Though this may have something to do with Amazon (and retail generally trending online), it does appear that the big culprit here were Bain Capital (and its partners) who took it private in 2005 via leverage buyout and ladened Toys r Us balance sheet with untenable debt from thereon. Apparently, they were paying $500M in interests alone per year vs. reinvesting capital in growth of their offline stores or online retail.
I personally feel that, similar to bookstores which as seen a resurgence in neighborhood mom & pop stores, while Amazon will continue to dominate, a lot of smaller toy retailers (both online and offline) will spring up to take Toys r Us' space.
Toy stores are a _great_ example of opportunity for brick and mortar. Just like book stores, they operate in a space where curation, discovery and the physical experience adds real value.
The town I grew up in has a great independent toy store, and I make it a point to shop there every time we're in town. Every time I find something unique that I would have never looked for on Amazon, and often I'm hooked by the tactile act of playing with something that couldn't be fully replicated online.
As an interesting aside, this particular store[1] fought for its right to keep their mural (which was awesome but violated city codes) all the way to the supreme court[2]. They lost, but you've got to admire the chutzpa of someone willing to do that.
>Toy stores are a _great_ example of opportunity for brick and mortar. Just like book stores, they operate in a space where curation, discovery and the physical experience adds real value.
Not anymore. Customers just use them as a free showroom and then buy it cheaper off Amazon.
If a toy store can't figure out how to take advantage "but MOMMMMMM I want it NOWWWWWWWWWW!" then little kids are far more mature than they were a few decades ago. :)
I don't know why, but my kids do really well in this situation. We often say "maybe for your birthday" or "we'll add that to Santa's list" or "we're not buying toys today". They might make a little fuss, but so far it's been pretty easy. We also do the thing where you repeat back what they said to them, like "oh you want that don't you? I know, but not today".
Edit oh and they are pulled out of the store if they don't behave, so there's that too.
No way. The high-quality wooden hand-crafted toys at good mom & pop toy stores are not available on Amazon. Discoverability of good intellectually stimulating toys is similarly poor on Amazon.
You also overestimate the delta between the Amazon price (if the product is carried by Amazon) and that of the brick & mortar price. Often the brick & mortar price is identical after shipping costs.
The competitive advantage of a good mom & pop toy store is a specialized, curated selection of unique merchandise.
Perhaps Etsy can compete in this category, but I am in doubt that Amazon is there yet.
> Often the brick & mortar price is identical after shipping costs. The competitive advantage of a good mom & pop toy store is a specialized, curated selection of unique merchandise.
I think their main advantage is not the curation but the availability. You can plan a trip to the toy shop, agree to a budget, go and play with toys, choose something in budget, and go home with a toy. This is a way better parent-child bonding experience than scrolling through pages of licensed junk together & then waiting 2-3 days.
Re curation: most good toy stores have the same sort of stuff. Most 'boutique' 'niche' ones have expensive crap for idiots with money. Protip: your kids will play with toys until they break, don't buy that miniature replica Miele vacuum cleaner toy for $200 unless you don't mind throwing it away in 3 months.
Museum shops seem to follow the 'specialized, curated selection of unique merchandise' of children's toys.
When we are looking at the generic market, nowadays people go to a store, look at something and then go on their phone to see if they'll find it cheaper anywhere else, as local stores tend to overprice stuff to make up their marginal costs.
I dare you to try telling a 3-year-old who's winding up a tantrum because they want the airsoft pistol from the other aisle that they have to wait 3 days for the sensible age-appropriate & mentally-stimulating toy to arrive.
You raise a good point. Availability is a huge advantage, especially for last-minute gift purchases. I haven't seen the good toys that I'm looking for on Amazon; I have seen them on Etsy.
On a tangential matter, I disagree with avoiding opportunities for teaching children delayed gratification in such a high impact way.
Think about it this way: every time you rightfully don't give your child something they want due to their bad behavior, you're giving them an effective lesson and improving their future life.
It's cruel to intentionally create situations that trigger a child; it should happen organically. It doesn't take long for children to adapt to understanding they won't get their way and start adopting appropriate self control.
Especially with modern research showing the damaging effects of corporal punishment, parents should take opportunities when they arise to discipline their children in a way that is meaningful to the child: withholding a toy they desire or another form of leverage.
> On a tangential matter, I disagree with avoiding opportunities for teaching children delayed gratification in such a high impact way.
My comment on 2-3 days? That’s too long for a child to make the connection between behaviour and outcome. I love delayed gratification and would ask that we wait to play with the new toy until after we get home, eat, tidy up, etc. I hope that they make the link between waiting, being praised for doing a good job with something else, then playing.
My argument is against online price-matching being a suitable way of shopping for parents with young children, not against visiting toy stores. I see I wasn't clear that: taking your attention off your children to focus on your phone in an area with a high number of distracting items will likely lead to a situation where you need to reassert parental control.
Did you know? The 2-year-old will tantrum regardless where you are, and buying online means you don't have a quick out on hand (either getting the toy almost immediately after calming down and ensuring enough separation between the tantrum and getting the toy, or some stopgap alternative toy that's a tenth of the price).
"No way. The high-quality wooden hand-crafted toys at good mom & pop toy stores are not available on Amazon. "
If they have any kind of success and are visible - the chinese will have copies flooding the market within weeks. Small shops play a game to sell - but don't become too big.
I bought a $80 item from a toy store this week, the price was the same as Amazon and I was glad not to deal with delivery, boxes and packaging. At another toy store i picked up a llama llama book, but it was $17 in store, and only $10 on Amazon. I didn't get the book. $7 is worth waiting and dealing with boxes
All the best buying something on Amazon, and realizing that you didn't like it after it was delivered at your home. The cost of treating it as a free showroom will now cost customers buying a lot of products they don't like.
Amazon only has free returns if you choose very specific options that place the blame wholly on the seller (I think it's "item defective"). If, for example, you say that you found a better price, or just didn't want the item anymore, Amazon charges a hefty return shipping fee and may also charge a restocking fee.
Of course, this means that customers always choose that option, and FBA sellers get harmful demerits on their account every time that happens. This is such a popular way to hurt FBA sellers that people have a habit of ordering items from competitors just to return them as counterfeit and/or defective, in the hope that doing this a few times will get a competitor removed from the seller pool.
It's possible that Amazon has some algorithm that decides whether a product is worth returning or not, and that they just tell you to keep the product since the cost of return handling, etc., would consume the margin they'd make reselling it. I'm not sure if this type of algorithm would be applicable to FBA sellers, but I doubt Amazon would want it to be, since they'd lose out on the opportunity to collect additional handling fees from the seller.
Just conjecture at this point as I don't think any non-Amazon employee could know exactly all the details around when Amazon decides to charge a return handling fee, etc. I guess this may be in the fine print somewhere, but I would rather expect the fine print just to say "We can charge you a return handling fee if we want".
My experience is that I tried to return something last year, and Amazon was going to dock 12 dollars of my 14 dollar refund for return shipping if I clicked anything other than "defective". The product wasn't defective so I just decided to keep it, not worth the hassle for a $2 refund.
Did you order from a third-party FBA seller? If you did, they will often tell unsatisfied customers to keep the product and issue a refund anyway, because they'd rather be out one unit than have a return against them.
Amazon has free returns for now as only a tiny minority uses that as an option. Also returns work largely if there is a defect or you genuinely bought a wrong product(Like a wrong shoe size).
