to claim its fair share of the toy market. The largest retailer in the world has decided
to expand toy selection in stores by 30% as well as on their websites by another 40%. Anne
Marie Kehoe, Vice President of Toys for Walmart in the United States, has said that the
company is making bigger investments in order to have the widest variety available in any store.
Along with in-store product demos and partnering with a child who will start reviewing some of
his favorites toys on Youtube, Walmart is gunning for the opportunity to acquire a piece of the
almost $7 billion in sales Toys and Babies “R” Us left behind. (WQAD 2018)
All of the previous data suggests that this holiday season will see heavy promotion from many
retailers and children will not be left wanting. Most have changed their marketing strategies and
become more present online to be able to compete. Others have made investments to procure the
most merchandise. Whatever the case may be, the question of who will sell toys this Christmas
has been answered and it seems that the void left behind by Toys “R” Us won’t be so hard to fill
after all.
Geoffrey the Giraffe’s Comeback
After stores closed and thousands of employees were laid off with the expectation of Toys R Us
being over for good, Geoffrey the Giraffe made a very unexpected appearance at one of the
largest wholesale events in the toy industry. As stated in Rachel Siegel’s article, “That was just
days after court filings showed that the owners of Toys R Us might be pursuing a comeback,
with the hedge funds that own the company opting to hold onto the Toys R Us and Babies R Us
brand names, Web domains and other assets -- including Geoffrey.” To the employees who lost
their jobs and severance pay, the news of a comeback of Geoffrey the Giraffe came to some as
“Lemon on the wounds”, stated by Carry Gleason, “campaign manager for the worker advocacy
group Rise Up Retail” (Siegel, 2018). Employees are furious with this comeback feeling that it is
destroying the last remembrance they have of the brand and mascot just to gain some short-term
profits during the coming holidays (Siegel, 2018).
The company’s marketing has shown in a tweet of Geoffrey the Giraffe a comeback during the
holidays to bring back some of their most iconic brands. In late 2018, Kroger announced that
Geoffrey the Giraffe will be featured at nearly 600 in-store locations in the coming Christmas
season. The displays will be reimaged and rebranded as ‘Geoffrey’s Toy Box,’ and will serve as
the last attempt to bring the dying store back to life (Clemons, 2018).
10
Figure 4: Toys “R” Us Tweet featuring Geoffrey the Mascot back from “Vacation”
https://www.washingtonpost.com/business/2018/10/08/toys-r-us-brings-back-geoffrey-giraffe-its-laid-off-
employees-are-furious/?noredirect=on&utm_term=.ed0b548e1aed
CONCLUSION
After the opening of the first official Toys “R” Us store in 1948, the company would eventually
grow to become a titan of toy industry, dominating its competition from the 1980s through the
early 2000s, and in the process becoming a worldwide brand. However, the company’s refusal
to update its business model, failure to see competition such as Walmart and Target, and an
increasing debt were just a few of the reasons leading Toys “R” Us’ ultimate failure in the
United States.
Even though the stores in the United States closed down, Toys “R” Us has continued to thrive
overseas. In countries such as China and Southeast Asia, the toy company continues to be one of
the best in the business. Since Toys “R” Us filed for bankruptcy in 2017, it leaves a void in the
Christmas shopping season. No longer will the toy company be a staple of Christmas shopping
during the holiday season. Other stores such as Walmart are modifying their holiday strategy to
fill the void left by Toys “R” Us.
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Geoffrey the Giraffe, the beloved mascot for the toy company, recently made an appearance at a
wholesale event in the toy industry, marking the company’s last attempt to remain relevant in the
United States.
Overall, the toy company has a long history of expansion and success. However, this resounding
success led the company to make many grave mistakes such as poor financial decisions and an
inability to adapt to changing market landscapes. The Toys “R” Us brand has been tarnished due
to its lack of care for its employees and community. Other countries such as Canada are working
to improve the reputation of Toys “R” Us. If the former titan in the toy industry has any hopes of
a comeback, it most likely will be through a rebrand of its reputation.
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References
Bhattacharyya, S., Bodley, M., & Joseph, S. (2018, August 24). 'We're here to play and we're
here to stay': Toys 'R' Us Canada wants customers to know it's still alive. Retrieved from
https://digiday.com/retail/play-stay-toys-r-us-canada-wants-customers-know-not-dead/
Blakemore, E. (2018, March 19). Inside the Rise and Fall of Toys 'R' Us. History.com. Retrieved
from www.history.com/news/toys-r-us-closing-legacy.
