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Thread: ToysRUs UK & US bankruptcy & closure

  1. #61
    bowspearer Guest

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    Quote Originally Posted by Raider View Post
    The problem with the article, as far as I am concerned, is not the point about the decrease in birth rate hurting the industry, but rather what appears to be an attempt to attribute blame to millennials as well as women. The article starts off, not be merely point out declining birth rates, but by specifically mentioning millennials being the cause for this.
    The problem is that if you're going to talk about declining birth rates, it's millenials who are currently in the age bracket who are responsible for producing most of the kids in society - with xennials taking up the tail end of that. Gen X at this point are in their mid-late 40s or older so their child-rearing age bracket days are well and truly coming to a close. Meanwhile Gen Z are really only starting to form the front end of that child-rearing age bracket. They're specifically mentioning millenials, because it is millenials who are the ones who, if birth rates were higher, would be rearing and raising the majority of kids in society. When birthrates aren't happening, it's because we're not having kids.

    Likewise, many women are putting off kids til much later in life (in fact you're starting to see the odd regret story about women who missed the window and now regret it), which likewise is going to lower the numbers of women who aren't having kids.

    No matter which way you slice it, those are the reasons kids aren't here.

    Quote Originally Posted by Raider View Post
    Why not go a step behind and argue that the reason millennials don't have as many kids is that we are all working our back sides off to get jobs and hopefully one day have enough of a deposit to buy a house but in the mean time pay huge rents to baby boomers.
    Because the article is about "What is a major reason Toys'R'Us is citing for loss of business?" not "Why aren't millenials having children at the same rate of previous generations?"

    Is that a possible response article? Not really. The reason is that if you were going to truly look at those reasons, I'm not sure a mere article would be long enough to do an exploration of those issues justice.
    Last edited by bowspearer; 21st March 2018 at 08:18 PM. Reason: fixing up bbcode tags

  2. #62
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    Quote Originally Posted by bowspearer View Post
    And yet you can't deny it is a factor. Population growth in the Western world is at a serious low right across the board - of course that's going to affect the primary demographic of the toy market for all companies and all properties when there are less kids compared to, say, a generation ago. Why does stating a simple matter of fact like that offend you so much?



    Certainly that's a factor, but I think the article has hit this on the head. Even if you factor in the lack of adult collector focused figures in parts, unexplored avenues of nostalgia cash-cowing and the way these very chains have decided on some very non-collector friendly case assortments, you're still only talking about what last I checked, was only a maximum of 30% of your entire consumer base.

    The fact is that unless you're really terrible at maximising your returns with that demographic, no matter how much you make the most of that 30%, losing kids means you've still lost 70% of that demographic.

    While it might be nice to think otherwise, there's no way that adult collectors form a large enough group to carry the toy industry at its current size if it ever came down to it.

    I didn’t realise that the use of a eye roll emoticon indicated I was “offended so much”. I had, obviously very naively, assumed it meant that one was simply mimicking the rolling of ones eyes.





    Also, that article only “hits the nail on the head” if you fails to do the most basic of googling to discover that TRU was saddled with USD$5B in debt in a leveraged buyout in 2005. This article explains it nicely and offers a far more considered explanation then “BLAME THE MILLENNIALS!!!!” As it states, when you are using 97% of your net profit margin every year to purely service the interest on the loans your business has, eventually that’s going to catch up with you.

    On a side note, the article explains one of the things I always wondered about: Why is TRUs online shopping experience such garbage? Because they simply didn’t have the money to invest in a good online shopping system. And with the retail world changing and moving more to online, they literally couldn’t afford to keep up.

    It’s a shame. I was in Shellharbour TRU today and to think that wandering into a massive shop full of toys is something that my son may not get to experience past his toddler years is a little sad.
    Dovie'andi se tovya sagain

  3. #63
    bowspearer Guest

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    Quote Originally Posted by Tetsuwan Convoy View Post
    I disagree here, I solely place the blame on the baby boomers for having so many kiddies to blow the population out in the first place.

    Also on a non jokey note, (yes, above was a joke before knickers get in a not), after just skimming through the first 3 or so paragraphs of the article, if TRU's sole business plan was based on population growth and they don't have a strategy if population growth declines, then they are a very stupid company.

    What a trashy article
    I disagree. The trap was always going to be with a megastore, that it requires a certain customer base size to sustain itself. Plan B would literally involve downsizing stores which requires sourcing new premises, but more importantly all new fitouts in those new premises. That in and of itself can be an incredibly costly exercise, depending on what fittings you can use and what fittings you need to acquire.

    It's one thing to do that with larger premises when you're expanding, like what I imagine happened as Toys'R'Us grew from its origins in 1957; it's another thing to do that when you're cutting a loss. In fact, considering that they appear to have gone down the "express" route with some of their US stores, I imagine that they looked at the widescale downsizing option a while back and decided it was just too costly.

    So if you're going to say that they should have had a Plan B, practically speaking, given that there was really no way out form the megastore model if things went bad, what you're really saying is that there should have been a Plan B back in the 1980s. The question then becomes, could anyone in the early 1980s in the toy industry have been reasonably able to foresee this current population trend. On the balance of evidence back then, the fair answer would have to be, not really.

  4. #64
    bowspearer Guest

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    Quote Originally Posted by Trent View Post
    I didn’t realise that the use of a eye roll emoticon indicated I was “offended so much”. I had, obviously very naively, assumed it meant that one was simply mimicking the rolling of ones eyes.

    It wasn't just the eyeroll. What you said was:

    Quote Originally Posted by Trent View Post
    Ofcourse. Everything else is our fault so why not The closure of TRU

    I can't have kids! I'm too busy eating my smashed avocado on fancy toast!
    Honestly, it came across as more than a little butthurt.