If most users start doing returns, they won't be free or even possible, given how much logistical nightmare that will be.
Beyond all this, that turn around time to buy a single product will be high.
Stores offer a good middle ground, and you can get a good hold of things before you actually make a purchase. I'm not saying toy purchase or any other purchase online will go down, but there will be a lot of buying will be waste.
> If most users start doing returns, they won't be free or even possible, given how much logistical nightmare that will be.
Would this nightmare be worse than unlimited 1-day shipping? Amazon seems to have worked that one out already.
Most places would allow you to print a label and leave the item at a designated collection point. In the UK there's heaps of companies handling this (CollectPlus, MyHermes, ParcelPoint, even Post Offices).
You doubt incorrectly :) From Amazon.de: "If you want to return an article within Germany, Belgium, Ireland, Luxembourg, the Netherlands, Poland or Portugal, we even supply you with a pre-paid return mailing label"
Sometimes they even let you keep the item. I barely buy anything from them, but I had that happen earlier this month with an item worth ~30€, despite choosing the option that indicated it was my fault.
You generally pay 3,90€ for returning the item via DHL/Hermes (unless you declare the reason for return as e.g. not working). Certain categories (clothing) have free returns. This is only the case if the order was placed through FBA or Amazon itself. Marketplace sellers with their own fulfillment usually charge you for returns or don't provide a shipping-label at all.
AFAIK Amazon.de does not charge for a return label no matter which reason you state if you return within 14 days and the article is valued over 40€ (even though they could legally now). Since this April they require Marketplace vendors to cover shipping back in those cases as well.
>Every time I find something unique that I would have never looked for on Amazon, and often I'm hooked by the tactile act of playing with something that couldn't be fully replicated online.
You're absolutely right. The result usually is though that the kid finds a toy they like then puts in on their Birthday/Christmas wishlist from where the Santa buys from Amazon. I like to think I never do this, but if the price is much higher even I have a limit.
I think that manufacturers should sell to physical toy stores at a lower price, and actively make sure online price is the same or higher than instore. but I dont how easy this is to police or even if is legal in some countries.
>I think that manufacturers should sell to physical toy stores at a lower price, and actively make sure online price is the same or higher than instore. but I dont how easy this is to police or even if is legal in some countries.
These days, many brick & mortar stores are a market inefficiency. It's simply cheaper to store & ship out of centralized warehouses (as it goes when you order online) than to ship merchandise to individual stores, which themselves have limited floor space and storage space (resulting in less variety of products) as well as a smaller potential customer-base (only those who live nearby). I don't see why manufacturers should be punished by selling at a lower price in order to sustain outdated business practices.
Stores that provide additional value, having unique goods that can't be found online or have cool atmosphere or such, will be fine.
What do you think of Amazon's retail outlets? They're little bookstores with a café and a display for a few electronics. They don't provide anything unique. In fact, they only sell what's popular on Amazon.
> The result usually is though that the kid finds a toy they like then puts in on their Birthday/Christmas wishlist from where the Santa buys from Amazon.
Well, it's also that when you walk in there looking for a present for the kids birthday party you are about to take your child to attend, you end up buying something there, and possibly even paying them to wrap it for you. I'm not sure I've ever ordered a present online for a friend of one of my kids. I have enough trouble remember the party is that day and getting there on time, much less ordering ahead of time.
Absolutely. For any parent with no time and a bit of money, the toy store is far faster for a just-in-time present purchase. I have yet to find a worthwhile price difference for merchandise on Amazon.
Former electronics manufacturer sales here. Manufacturers usually set the pricing steps with volume generally at the lowest price they can accept. The venue of goods sold often does not play a role in manufacturers' price structure.
Now when it comes to channel cost, physical stores are already taking more margin out of retail price and for manufacturers, there is simply rarely large enough incentive to sell to physical toy stores at a lower price.
It's possible to enforce MAP pricing (minimum advertised price) online that matches in-store prices, but if you're a small player you'll lose out on the business of some of the larger buyers who are used to getting their way, and then you run the risk of getting yourself put out of business by trying to help out the little guys.
When your largest reseller is even 1-2% under MAP you you really can't do anything about it. Especially if they are over half your income - it's a game of chicken that isn't worth playing.
MAP really only works when your resellers are fairly diverse and fairly even-sized. But if that were the case, we wouldn't have online behemoths undercutting everyone else in the first place.
In many European countries, the prices of books are fixed [1]. Sometimes it's arranged by law, sometimes by publishers. Toy publishers could try to achieve the same.
> I like to think I never do this, but if the price is much higher even I have a limit.
Really? You rationalize going to a brick and mortar international franchise simply because it is physical, instead of going to an online international franchise?
Thats the biggest stretch of "buy local" that I've ever been exposed to.
OP is talking about a small toy store, but regardless - an international franchise that has a location in your home town employs people from your home town, whereas Amazon (for the sake of argument in this case) does not. That's the core argument of 'buy local'.
Amazon may be local to my state but the small toy store is local to my _city_. The warehouse four hours away means less to me than someone who pays taxes in my city and lives two miles away.
I don't think the size of the warehouse matters - that's like caring how a big the kitchen is at a great restaurant. It's the experience of finding the thing you spend money on, and then getting whatever value it is you hoped for.
There is a physical constraint aspect to local businesses that create an inherent diversity. Being next to a huge store curated by one entity is much different.
Would you rather live next to a Wal-Mart or a thriving strip/block with a dozen or so various options? It depends on your needs and desires I suppose.
A slight price increase can be more than worth getting an item immediately instead of waiting for it to ship, while 1 to same day delivery would be generally much more expensive.
Perhaps the end game is that customers will pay $10/family to enter the bricks and mortar store) - not unreasonable, if it has entertainment value/ a cool vibe.
Then the $10 is rebated off anything they buy in-store.
I think the place brick and mortar seems to do well is where the store adds value over just selling merch. You go to Home Depot for expertise as much as for parts. You go to a local boardgame store for recommendations and events. You go to a toy store to get your hands on them and leverage staff expertise and curated inventory.
The only big problem with this approach is showrooming.
Toys r us or best buy carry bad products and are staffed by the lowest bidder. They offer no value over Amazon, so Amazon makes them worthless.
Expertise at a Home Depot can be problematic. Sometimes you get someone who really knows what they are talking about. Sometimes you get someone who doesn't, but is speaking with authority anyway.
A friend recently told me about a time he sent his wife in to Home Depot with a list of things to get, and she came home with a different set of things that an employee recommended. My friend went back there to raise a stink about being sold the wrong things, found out the employee was a out of work plumber, and that "sharkbite" is great stuff.
"That's funny" I told my friend, "Literally yesterday I was talking with my plumber and he pointed out that I had sharkbite running to my sprinkler system. I told him I didn't know what his opinion of it was, but I didn't love sharkbite, he said he didn't love it either."
Mostly I go to my local hardware store because it's 2 minutes away rather than 15. Lowes is another 5+ minutes further, but it seems to have a lot more choice in some things, and I've had a bad experience with a couple Home Depot employees that I just can't let go of.
Home Depot does seem to have a weird set of things they do stock and don't. Like all their thinset mortar didn't seem to be labeled as modified or unmodified last weekend...
Either way, the fact that you can even have that conversation with a person at the store is a huge difference from the kid who'll read you the card on the display if you ask him about a product at Best Buy.
