Toys’R’Us Closing Down and the Future of Brick and Mortar Toy Stores

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Photo: mysavings.com

It’s going to be a little bit harder to be a Toys’R’Us kid in the U.S.  The toy retailer plans to close up to 182 locations across the country as part of its Chapter 11 bankruptcy reorganization plan.

The retail chain, which filed for bankruptcy protection in September, has been fighting an uphill battle to stay relevant amid growing competition from the likes of Target, Walmart and Amazon.com. It’s woes only seemed to magnify in recent months. The retail industry enjoyed its best holiday season in years, but Toys R Us struggled to find its footing.

Online sales of toys have also picked up in recent years, as Amazon.com, Walmart and others have expanded their selections. Roughly 14 percent of toy purchases were made online in 2016, up from about 7 percent in 2011, according to research firm GlobalData Retail. Toys R Us, meanwhile, has been slow to adapt.

Other Retailers Struggle

Analysts believe this is a red herring for things to come for retailers in the toys and games space. Gamestop, a lead retailer in this space, has been struggling for years. While the gaming industry keeps booming, online game sales have been steadily rising. Amazon offers 20% off new games delivered to your house day of release. Gamestop has entered new spaces in an attempt to remain relevant to their customer. They now sell old phones and have increased their toys inventory. Even with their recent acquisition of ThinkGeek, their sales continue to struggle.

GameStop is losing out because consumers are not upgrading their phones as frequently as expected. GameStop has been struggling to adapt to lower foot traffic through its brick-and-mortar stores. This is why its stock price is deflated. The overall investor sentiment against GameStop is understandable, but I argue that the negativity is overblown. Patient investors who are able to disconnect from the share price and invest today might see a profitable return once GameStop returns to growth.

Photo: Gamestop

Retailers Fall from Grace

The three main reasons analysts attribute the fall of retailers are:

  • Weak web strategy: Engaging features like ratings and reviews, social sharing, detailed product images and videos, and enticing discounts and promotions are now common, and consumers expect them everywhere they shop.
  • Poor Omni-Channel Execution: True unified commerce ties in ALL of the retailer’s channels. This may go beyond physical stores, e-commerce sites, and catalog sales to include marketplaces like eBay and Amazon.
  • Underinvesting in stores: Retailers who have been slow to adopt new technologies like mobile point of sale and clienteling are lagging behind in delivering the quick, convenient service and engaging experience that today’s consumers demand.

The business of retail is evolving at a rapid pace. Retailers who adapt quickly are the ones who will ultimately survive.

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