    Quote Originally Posted by Trent View Post
    Also, that article only “hits the nail on the head” if you fails to do the most basic of googling to discover that TRU was saddled with USD$5B in debt in a leveraged buyout in 2005. This article explains it nicely and offers a far more considered explanation then “BLAME THE MILLENNIALS!!!!” As it states, when you are using 97% of your net profit margin every year to purely service the interest on the loans your business has, eventually that’s going to catch up with you.
    Yes the market equity firm that is responsible for shenanigans here definitely has a case to answer for, and they certainly sped things up, as evidenced by the way the same thing destroyed Dick Smith. However if anything, it only sped up an inevitable process with the way their entire market demographics have been affected by population growth or lack thereof in this case.

    Quote Originally Posted by Trent View Post
    On a side note, the article explains one of the things I always wondered about: Why is TRUs online shopping experience such garbage? Because they simply didn’t have the money to invest in a good online shopping system. And with the retail world changing and moving more to online, they literally couldn’t afford to keep up.
    You could also add the issue with poor case assortment choices they were dictating on companies like Hasbro into that mix. The problem is that in terms of who they mostly affect, those are secondary drivers, due to the fact that as much as we wish otherwise, adult collectors are simply a smaller to medium minority of their market share.

    Yes you might get the odd parent doing a quick online shop for their kids, but most of the people using online are generally going to be adult collectors buying for themselves. You see this by the fact that Christmas layby sale days here and massive sale days over there still have queues running for miles with people shopping in person in a bricks and mortar store.

    Let's say they'd fixed their online service. Let's even say that they altered their case assortments to be more collector and troop builder friendly rather than aimed at 5 year olds all wanting a Luke Skywalker, a Darth Vader, an Optimus Prime or a Megatron. I'm not convinced that if you did optimise that business plan to make every cent possible from your collector base, that it would have been enough to stave off Toys'R'Us' death spiral. As a megastore, they simply were too big to survive from that small a clientele.

    Case in point; comic shops and adult collectible stores like zing tend to do very well, as do the likes of EB Games. The difference there though is that they're small stores, with small sized real estate and therefore much smaller overheads, so they're able to survive with much smaller customer bases. It's a flexibility which the megastore model simply doesn't have.

  5. #65
    Jellico is offline Rank 6 - Dedicated Member
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    You needed the mega store in the 80s/90s. Look what happened to the small stores. Mega stores are still a great way to sell. See Bunnings. But there are a lot more people renovating with specialist equipment that you can't get a Kmart than buying specialist toys.

  6. #66
    bowspearer Guest

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    Quote Originally Posted by Jellico View Post
    You needed the mega store in the 80s/90s. Look what happened to the small stores.
    Which only goes to show just how unfeasible any kind of Plan B truly was.

  7. #67
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    Quote Originally Posted by bowspearer View Post
    what you're really saying is that there should have been a Plan B back in the 1980s. The question then becomes, could anyone in the early 1980s in the toy industry have been reasonably able to foresee this current population trend.
    That's exactly what I'm saying. If TRU only have one plan of how to expand, then they're idiots.

    Anyhoo, lack of kids to sell to was probably the least of their problems. From what I've read, the debt they got saddled with and other aspect (not related to low sales, but having to pay obligations hand over fist to others in the first palce is what more likely did the trick.

    Regardless, of all that, I thought I made it pretty obvious of the joking nature of my post.

    I'll be off now thanks. Later guys

  8. #68
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    So, TRU Kotara (one of like 3 in the Hunter/Newcastle Region) has been undergoing major renovations (along with Kmart and JBHifi) at a local shopping center, with plans to reopen in late 2018. Will be interesting to see how this affects their plans. Maybe a candle lit vigil in the near future?

  9. #69
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    The UK and US ToysRUs companies failed due to issues that were not related to sales (so demographic changes are moot points).
    The US company collapsed due to the people who bought the company, not doing their homework and over-valuing the it, so borrowed more than they could pay back in a short period of time. The sales were actually improving over the last couple of years, with them actually making a profit last year... and then they made the stupid decision to file for bankruptcy last year thinking that it could help increase their Christmas sales if they could delay paying bills until afterwards.
    That started a whole legal process that included the possibility of liquidating the company, which they didn't think would happen... or were too arrogant to think that it could happen.
    They were still in a very stable financial position, adapting to the changing retail environment (and customer demographic) enough too be able to have steady increases in their sales in recent quarters and make profit last year... but that over-valuation purchase debt was something that was working against them. They were paying it off, but it was still a burden, and not something that they would be shaking any time soon.

    Meanwhile, the UK operation was burdened by a different debt, relating to their leasing costs blowing out as the land values outpaced their sales rates.

    Demographic changes are real, and a challenge for all retailers who have to market to whatever the current trends or demographics are, but ToysRUs (particularly with their BabiesRUs branch that kept them afloat last time they went through a bad run), had adapted, and none of the various global branches were suffering from significant sales slumps or even downturn at all.

    And I think that the talk about selling off Asian, European or Australian operations is because the US company has a stake in them, and if that company is being liquidated, their stake (partial or whole), has to be sold off to repay their debts. It just depends on who gets the naming rights in those countries... if they are sold with the stores and assets.
    It would be like Mcdonalds collapsing in America - the Australian operation would still continue if it is profitable, but the American company would sell its stake to a new business or investor... who would want to have the name with the purchase, as much of the value of the company comes from the brand recognition.

  10. #70
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    If Toys R Us is financially wrecked because people weren’t bonking enough and walking through the doors then clearly their business model was outdated.

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