The Rise, Fall & RETURN of Toys R Us in 2024 — Documentary

[00:00:00] Speaker 1: You probably hold an iconic memory of walking into Toys R Us as a child. The stores were magical, your eyes lighting up at the sight of your first bike or that must-have action figure. It was a piece of our childhood. Imagine the shock when, after 70 years, nearly all its doors closed in 2017. A world without toy stores felt a little less joyful. But fret not, they're making a comeback. [00:00:51] Speaker 2: What made you think to start a business catering to babies? Everybody I met in service said they were going to go home and get married and have children. And I decided that along with the entree from my uncle, who had influenced me greatly, was enough for me to go into the baby furniture business. [00:01:15] Speaker 1: All stories, just like the children's fairy tales and movies, and a visit to Toys R Us brought to life for kids around the world, have to have a beginning, and this one is no different. The story of Charles Lazarus was a young entrepreneur. He was a young entrepreneur named Charles Lazarus took over his father's furniture store in Washington, D.C. One day, he noticed something interesting. A nickel ride for children he offered in the store was a huge hit. This small amusement park-style ride cost just a nickel, a common practice for such rides at the time. Seeing the pure joy in the world, the world was a huge hit. This small amusement park-style ride cost just a nickel, a common practice for such rides at the time. Seeing the pure joy it brought to kids sparked an idea in Lazarus' mind. Lazarus realized that, unlike most things you buy, toys have a short shelf life. Kids break them, outgrow them, and constantly crave something new. This means parents were constantly coming back for more. He basically realized that kids are like tiny toy destroying tornadoes. Leaving a trail of broken plastic and empty wallets in their wake. But that meant a potential goldmine for a store that catered solely to that need. That was the birth of Toys R Us, and even Lazarus, confident in his idea, wouldn't ever have imagined the success it would become. Before Toys R Us, toy stores were often small, independent retailers, and you might have to shop around for the toy you needed. And that's where Lazarus' genius took shape. Lazarus started small, dedicating only a small section of his furniture store, to selling toys in 1948. It was called Children's Bargain Town. This initial foray into the toy world proved successful. And by 1957, Lazarus was ready to take a big leap and a big risk. [00:03:18] Speaker 2: I did anticipate, to some extent, I had no idea where it would go to. I thought there would be a baby boom. I had no idea of the size of what the toy business could be. [00:03:31] Speaker 1: In that year, he opened the first store, dedicated solely to toys, christening it Toys R Us, with its now iconic Backwards R logo. The Backwards R was actually a design choice Lazarus made himself wanting the logo to stand out. It even came with its own joyful mascot. Jeffrey the Giraffe, the beloved mascot of Toys R Us, has a storied history dating back to the 1950s, when he first graced the pages of print adverts for the store, when it was still known as Children's Bargain Town, and was called Dr. G. Raff. Over the years, Jeffrey underwent several transformations, evolving into the lovable character still fondly remembered and loved today. Renamed simply as Jeffrey, he was shown as a family man, often appearing with his wife and two children. Originally hand-drawn and animated, Jeffrey briefly transitioned into live action in 2001, with the honor of providing his voice falling to Jim Hanks, brother of renowned actor Tom Hanks. In a further makeover in 2007, Jeffrey's iconic spots were replaced by stars, returning him to his beloved 2D form. Through his various iterations, Jeffrey remains an enduring symbol of joy and wonder for generations of children and families. The end result of all this was a revolution. Lazarus' vision was simple, yet completely fresh and exciting. Creating a supermarket for toys. A place with a mind-blowing selection, where kids could roam aisles overflowing with everything imaginable. It wasn't just about having a lot of toys in stock, it was about making a whole new shopping experience. In 1957, the first big box Toys R Us opened its doors. Forget cramped aisles, this was a toy wonderland. Wide spaces showcased a mind-blowing selection of everything imaginable. From dolls and action figures, to board games and bicycles. It was like a supermarket, but just for toys. A wonderland where kids could roam freely. Their imaginations ignited by endless possibilities. But this wasn't just about fun. It was about strategy. The big box format allowed Toys R Us to buy toys in bulk, which meant aggressive pricing. They could undercut competitors, offering parents better deals on the toys their kids craved. With a huge inventory, Toys R Us almost guaranteed