And yeah, I used sharkbite to book my dishwasher up, but it's definitely on the list of "get that replaced next time a plumber is in the house".
FWIW, my friend is a plumber and he thinks Sharkbite is one of the best things that happened to plumbing. Of course he didn't use it for every job because the cost isn't always justified.
I suck at plumbing. For people like me who do the occasional repair around the house, Sharkbite is a godsend.
Ace Hardware is a cooperative, not a chain, or even a franchise system. As such they vary a lot, and it seems on average they are getting worse.
We used to have a really good Ace chain around here, with a proper hardware section and quality tools. They now only stock super common hardware, not the stuff I'd go to a specialty store for, and a lot of really garbage tools.
And they certainly don't have any experts anymore. you're lucky if somebody's working who knows how to run the key machine (which also no longer requires any skill)
I don't understand why it being a cooperative makes for wide variance in staff quality. Do US Americans not like working in co-ops? What is it about profit sharing that causes the variation, in UK cooperatives seem to be more liberal and offer better working conditions but their recruitment seems pretty much inline with other forms of corporation.
Can you offer any further insight?
Perhaps the demise of this particular store (chain) is orthogonal to their cooperative status but you're assuming a causality?
It's not a cooperative like REI or other much-loved stores are cooperatives. In the case of REI, the end customers are the members. In Ace's case, the store owners are the members.
So in the example of REI, it's a cooperative but there is still a central control and consistency between stores.
Between Ace chains, the only thing common is the word "Ace" and some fraction of Ace-branded products in the store. Some chains have tons of them, some have very little. The "Ace cooperative" exerts very little control over the stores. The cooperative is mostly about branding, not about products or quality.
> > You go to Home Depot for expertise as much as for parts
> Has not been my experience. Ace hardware is a little better, but not much.
Most Home Depot employees at my local store were very knowledgeable for a while, but the construction market is so crazy here (Colorado) that anyone with that knowledge can make at least double what Home Depot will offer.
That said, my local store still does have a few knowledgeable people, but they tend to work morning shifts. I've learned to drop in before work if I have any DIY-type questions.
My strategy is to look for the people working there around retirement age. A lot of times they have been tradesman or contractors, and are working part time for some extra money.
Toys R Us is a place to look at toys mainly though IMO. They're all boxed with wire and plastic holding them in place. Lots of expensive stuff in plastic with a "try me" button. Not really instant gratification like a traditional toy store (Hamleys, say) where you can play with lots of the toys before you choose.
Absolutely. My local bike shop[0] does this amazingly - holding rides, in-store events, very friendly and knowledgable mechanics, lots of in-house produced merch and encourages a culture of customizing and sharing bikes between customers. They do a lot of online work too, with an amazing series of instagram accounts.
Bike shops play by different rules. The industry and vendors collaborate to block big stores. You cant get a Colnago or pinarelo or any top end bike at Walmart or web Walmart (amazon) you have to go to a bike shop and said shop is expected to perform certain services as you buy that bike. They fit it, they assemble it properly, usually tune it after a few rides, etc. the wholesale price has a price cooked in for assembly and those services. There are industry groups that aggressively police it. The small shops are, in essence, representatives for the vendors. There are also agreements that strongly control what's on the floor, a Specialized shop very rarely has Cervelo, BMC, or Trek bikes too, some might but generally the vendors don't allow it.
It changes periodically, Giant, Specialized and Trek are big enough that they are doing their own stores and performance shops and not relying on small dealers as much. It's also different from many other things in that a misassembled bike can result in death. The industry as a whole supports bike shops though
Why would Walmart stock high-end bikes, fully knowing that their floor staff don't have the expertise to answer any questions about the products? Who would go to Walmart to buy a high-end bike?
Walmart shoppers look for commodity items, full stop. There is nothing wrong with that, by the way; toilet paper and cleaning supplies are used by everyone but are barely distinguishable.
But Toys R Us was not a value adding retailer but rather just another big box warehouse store that did as well at lowering costs on big selections as possible before Internet shopping started to dominate big sales on big selections.
Because it doesn't work that way? The banks that fund the "giant loan" in #1 put in covenants preventing any payments to the equity investor (who has to put in their own money) from paying out on the equity until all the debt has been paid off. This is not their first rodeo. The nature of the covenants varies a lot between industries, but the general rule is that the banks won't lend into the deal unless they are guaranteed to get their money back out first (maybe the CEO gets a salary, but it's all specified in the debt documents upfront). That's almost the definition of leveraged finance.
If you want to criticize the leveraged buyout model, a stronger critique is whether the equity investor is putting 10 bets down, where each has a 10% chance of a >10x return, which puts 9 companies at risk.
The covenants still typically allow the private equity investor to do a 'recap' (i.e., issues themselves a dividend) while still having the debt outstanding. This would come with restrictions, such as balance sheet ratios and interest coverage ratios.
What the PE player would want to do is do the leveraged buyout, cut expenses to boost EBITDA, reduce working capital demand (create cash) by lengthening payables, collecting extended debts, and cutting inventory or selling off excess assets, and then once interest coverage is up from the EBITDA boost, issue a recap as big as the covenants allow to get much of the original equity risk off the table.
Then they see if they can grow it, or sell it off, to get their multiple.
Sometimes it works, sometimes the company goes through bankruptcy (ch 11) instead. It's not whether it always works, it's whether it works on average. The results have higher variance due to the higher leverage but it doesn't make it wrong.
You’re not wrong, but neither is the parent. The way LBO works is you pick a juicy target with a lot of cash. Then you raise equity from others in your still-worthless company. Then you take out a loan for up to said company’s cash reserves plus the cash you’ve raised. Guaranteed win for sleazy VC and bank. Company is screwed, but their CEO probably got a nice bonus for negotiating the buyout plus a hefty separation package.
I'm a Star Wars collector and parent who shops at TRU. Beyond debt, the stores are mismanaged the same as most other old-school retailers that are having problems.
For the last Force Friday (the day all the stores get new Star Wars toys and people go out at midnight to purchase), there were numerous reports of TRU's opening at midnight with almost zero new inventory. How does that happen, it's a planned date set months in advance. My TRU also has $200 items that have sat on the shelves for over 2 years.
Same thing happened to iHeartMedia (formerly ClearChannel). Bain Capital took it private via the leveraged buyout and now the company is burdened with $18B debt and is likely to declare bankruptcy soon.
I just don't understand the people/institutions that give loans to such entities when a simple analysis would show how burdened by debt they are... are these investors really that stupid to loan money at unsustainable rates?
Stupid? The investors are loaning someone else's money. They probably isolate it legally so if the loan defaults they are not personally liable and it doesn't affect any other investments. The money isn't hard earned. It isn't someone's hard sweat-earned savings invested. It is debt. Debt generally just expands the money supply.
Is this true? I don't really connect the brand with value anymore. I think that legacy was firmly in the 1980s-1990s. There's some value there, but I doubt it is highly valuable.
I don't believe so. Toys R Us makes most of their money during the holiday season, and most of their stuff is overpriced crap. They're regularly 20-30% more expensive than Target, which in itself is already overpriced compared to BezosCorp.