Bomey, N. (2018, March 18). 5 reasons Toys R Us failed to survive bankruptcy. USA Today.
Retrieved from https://www.usatoday.com/story/money/2018/03/18/toys-r-us-
bankruptcy-liquidation/436176002/
Clemons, D. (2018, November 2). Geoffrey’s back! Kroger, Ralph’s to sell exclusive Toys “R”
Us merchandise this holiday season. ABC 7 Eyewitness News. Retrieved from
https://abc7chicago.com/shopping/geoffreys-back-kroger-ralphs-to-sell-exclusive-toys-r-
us-toys/4603836/
Garcia, T. (2018, October 1). Toys 'R' Us liquidation will have minimal impact on the holiday
season: NPD. Retrieved from https://www.marketwatch.com/story/toys-r-us-liquidation-
will-have-minimal-impact-on-the-holiday-season-npd-2018-10-01
Hartung, A. (2017, October 31). Toys R Us - How Bad Assumptions Fed Bad Financial Planning
Creating Failure. Forbes. Retrieved from
www.forbes.com/sites/adamhartung/2017/09/20/toys-r-us-is-a-lesson-in-how-bad-
assumptions-feed-bad-financial-planning-creating-failure/#7c6cef4658ea
Horowitz, J. (2018, March 17). How Toys ‘R’ Us Went from Big Kid on the Block to Bust. CNN
Business. Retrieved from https://money.cnn.com/2018/03/17/news/companies/toys-r-us-
history/index.html
Isidore, C. (2018, March 16). 31,000 Toys 'R' Us Employees: No Job and No Severance.
CNNMoney. Retrieved from https://money.cnn.com/2018/03/16/news/companies/toys-r-
us-employees/index.html
Isidore, C. (2018, June 25). Toys 'R' Us Will Close for Good This Week. CNNMoney. Retrieved
from https://money.cnn.com/2018/06/25/news/companies/toys-r-us-store-
closings/index.html
Loeb, W. (2018, July 27). With Toys 'R' Us Gone, Who Will Sell Toys This Christmas? Forbes.
Retrieved from https://www.forbes.com/sites/walterloeb/2018/07/27/who-will-sell-toys-
this-christmas/#20c5e97675c2
Pymnts. (2018, April 26). The Show Will Go On For Toys R Us Stores Abroad. PYMNTS.com.
Retrieved from https://www.pymnts.com/news/retail/2018/toys-r-us-stores-us-canada-
europe/
Rosenwald, M. S. (2017, September 18). Toys R Us: The Birth – and Bust – of a Retail Empire.
Chicago Tribune. Retrieved from http://www.chicagotribune.com/business/ct-toys-r-us-
history-bankruptcy-20170919-story.html
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Siegel, R. (2018, October 8). Toys R Us Brings Back Geoffrey the Giraffe -- and Its Laid off
Employees Are Furious. The Washington Post. Retrieved from
https://www.washingtonpost.com/business/2018/10/08/toys-r-us-brings-back-geoffrey-
giraffe-its-laid-off-employees-are-furious/?noredirect=on&utm_term=.ed0b548e1aed
Taylor, H. (2018, May 23). Design Evolution: Geoffrey the Giraffe of Toys‘R‘Us. The
Washington Post. Retrieved from http://360.advertisingweek.com/design-evolution-
geoffrey-the-giraffe-of-toysrus/
Van Abbema, A. (2018, August 23). Target races to fill void left by rival. CNBC. Retrieved from
https://www.cnbc.com/2018/08/23/target-races-to-fill-toy-void-left-by-rival.html
Verndon, J. (2018, March 9). Toys R Us Timeline: History of the Nation’s Top Toy Chain. USA
Today. Retrieved from https://www.usatoday.com/story/money/business/2018/03/09/toys-r-
us-timeline-history-nations-top-toy-chain/409230002/
Verdon, J. (2018, April 25). Toys R Us will live on in Canada, but so far, not in the U.S. USA
Today. Retrieved from https://www.usatoday.com/story/money/cars/2018/04/24/toys-r-
us-live-canada-but-so-far-not-u-s/548377002/
WQAD. (2018, September 05). Walmart working to replace Toys 'R' Us in time for holiday
shopping. WQAD. Retrieved from https://wqad.com/2018/09/05/walmart-working-to-
replace-toys-r-us-in-time-for-holiday-shopping/