you'd find what you were looking for. No more multi-store treks. Toys R Us became a one-stop shop for all things playtime. In 1966, Charles Lazarus sold control of Toys R Us to Interstate Department Stores Inc. for expansion capital, remaining CEO. With newfound resources, the company aggressively expanded nationwide, becoming the largest toy retailer in the U.S. by 1978. Through tactics like loss-leader pricing, Toys R Us dominated the market, achieving a quarter of all U.S. toy sales by the mid-1980s, and expanding to over 1,300 stores worldwide by 1990. Their strategy made them a go-to destination for parents seeking the latest toys for their children. But the brilliance of their marketing and sales approach didn't stop there. Remember the excitement of meeting your favorite athlete or celebrity at a toy store? Toys R Us understood the power these real-life heroes had with children. They didn't just think about selling toys, they wanted to create entire experiences, such as partnering with big names like NBA legend Magic Johnson. But just how did these star appearances boost sales at a toy store? Well, for a young basketball fan, or even an adult one, Seeing Magic Johnson was signing autographs or promoting a new line of sports toys at Toys R Us meant people were visiting stores even if they didn't need anything. It turned a trip to Toys R Us into an unforgettable event and would encourage impulse purchases while in the store. The celebrity appearances generated excitement, driven customers and strengthened the emotional connection kids and their parents had with Toys R Us. It became more than just a toy store, it was a place where dreams came true. And that translated to happy parents and overflowing shopping carts. Due to these innovations, by the mid-1980s, Toys R Us had grown into a retail giant and had captured a significant portion of the U.S. toy market. Estimates suggest their market share grew from 14% in 1980 to a whopping 25% by 1989. That came with impressive sales figures, with the Wall Street Journal recording annual sales reaching a staggering $4 billion in just one year. That's right, billions with a B. Back in the 80s, numbers that big weren't anywhere near as common as they are today. However, Toys R Us wasn't content with dominating just in the U.S. They had firmly set their sights on global domination. International stores began popping up in Canada, Europe, and even Asia. They even partnered with established companies like McDonald's in Japan to open toy stores in that country. And by working with a Western brand that already had a foothold in Japan, it showed real business smarts, minimizing risk in a market they didn't yet understand. By the end of the 1980s, Toys R Us had become a huge cultural phenomenon. It became synonymous with childhood, a place woven into the fabric of growing up for kids across the globe. It's hard to forget the anticipation of walking through those giant doors, the sensory overload of colors, sounds, and endless aisles of possibilities. That iconic jingle "I don't want to grow up, I'm a Toys R Us kid" wasn't just a catchy hook line. It managed to capture the essence of childhood, what all kids feel. That Peter Pan idea of never growing up, because childhood is so great. It didn't sell toys, it sold a feeling, the joy of discovery, the thrill of finding that perfect gift. The excitement of a birthday or Christmas wish about to come true for some lucky child. And the huge amount of joy that brings. [00:10:32] Speaker 3: I don't want to grow up, don't want to grow up. I don't want to grow up, don't want to grow up. I don't want to grow up, I'm a Toys R Us kid. [00:10:42] Speaker 1: Let's face it, Toys R Us was a wonderland for kids. And a potential minefield for parents' bank accounts. But that's all part of the magic. It was a destination for families, a place to create lasting memories. Somewhere to spend a few hours on a rainy afternoon. And somewhere children begged their parents to take them. Just think back to those childhood trips to Toys R Us. The first time you saw your dream bike gleaming under the lights. The excitement of picking out a new board game for family night. The sheer joy of a stuffed animal that was about to become your constant companion. Those moments, fueled by Toys R Us, became cherished parts of childhood. Toys R Us was, for many, a core memory of being a kid. But as they say, what goes up must come down. A host of challenges eventually led this giant of the toy world into decline and ruin. But there's also its surprising comeback story that's unfolding even today. But we'll get back to that later. [00:11:51] Speaker 4: Here you go. Thanks. The biggest toy store chain in the world. [00:11:57] Speaker 5: I'm a Toys R Us kid. [00:11:58] Speaker 4: Now facing a very grown up problem. Filing for bankruptcy and 5 billion dollars in long term debt. As foot traffic slows down and it's nearly 900 US stores. [00:12:09] Speaker 1: Unfortunately, the magic wouldn't last