> who took it private in 2005 via leverage buyout and ladened Toys r Us balance sheet with untenable debt from thereon
You are not taking into account the changing habits of kids as a result of both the iphone and ipads or equivalent. Kids don't view toys the same way that they did prior to 2007 onward and neither do parents. I grew up in a day and age where getting a chance to have a toy was a big deal (and only happened a few times per year at that). Today kids can play games and be entertained with a digital device. It's hard to even compare to whatever projections that were done with the leveraged buyout.
With three kids, my wife and I used to buy Lego at every opportunity. It was also an easy gift idea to give to grandparents.
My kids haven't played with Lego for years. They enjoy doing it Minecraft or one of a zillion other Steam games that offers the same build-it-yourself functionality as Lego.
Yeah, here in the UK Smyths Toys (a large out-of-town toy retailer that first entered the UK market a decade ago) seems to be doing doing a roaring trade these days and expanding rapidly, Toys R Us not so much. I believe Smyths are still owned by the original family that founded it too.
> Though this may have something to do with Amazon (and retail generally trending online)
Online shopping plus theres a growing trend to spend money on experiences instead of things. We've switched to buying our kids things like climbing lessons or horse camp instead of toys.
Yeah, so Bain made a bad decision when they bought Toys `R' Us and took on a lot of debt right at the moment when Amazon was about to enter the business. Now they lost their investment. Why do I get the sense that Bain is being cast as a villain in this story?
"Here’s how a private equity fund such as Bain Capital works: It picks a successful company and then takes it over with a leveraged buyout (LBO). The money borrowed from a bank to pay off the owner or stockholders does not become the debt of Bain Capital. It becomes the debt of the company that was taken over."https://sandiegofreepress.org/2012/07/how-mitt-romney-drove-...
Take the same building, reduce the space dedicated to toy sales, open up a series of indoor playgrounds and gymnasiums. Heck maybe carve out a daycare facility.
Maybe some sort of toy lab for kids to try before they buy.
Refocus the concept on being a real place for kids to grow and I think you'd see customers coming in the door again.
It sounds like from reading relevant articles it's not so much business model as staggering debt loads from being taken private that is hurting the company. They have no money to do anything with right now.
I used to go to Borders constantly, like a hangout. As Amazon grew, I found myself doing exactly this: going to check out the latest releases, flip through the pages, pull out my phone and check Amazon prices. 99% of the time it was cheaper there. Add the book to a wishlist or my cart, put the book back on the shelf and leave empty-handed.
I felt horrible when Borders went under, but I do the same at B&N. If brick-n-mortar want to compete with Amazon, they need to compete with their prices. However, they also have a lot of additional overhead that makes it untenable.
This trend of resellers is going to occur until Amazon dominates the market, or we start buying direct from vendors which doesn't seem likely for many items.
This is why many bookshops teamed up with coffee shops. Even Blackwell's in Oxford has Caffé Nero upstairs. Several indie bookshops do it too.
Nowadays I just go to the Oxfam bookshop near me. It's cheaper than Amazon marketplace (£2.80 shipping). I'm working through the old Hugo/Nebula winners and pretty much every week there's a new classic sci-fi I haven't read. That and cookery, you can pick up lovely books that would cost upwards of £20 for £2.50.
I'm also very wary of buying on Amazon, because it's been flooded with cheap crap from Aliexpress. The exception are a few brands like Anker which are reliably OK.
This is not true any more btw. Amazon has lost a number of advantages after they started increasing the number of warehouses and placing them close to consumers. The only advantage they retain is that because their distribution is a warehouse instead of store, they can stock and restock any time they want - and not have to pay the additional labor cost of restocking during after-store hours, and also to keep the place functional but not necessarily presentable. Don't forget that shipping costs are not neglible and Amazon also provides free returns ...etc.
Stores can try a new model where they charge a little extra for customers who want it right away and then aggressively price match online for those who don't mind receiving the item in a day or two. That way, they can keep their labour cost low, and operate like a showroom. However, they need to really aggressively market their touch and feel factor at the same cost as online.
Where it's impossible to compete on price, bookshops (and other segments of retail) need to compete on features, for example a number of retailers have seen a huge growth of people collecting online orders in retail stores [1].
I've picked up an Apple store order within a few minutes of ordering it online (obviously it depends on stock). Considering how much Prime Now costs, there's evidently money to be had for offering rapid gratification.
Unfortunately a number try to have it both ways with high prices, uninterested staff (not helped by low wages) and terrible service. Little wonder Amazon's eating their lunch.
> If brick-n-mortar want to compete with Amazon, they need to compete with their prices. However, they also have a lot of additional overhead that makes it untenable.
Seems like a contradictory statement.
The economic message you're sending is that you gain no value from being able to see a book in person. The market will respond in kind.
I go to B&N with gift cards a lot. Even with cash, I'm already in the store, and most of what I buy costs less than an average lunch. Amazon might cost less, but not enough less to matter if I happened to pop into the bookstore while walking around the mall.
As an analogy, I visited a weird Ikea experiment like this in Toronto at a popup in an old retail store building. But half the store was some (not very fun) carnival games and some products on display. The products were available to purchase but the variety was (severely) limited and somehow felt like an afterthought. A portion of the retail center was a place to buy the food that is popular at the suburban retail outlets, but a little out-of-place in a downtown area with plenty of alternatives.
I feel like this was a failed approach to this idea.
That said, the try-before-you-buy combined for a primarily eCommerce company with a playground for kids approach makes a lot of sense to me. But I'm doubtful it transfers well to other submarkets. Unless they are living (but welcoming) examples of say a fashion lookbook or home furniture example displays by interior designers, similar to what Ikea has in half their maze-like suburban stores.
It really is unfortunate that stores I grew up with as a kid, ones like KB Toys, Montgomery Wards, Service Merchandise, Blockbuster, Kmart/Sears, and now even Toys"R"Us have gone by the wayside for one reason or another.
It both depresses me and blows my mind that future generations may not even be able to experience Brick and Mortar.
There's something to be said for getting rid of excessive waste and unnecessarily large warehouses of "cheap junk", but it's also worth remembering that toys play a very important part in teaching children fundamental skills like hand-eye coordination, simple problem solving, fostering imagination, etc.
It's a game of "what-ifs", but I'm fairly confident in saying I wouldn't be pursuing the career I am now if I had never had the experiences of walking down the Lego aisle at the toy store and falling in love with piecing together toy cities.
Same - except for me it was also Capsela (now called IQ Key), a bunch of cheap plastic crap that let you engineer modular machines.
I think the medium that kids play with 'toys' has changed with tablet and phone devices. Now they're solving puzzle apps and building Minecraft cities - whether or not that's a good or bad thing, I'm not sure, but it doesn't bode well for toy stores.
I think so too, but I wonder about the long term effect that doing everything in the virtual world will have on abilities in the physical world. It's extremely anecdotal, but my little brother, who almost exclusively plays Minecraft, seems to have a fantastic imagination but very poor fine motor skills. He has trouble doing anything physical that requires not using a keyboard and mouse.
I feel like there's a point far into the future where they might consider the current technology age as a turning point in our evolution as biological beings. Consider a future 1000 years from now, after we've spent a thousand years interacting with the virtual world. Imagine a world where the virtual is indistinguishable from the physical - where the virtual IS physical, and the physical IS virtual.
