Toys-R-Us has closed their doors. The market always chooses the winner.

By Aaron Rice
July 2, 2018

The remaining Toys-R-Us stores closed last week ending an era of retail shopping in America. Many were saddened to see the large retailer collapse, but as long as we have had stores in this country, we have had stores that go out of business.

Before Toys-R-Us entered our malls and shopping centers, we had independent toy stores. They couldn’t compete with the large chain and today you see very few independent toy stores, outside of specialized stores in specific locations.

But the reaction to Toys-R-Us closing was a little different than we usually see for these types of announcements. Driven by nostalgia, we saw people shed tears- either real or virtual- about the news. We even saw someone set up a GoFundMe campaign to raise $1 billion.

GoFundMe and nostalgia simply weren’t enough to save the giraffe.

If people were that concerned about Toys-R-Us, there is one very important thing they should have been doing for a long time: shopping there. As happens in a free market economy, the markets change. Toys-R-Us did not adapt and they failed. No different than any other number of businesses.

But we always have to blame someone. That use to be Wal Mart. Today it is Amazon. They are the reason small towns are dying. Why shops downtown are boarded up. Why local governments aren’t receiving enough tax revenue to pave their roads or fund schools. The list could go on for days.

Blaming someone else is the easy thing to do. But the market always chooses the winners. American consumers are, and should be, free to shop for the best options available. In the end, Toys-R-Us missed on a number of key business trends in consumer shopping behavior.

They weren’t competitive with competitors, brick and mortar or online

A very basic rule to retail: you need to be competitive to survive. Toys-R-Us simply did not match their brick-and-mortar competitors like Wal Mart or Target on pricing. Add in the fact that you can also get groceries or household items at those stores and there was no real reason to visit multiple stores when you could complete your shopping in one location. Something that is especially appealing to mom’s with young children.

But Toys-R-Us, as well as Babies-R-Us, had a larger selection than their competitors in the store some might say. That was a bonus if you needed an item at that very moment. However, you can find those same items online either from Wal Mart and Target, or an online retailer like Amazon. And you can receive them in a day or two, with free shipping. Toys-R-Us didn’t seem to grasp the digital trend until it was too late. Again, they just weren’t competitive.

To truly understand how uncompetitive they were on pricing, you needed only to visit a Toys-R-Us or Babies-R-Us during their liquidation sales before closing. At 30 or 40 percent off, they were about on par with their competition.

They didn’t set themselves apart from their competition

The brick-and-mortar advantage is that people can touch and feel items before they buy. We certainly purchase tablets and computers online, but we also like to be able to go to a Best Buy and put our hands on a keyboard or our fingers on a screen- and maybe seek a sales adviser for some expert guidance.

Save for the joy of riding bikes down the aisles, there was nothing that set Toys-R-Us apart. The stores were often cluttered, the experience wasn’t enjoyable, and they certainly were not known for their customer service.

You need to be competitive in pricing, but you also need a niche. Simply selling toys is no longer a niche. Toys-R-Us didn’t do anything to set themselves apart. A joyful customer experience was not part a customer’s average visit to Toys-R-Us.

Kids are seeking digital options, rather than traditional toys

The other part of this story is that the market for toys has changed. As much as we may or may not like to hear it, kids today prefer digital options such as tablets or video games. If you are in the business of selling products for children, you need to adapt. Especially in an environment that is becoming more and more competitive each day.

Some might feel sad that Toys-R-Us closed. Some of us might think back to our childhood. But consumers voted with their feet. They chose convenience. They chose lower prices. They chose independent, niche toy stores. Unfortunately for Toys-R-Us, that means the market chose someone else.

When all is said and done, nostalgia or a catch phrase will only get you so far. The market always determines the winner…and the loser.


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