Virtual worlds that are infinitely customizable, creating scenarios for your mind that are infinitely more compelling than what you can experience in the purely physical realm. Reset your life to any point in time. Fast forward. Rewind. Play through every conceivable event. Travel to any destination you can imagine. Meet anyone or any creature. BE any creature. Live an existence that can be shaped by your very whim; reality could be whatever you wanted it to be, changes made as quickly as thoughts come and go. For all intents and purposes, you are the architect of your own reality. God.
Computer chips implanted into the body to regulate vital functions. Nanobot technology to repair or modify biological cells. Countless methods to sustain and prolong your biological life.
Eventually the biological dies, but the virtual simulation is not interrupted. Instead, your consciousness is uploaded to the world's mainframe server, where your mind is allowed to continue on it's journey of self-discovery within the virtual world. You and your loved ones can continue to interact virtually, forever. Where you can continue to explore, to learn, and to experience life long after your death.
Being "alive" forever, virtual or otherwise, sounds creepy and revolting. You are welcome to it, I think [1]; I and many others enjoy the inherent richness that comes with the ephemerality and unpredictability of biological life.
[1] my concern is how this line of thinking and "living" might continue on a path of mindlessly destroying everything that isn't it.
Capsela! THANK YOU! I've been googling "little plastic bubbles with gears in them" occasionally for years without finding these.
Between this, K'nex and the original Macintosh my life as a programmer was more a destiny and less a choice :P
Edit: Holy shit, when I google "little plastic bubbles with gears in them", Capsela comes up. Maybe google has gotten better at vague searches in the last decade :P
You're a bit too cynical even though the subject is interesting. Childhood is full of crap that is magical to the eyes of kids. I wished I and others had clearer, cleaner and more serious things to grow and learn; but in a way I'm not sure it's neither both possible nor worth it.
And similarly the notion of "place" is melting in this era. No more music shop, useless, you can buy a Trillion things on whatever. Same for toys now. But I think humans have a thing for local space. Culture in a way. Every shop used to be customed in weird ways. Some people would waste their time there and find things randomly. They would discuss with owner tastes. Going to a toy store was a treat in itself, even when you couldn't get one.
Right now they're going away, but like vynil some will reopen when people miss them too much.
Local will re-emerge with tighter communities. Suburbs are unsustainable wastes and we'll have to adapt by reforming walkable cities. Kids will have tons to explore at that point, like they used to.
AR/VR will enable more spatially interactive technologies as well. Pokemon Go was a fad but I think it heralds a yet-to-come wave.
>Local will re-emerge with tighter communities. Suburbs are unsustainable wastes and we'll have to adapt by reforming walkable cities. Kids will have tons to explore at that point, like they used to.
The suburb hate bandwagon on here has gotten way out of hand. They are not inherently unsustainable and it is not a "waste" to spend a bit more resources to make a space that's nicer to live in. Not everybody wants to have to walk everywhere/take public transit and live like a sardine in a can getting accosted for spare change all day. And are you saying you'd really let a kid "explore" in a city? You're not even particularly safe in a "walkable city" as a lone adult if you go down the wrong street or you're not paying attention.
A lot of people simply dislike density beyond the density found in small towns and suburbs and are willing to pay a bit of a premium for that living condition. The author even "admits that the ideas of the Garden City and the Decentrists made sense on their own terms: a suburban town appealing to privacy-oriented, automobile-loving personalities should tout its green space and low-density housing. [Their] anti-orthodox frustration stems from the fact that their anti-urban biases somehow became an inextricable part of the mainstream academic and political consensus on how to design cities themselves[.]"
I noticed that the author mentions that a busier city street is safer from violent crime but doesn't acknowledge that very busy streets are also havens for pickpockets, whereas you generally get it both ways on mostly-vacant-except-cars streets in lower density areas with little to no violent crime.
I figure we do more damage by limiting their exposure to other people and places filled with sites that they cannot truly experience just by ordering stuff over the internet. we are raising future generations in an environment where it becomes deadly easy to isolate one self from the world.
that environment also gives you the ability to teach your children. from making choices, to behaving in public, to seeing other children do both, to being out of the house in a noisy environment that is strange, exciting, maybe even a little scary, all the while with a parent to help them understand.
plus where does it end, how much do we write off due to our prejudices?
You don't need cheap plastic crap though, wooden toys and well made plastic toys can last generations.
Some baby/toddler toys look very much like Skinner boxes to me, intended primarily to keep the child occupied so the parent/carer doesn't have to bother with interacting.
The web is great when you know exactly what you want to buy. Brick and mortar is great when you’re still deciding.
Web is very very far from solving the browsing problem. Sometimes I know I want <new toy> but have no idea what exactly I want. So you go to the store to look around.
Sometimes I also like to ask the sales associate, “I have so and so nephew, what should I get for them?”. Web still sucks at solving the librarian/curator/advicegiver problem.
That's part of why I've got several shelves of DVDs. Browsing is enjoyable, and I was able to pick up a lot of movies cheaply when Blockbuster was going out of business.
Those "fluorescent-lit warehouse full of cheap crap that will be thrown away in a couple of months after it's bought" still exist, they're Amazon warehouses now, though.
Good riddance. Turn them into multi-use developments and let local stores start to repopulate the area. Like a forest after clearcutting for agriculture.
Edit: at least in already-built-up areas. Tough to say what to do in remote places where you have the "no jobs -> no money -> no spending -> bad place to start a business -> no hiring -> no jobs" feedback loop.
Unfortunately they failed to anticipate the future during the 1990s, which is especially egregious in the case of Sears which started out as a mail-order only business.
As a kid I never bought my toys... My parents sometimes bought them while we were shopping in the toy department of a store like Fred Meyer or Walmart, occasionally other random places like gas stations or movie rental stores, but the general department store is where we'd go when I needed a toy-gift for a friend/relative (unless it was something more specific like some packs of pokemon cards where then I'd go to the card store). Usually I'd only get toys wrapped up on holidays like Birthday/Christmas/Easter and it didn't matter where they came from.
I never needed to go to one of these stores to know what I wanted, they just happened to be the most convenient place to get them. I now shop at Lego.com for Lego's for me and my children and Amazon for most other things. Avoiding toy stores and advertisement heavy entertainment has given me and my spouse great control over the toys that we introduce to our children and household.
In my day, the Sears X-mas catalog was awesome for that. It was like Amazon in paper form, and I'll always remember the Star Wars or GI Joe figurine scenes nostalgicly.
The CEO of Toys 'R' Us as of 2015 is Dave Brandon. He was the former CEO of Dominoes Pizza. After he left Dominoes in 2009 is when they started the "We used to suck, we don't anymore, please come try us again!" advertising campaign.
After Dominoes, Dave Brandon was the athletic director at the University of Michigan. During his time as AD, he managed to alienate the majority of the fan base, hire a coach who got worse over the course of four years and who ended with a losing record and who gave up the title of "winningest program" to Notre Dame, violate FOIA law, repeatedly mishandle PR situations (including the time where it appeared that a QB with a concussion got put back in the game), and run up the athletic department debt. He got fired on Halloween 2014, after slightly over four years as AD.
I just sat through a meeting with a bunch of high-level execs at a huge corporation. The amount of shrugging and barely educated guessing that goes into million dollar decisions is pretty absurd. The main qualification seems to be the willingness to make decisions in the face of uncertainty.
I have no experience at that sort of level, so can't speak to your experience, but being able to make decisions in the face of uncertainty is black magic to me. I think there is definitely value in being able to do it.
"Those who are clever and industrious I appoint to the General Staff. Use can under certain circumstances be made of those who are stupid and lazy. The man who is clever and lazy qualifies for the highest leadership posts. He has the requisite nerves and the mental clarity for difficult decisions. But whoever is stupid and industrious must be got rid of, for he is too dangerous.”
This is the reason why people with an engineering background, basic math skills and a spreadsheet can do a lot more with A/B testing than a guy who has an expensive MBA degree can?
Nope. Most of the really important decisions can't be quantified in that way. Any most senior executive do have basic math and spreadsheet skills. Plus they have analysts on staff who can help with the more complex math.
Sorry, but I have seen billion dollar worth front page releases made on A/B testing results. The tests and analysis long over several months, and the data is looked at from various dimensions to see what's good.
If there is a manager that has an excuse to not look at data or play the usual 'I know better' game, its generally an indication that person is hiding a bigger incapability behind these 'appeal to authority' word games.
I'll also note that in the time since Dave left Dominoes, their stock has outperformed Amazon, Google, Microsoft and Apple, with slightly under 12x returns in the last 10 years.
Since Dave left Michigan, the interim AD hired Jim Harbaugh, and the football program is now regularly in top 10 in the nation.
Brandon did very well at Dominos; Bain Capital, Dominos' owners, certainly thought so, because they later hired him to run Toys R Us.
> Since Dave left Michigan, the interim AD hired Jim Harbaugh, and the football program is now regularly in top 10 in the nation.
Harbaugh's record through 2 seasons + 3 games = 23-6
Brady Hoke, the coach Brandon hired, through the same period = 22-7. Hoke also beat Ohio State during that period and Harbaugh hasn't. At Michigan, beating Ohio State is almost more important than the rest of the season combined; ESPN called it the top rivalry in all of sports at one point.
But more important to the University of Michigan than winning a children's game played with a ball, at least before Harbaugh and that interim AD, was the student-athletes' welfare and their development in the classroom and in the community. By those measures Hoke and Brandon far outperformed anyone. I know sports fans don't think about those things, but remember that it is an educational institution and the athletes are students (and if they aren't, they should be paid like highly talented employees).
I very much enjoy watching football, and might have seen over 100 Michigan football games. But it's a game; the welfare and education of the students playing it are real life.
I agree that sporting prowess is fleeting & a good education will set someone up for life, but I think infantilising football is rude and uncalled for.
Brandon is still CEO, might want to wait until after he leaves. Also wait until it is clear they aren't going to declare bankruptcy because that usually wipes out share holders.
It's high time people realize something about these positions. Being at the top of a gigantic mature hierarchy in a complex world is more a function of legacy than utility. John D Rockefeller or Thomas Edison were the single BRAIN that shaped and directed where their orgs went. Today's leaders in govt or in the private sector or more like a single neuron most of whose time is engaged in constant power struggles for survival. Nobody with any real sense wants to be sitting in these chairs other than the mindlessly ambitious. CEO's are propped up. Cause we are still hardwired to believe in kings, popes and heroes taming complexity we can not handle.
With data flowing in like never before on the utility of these roles it will get increasingly and unavoidably clear in the next few years on the over importance we attach to "leadership". We are not on the Serengeti plains anymore.
Leadership is a thing. It really matters. An effective leader can be a force multiplier for everyone in the organization that reports to them, directly or indirectly. An ineffective leader can literally bankrupt an organization.
I would replace Kalanick with Bill Gates in this idea.
Kalanick is a dickhead who lasted a few years before getting busted for it.
Both Jobs and Gates really built shit for a very long time.
You might not care, but the Microsoft empire was real once upon a time. Gates was fucking good at his job for his entire career. Jobs had some ups and downs in terms of results. Putting Kalanick in the same category as either of them is really really weird.
All leaders are very quickly out of their depth these days given the scale, speed and complexity of today's markets and rates at which things change. What they can actually do, to be effective has reduced. Lot of them end up being lightning rods when things go bad. They know this and rightly get compensated highly for it.
I don't know that this is true at all. Yes, complexity has shifted, yes today's market is different.
This does not really change the fact that a focused, driven leader can impart a strong sense of company focus and vision that becomes a really powerful driving force. I've seen it, it's definitely still a thing and I don't see a great leader being less important anytime soon.
Are there non-cynical explanations of how someone with such a terrible track record gets hired? Maybe a dearth of alternative CEOs? Or is the reality as bad as it appears?
Who's on the board that hired him? Did they have a pre-existing personal relationship from a frat or something? Getting to the bottom of this would probably inform a good stock shorting strategy.
There is something to be said about transitional CEOs who keep the lights on while the company figures out a long term strategy. Most actually terribly run companies don't just bounce back the minute they get rid of a bad CEO.
Dave Brandon had an exceptional track record and the business community thought so, maybe still does for all I know. He was just disliked by a popular (in the University of Michigan community) sports blogger. See my post below.
I'm amazed and saddened to find this written here. What you read in the parent is the content of a social media slander campaign from years ago led by a blogger named Brian Cook (who runs a blog popular with University of Michigan sports fans called MGoBlog), apparently because Brandon fired Cook's favorite coach. Sorry this is so long, but I can't watch a good person's reputation be slandered.
Dave Brandon was a class act and very talented leader and executive. Note that despite the sports blogger's considered opinion (as paraphrased in the parent), Brandon's reputation in the business community is exceptional. Per Bloomberg: Brandon had run Domino’s for 11 years and gained a reputation as a turnaround artist. He helped shepherd the pizza chain, then owned by Bain Capital Partners, through the largest initial public offering in restaurant history in 2004. He got the Domino's job because Bain - no lightweights themselves - thought highly enough of Brandon's CEO performance at Valassis Communications to hire him to run their foundering investment in Dominos. Then Toys R Us hired him. How many people get hired to three significant CEO jobs? Why didn't someone ask the sports blogger? I'm no Fortune 500 CEO, but I know more about business than Cook and I was very impressed by what I saw of Brandon from the outside - a natural, thoughtful, intelligent, highly skilled, high-integrity manager and executive, the kind of manager you seek out to work for.
Brandon left the CEO job at Domino's, a company with billions in revenue, global operations, and >100,000 employees, and where he was quite successful, to rescue from trouble the $100 million, < 100 employee athletic department of his alma mater - all operations in Ann Arbor, MI, except for road games. How many people would do that? He could have gone to another company (and he did after U. of Michigan). I hope he doesn't regret it.
...
Brandon's performance:
Before him, the athletic department was in the red, the football team was losing (both very unusual situations at U. of Michigan, an elite blue-chip program - like Google search becoming mediocre and unprofitable), and far worse from the perspective of then-Michigan supporters, corruption was brewing. Big-time college sports is a magnet for corruption, with billions of dollars tossed around ostensibly amateur sports, unpaid athletes, and mostly non-profit institutions. U. of Michigan's great tradition and culture, at the time, was that it's an educational institution first; it priorities were its student-athletes and its values ahead of money - integrity first and it wins: The football program is roughly tied for the most successful in college football history (with some parochial school in Indiana). Many say these things; Michigan really did them.
Brandon returned to restore all that. He fired Cook's favorite coach, Rich Rodriguez, who was the only Michigan football coach since 1900 with an overall losing record, including arguably the team's worst season ever; he also was responsible for Michigan football being penalized for its only NCAA violations (i.e., college sports ethics violations) in its history, and was involved in odoriferous situations off the field. Firing was not a hard call, especially for a job among the most sought-after in football. Brandon put the athletic department back on track; he emphatically put the student-athletes first - and before the football fans, as he should have, but earning the enmity of many fans who could care less about the education and welfare of the unpaid students on the field - and he restored the department's integrity and profitability (which soared). He also hired a football coach with exceptional integrity and talent for mentoring college students (see Brady Hoke, below).
Brian Cook, the blogger, is easiest described as like Rush Limbaugh; he likes to inflame his followers, who can be sycophantic, with media campaigns based on sensational lies and half-truths, and in my experience has few limits. For example, early on Cook disliked what a ~13 year old was posting in the MGoBlog forums, so Cook doxxed him, including his home phone number, and Cook's classy followers went after the child (I still regret not calling the state Attorney General's office). He lies brazenly: I once read a newspaper article saying a famous basketball coach 1) called the Athletic Director (the one prior to Brandon, who Cook also attacked) about the Michigan job and left a voicemail; 2) the coach spoke to his wife, who was adamant that she didn't want to move to a new town (coaches' families move constantly); and 3) the coach decided against the job. Cook quoted the article but conveniently deleted part 2 - in a block quote, no less - and accused the Athletic Director of losing the coach because he was out of touch. It was as brazen as it sounds. Cook and his followers also attacked, maligned, and sometimes chased out of town multiple coaches and other people. I'll add that Cook as no experience in sports AFAIK, either playing or coaching, or in business or in anything but blogging about sports at his former college.
...
Regarding another person's reputation: Brady Hoke, the football coach Brandon hired, was (is) one of the great class acts in the sport. He put the (unpaid) student-athletes first, as students and people, and football second, and Hoke openly said it - an amazing thing to find in college. High school kids - and their parents - who decided against going to Michigan would talk about what a class act he was and nothing like the snake oil salesmen that populate the sport. The students he brought to Michigan - Hoke was among the best recruiters in the nation - were in tears when he was fired, and for years after that - when he was long gone and they had a new coach - you could read them (and their parents) regularly talking about what a "great man" (that phrase is used repeatedly) he was and how much he helped changed their lives. His peers raved about him, and the top coaches in the country wanted to work for him (e.g., the defensive coordinator of the Baltimore Ravens, at the time arguably the top such job in the NFL, left Baltimore to work for Hoke, then starting his first major college job). Unfortunately, Hoke wasn't a great offensive coach and the team was around .500 by the time he left. He was also maligned and attacked by Cook because, AFAICT, Hoke was Brandon's guy and replaced Cook's favorite.
Sometimes, the Rush Limbaughs of the world succeed, the good people lose out, and the slander, sadly, follows them even to Hacker News.
I've wondered that. Perhaps the ~13 year old felt intimidated or ashamed (completely unfairly, but they are 13 facing the wrath of a mob of adults) and hid it from their parents? Maybe the parents were absentee, didn't care, didn't know what to do, or lacked resources? IIRC, the kid lived in another state, complicating things. Or maybe there was a lawsuit and quiet settlement, and I just don't know about it.
Also, IIRC, the ~13 year old's forum posts were fine, they just disagreed with Cook and his mob, apparently a crime in Cook's mind. Not that any forum post would ever justify doxxing someone.
Cook also ran a campaign against two journalists at one of the major Detroit newspapers who broke the story of the football team's (and Cook's beloved Coach Rodriguez's) NCAA violations. At least one, and I think both, of the journalists left town for greener pastures. For years afterward, and probably to this day, Cook's supporters vilified the reporters for the team's violations. That will teach them for practicing journalism.
It disappeared before that, under Rich Rodriguez. Rodriguez lead Michigan to maybe the worst season in its history (2008), his recruiting was awful (I forget the number, but his predecessor and successor were among the best in the nation, as Michigan always is), and he is the only Michigan head coach since 1900 with an under-.500 record overall. He never beat either of Michigan's rivals, Michigan State and Ohio State, and earned Michigan it's only NCAA sanctions ever.
Brandon fired Rodriguez - an easy call but one which earned the enmity of a sports blogger who loved the coach and maligned Brandon (which is what the post above is really about; see my response below) - and hired Brady Hoke. In Hoke's first year, they went 11-2, beat Ohio State, won a bowl game, and the team's defense went from ~110th in the nation to the top 20. Hoke did slowly decline after that, and was fired after an under-.500 season; his weakness was offense, which he just couldn't raise to an elite level.
I remember being young and looking forward to every year near Christmas my mom and Grandma would take me to Toys 'R' Us and pick out my present.
Feels weird to hear they're going bankrupt. Understandable, though. Huge stores with random assortments of product (non-essential product, unlike toilet paper et al.) aren't cost effective or convenient in comparison to something like Amazon.
Of all the things in the world, children's toys are THE most amenable to replacement by makers, tinkerers, and other people who want to do something in the real world.
(Alas, that's not what's happened. People just buy the cheap plastic crap from Amazon.)
Pretty sure most makers and tinkerers don't have the liability insurance or budget for safety testing or the mental shielding to handle when their products cause the death of a 18-month-old.
Step one of designing a toy: work out how many children who get it could be killed by it.
Step two: make that number as close to zero as you can.
Step three: arrange for enough money to cover the gap.
Amazon sells a slightly different but much wider range of "cheap plastic crap" thanks to FBA. There's no shortage of budding sellers with an Alibaba account who think they have the next best thing (read: re-labeled, generic Chinese crap) and flood the market with crazy cheap products making it difficult for bricks and mortar retailers to compete.
A store like Toys 'R' Us may have a slight advantage when it comes to licensed merchandise, but I think even most of the big sellers long ago accepted that it's impossible to ignore the Amazon juggernaut and now also sell on the platform.
Bain (and their horrible ilk) put up a tiny amount of capital to secure huge loans. They used those loans to buy the company, taking it private. Once it is private they can do whatever they like with it; they pay themselves back for the loans by loading the company up with debt (and then some to ensure an immediate profit). They cut everything to the bone, fire as many people as possible, then spin the husk back out as a public company (or offload it to some other sucker).
Bain effectively risked nothing to make a killing and ensure Toys-R-Us would eventually file for bankruptcy due to an unsustainable debt load. Banks are happy to loan Bain money for these schemes because Bain makes a killing on them and private equity almost always finds a sucker dumb enough to buy the zombie company off them. (Every once in a while the zombie goes south so fast private equity is left holding the bag).
For loans to the zombie company the terms are punishing enough the bank only needs the zombie to survive for a limited amount of time.
The part I don't understand yet is who is the dumb money buying shares in these hollowed-out debt-laden husks from the private capital vultures? It almost always ends up badly. Even when it doesn't the upside isn't great.
FWIW Guitar Center is almost certainly headed for the same end and for the same reason.
>The part I don't understand yet is who is the dumb money buying shares in these hollowed-out debt-laden husks from the private capital vultures? It almost always ends up badly.
Is this based on reliable statistics or on highly visible anecdotes? Perhaps the "dumb money" isn't as dumb as you think.
Whoever took it private needed money to buy out the shareholders. They borrow that money using the business itself as collateral. They buy the stock and the company is now private, with all that debt on the books.
It's possible there was fraud, if the investors were given false statements. But most likely, they made an educated bet and lost.
The people who issued the debt (made loans to the company to buy back its outstanding shares) are sophisticated investors who saw the balance sheets of the company and thought they were likely to get paid back. If things had worked out, they'd have made an above-market interest rate. They also knew what would happen if things didn't work out (the present situation is a typical downside for LBO capital). They didn't lose all their money -- they made 7.375% interest for 15 years. If they get 50% of the capital back through bankruptcy, that's a total return of 160%. Not the worst investment over the last 15 years, though obviously Apple would have been better.
I'll give you one thing: the assets of the company are pledged to the senior bond holders, but then after the bonds are sold the PE company generally disposes of the assets, leaving nothing backing the senior debt.
The junior debt, of course, has nothing pledged to back it at all. Junior debt in leveraged buyouts is pure gambling.
To make the private equity people rich. They stiff the suppliers, employees and other creditors.
This is a variant of the 80s era stuff in the movie Wall St. When WalMart was expanding regional players like Ames, Jamesway, etc would do this. You could tell when it was happening because the stores would be stuffed to the brim with stuff before the bankruptcy.
1. Their revenue is quite stable but decreasing
2. Their EBIT is positive and increasing
3. Their operating cashflow is negative but increasing
4. So they seem to be running out of cash...
5. They cannot lend more with such bad terms eg. 12% interests.
"Ratings agencies have rushed to cut their credit ratings on Toys “R” Us to reflect the sinking market sentiment...[S&P] had the retailer rated B- just two weeks ago, and Moody’s Investors Service still has a B3 rating and stable outlook for the name."
Ratings agencies once again showing how efficient they are at actually rating debt. B3 and stable outlook for a company that has actually field for bankruptcy, you gotta be kidding me.
I'm not surprised. They sell pure garbage. Every single time I go there to get a toy for my kid, I can't pick anything. I end up spending an hour walking around choosing the best of the worst and keep repeating to to myself something like: "Where does this shitty store get the money to pay the rent?"
I moved to U.S. just a few years ago, but I know what you mean. The bar to kids' happiness is very low, which is, unfortunately, not the same with adults, including myself.
The kids are thinking "did that look cool" and are swayed by the box and presentation (eg big box to hide the small size of the toy, etc.).
Adults are wise to the tricks and look for a toy that's not just good to play with "right now" but also will last to be played with again, and will still entertain when the box is open and the novelty has faded.
What are toys these days? VTech LED craziness or Lego-on-steroids? No kid (even Babies it seem) are interested in old fashion wooden/metal toys whereas toddlers+ are only interested in digital/musical/mechanical stuff that feels all 'plasticy' and 'gimmicky'.
Let's face it - kids these days are taught to follow the latest 'fads' when it comes to toys and to feel everything they own is super disposable -- similar to their parents.
No wonder Toys R Us can't meet the budgetary requirements of a modern parent whose kids are so fussy when it comes to toys that as soon as the kid is 7/8 years old, the focus is shifted to electronic gadgets and the modern sport 'app'rchery.
I have come to the conclusion that it is very hard for a specialty businesses to survive in the era of Walmart and Amazon - which does not bode well long term for places like Barnes & Noble and Gamestop. I hope I am wrong.
For large scale specialty businesses that do not have a unique competitive advantage due to their specificity? Sure! And they should go.
These stores are all middlemen and if it's their sole function, they should expect to compete on efficiency.
However, there are tons of smaller stores that I still frequent due to atmosphere, niche goods, or a niche appeal. For example, friendly local game stores that have excellent customer service or local grocery stores that actually source their products using local connections. One provides an atmosphere that keeps it busy every time that I've been and the other provides goods that I can't find anywhere else, unless I'm getting a substitute good.
Brick and mortar stores that lack either should expect to go under, and hopefully be replaced by higher quality stores.
At least for Gamestop, you're probably not wrong. Amazon Prime gets you new video games at 20% off MSRP. That's cheaper than what the distributor sells them for.
Go into your local Gamestop for a copy of Destiny 2 and see how hard they try to push you into buying a pre-owned (used) copy for $55 over the new copy for $60.
Their trade-in value for Destiny 2 is $24 (in store credit) and their pre-owned purchase price is $55. No wonder the sales staff force the pre-owned games over new.
Gamestop gave the middle finger to game producers when they realized how selling used games was way more profitable than new. When they file for chapter 11 in the near future they will claim downloadable games and competition from Amazon killed their business rather than their greed causing their suppliers to find alternative sales channels.
i'm on a slow connection so i can't find the links/news but i don't think that's true anymore. they certainly have restricted it. before it was including collectors editions. then it was only on preorders. not sure about it now but it's definitely not all just 20% discounted anymore.
It's crazy to me that nearly all brick and mortar stores that sell video games took out their biggest draw, in store game demos. It was a huge draw as a kid, I'd want to be in the store even if I didn't expect to get anything, but I always knew what I wanted next since I had played the demo.
Do they not exist anymore because most kids are satisfied watching others play on the internet?
Demos for the most part have fallen by the wayside and when they do exist they often come out months after the official launch. The one platform I see consistent demos on however is Nintendo DS.
Yeah, and Amazon often offers better prices with instant gift cards and several days grace period to ship your games to them on their dime. GameStop is only a good deal a few times a year during specific sales.
> With speculation of a bankruptcy mounting, shares of Toys “R” Us’s vendors tumbled on Monday. Mattel Inc., the maker of Barbie and Fisher-Price, fell 6.2 percent -- its worst decline in seven weeks. Shares of Hasbro, the company behind Monopoly, Nerf and Transformers, dropped 1.7 percent.
Does Toys R Us owe money to Mattel? Or are people thinking that if they go away or significantly reorganize people will just buy fewer toys of these types? On the surface a 6% drop for Mattel seems huge based on this news. If a grocery chain goes into bankruptcy, you're not going to see Coca Cola stock drop..
If Toys R Us is responsible for about 10% of all toy sales by revenue that wouldn't be terribly meaningful, but yeah, if they sell proportionally more Mattel toys, whereas other retailers might sell comparable toys from other brands more, that could certainly account for it. Thanks.
Too bad. Toys r Us has a great selection and good pricing. I found that they almost always beat Amazon on toys and eliminated the risk of counterfeit stuff, especially for things like Lego.
Aw man, I've just rediscovered this place with our 9 month old son. Was looking forward to going there as he grew up. Hopefully they can work out some sort of restructuring..
Toys 'R' Us might have been a great store when we (I) were kids, but I went there a few months back--what a wasteland. Barbie, GI Joe, and movie tie-in action figures as far as the I can see. Good riddance. People can buy crappy Angry Birds dolls on Amazon just as well as Toys 'R' Us.
I hope this opens up opportunities for superior brick & mortar toy stores.
When was it anything but Barbie, GI Joe and movie tie-in action figures? That is mostly what it was in the 70s and 80s when I was a kid. 1/2 the movie action figures are probably Star Wars just like when I was a kid.
Damn. I was just in one like two weeks ago looking for a laser tag system. The prominent NERF gun display right by the entrance was glorious. NERF has progressed significantly and has also developed a new kind of spherical ammo in case you were wondering. I'll have to buy a few while they're on clearance.
I personally feel that, similar to bookstores which as seen a resurgence in neighborhood mom & pop stores, while Amazon will continue to dominate, a lot of smaller toy retailers (both online and offline) will spring up to take Toys r Us' space.