forever. By the late 1990s, new challengers began to emerge on the toy scene. And the fortunes of this retail giant began to decline. The 1980s and early 1990s, Toys R Us still held a dominant position in the toy market. Boasting a sprawling network of stores across the country and around the world. However, the market was starting to shift. Large generalist retailers like Walmart and Target saw the money making potential of toy sales. Quickly started to expand their own toy selections. And large toy aisles were soon popping up in these stores. With advanced supply chain management, these mega retailers had the ability to undercut Toys R Us on pricing. Something Toys R Us had built its success on when it rose to the top of the global toy retail industry. This became a huge challenge to its market dominance. Willing to take a small profit loss on the hottest toys to offer lower prices, Walmart and Target gained more and more of the toy market. At the same time, something new and innovative was happening with the growth of the internet. Online shopping was a completely new threat to Toys R Us, which had a traditional brick and mortar model and wasn't quick enough to change. Other toy stores like KB Toys beat Toys R Us to the punch. They began offering a more focused and personalized shopping experience compared to the vast warehouse-like layouts of Toys R Us stores. This was way more successful in opposition to online stores than the huge stores owned by Toys R Us. As a result of these factors, by the late 1990s, Toys R Us began losing ground. Its share of overall toy sales dwindled from a leading 25% in 1990 to just 18% by 1997. Profits were squeezed as operating margins dropped from over 12% to just 8% over the same period. Faced with a declining market share and dwindling profits, Toys R Us management recognized the need for intervention. The company required a substantial investment of capital so it could modernize its stores and start to improve its e-commerce capabilities to compete with its rivals. Toys R Us filed for Chapter 11 bankruptcy protection in 1998. This legal process allowed the company to restructure its debt while continuing with normal business operations. This was a lifeline during a period of transition. And without it, Toys R Us might have closed its doors right there and then. The company found a way to go on, but it wasn't out of trouble entirely. In the early 2000s, Walmart and Target increased their focus on the toy market, giving even more space to the high-profit toys and games within their huge super stores. Toys R Us was busy grappling with the burden of maintaining hundreds of large stores, each one needing a large level of staffing and expensive operational costs. The generalist stores had much lower overhead expenses and could completely kill Toys R Us on pricing. This intense competition completely destroyed Toys R Us bottom line. Profits fell off a cliff between 2000 and 2004. Even though it tried to adapt to the evolving retail landscape, the company struggled to stay relevant. By the mid-2000s, it became clear that Toys R Us needed a complete overhaul of its business strategy to survive in a market that was becoming more and more cutthroat. Seeing the company's vulnerable position, private equity firms Bain Capital and KKR entered into a $6.6 billion buyout of Toys R Us in 2005. This gave the business the time and flexibility to make the needed changes in its operation, but it also saddled Toys R Us with an enormous amount of debt. The annual interest payments alone were more than $400 million. This heavy financial burden made it impossible to invest, and investment was the only thing that would save the company from the worst fate. Even though the business tried to change and adapt in what was a completely different age to the one it dominated, Toys R Us struggled to recapture the magic that had once made it a much-loved destination for families. Shoppers grew increasingly frustrated with the poor level of selection and the shopping experience on offer, especially when they could hit a few keys online and have the exact toy they wanted at their front door a day later. Even though it was on the ropes, Toys R Us was still the largest dedicated toy retailer in the U.S. and still had over 800 stores, with annual sales exceeding $11 billion. Sales, however, is only part of the story. Profitability was still poor and the company only experienced one profitable year between 2006 and 2013, showing that this was still a giant on its knees. In early 2017, Toys R Us announced plans to close down 180 U.S. stores to try and stabilize the company. Unfortunately, this was too little, too late. The decades of falling market share, competitive pressure, and the massive debt burden had all taken their toll. And it was all downhill from this point onwards. The nearly 70-year-old Toys R Us is looking to potentially file for bankruptcy due to its massive debt. Holiday sales came in far below expectations in 2017. In September, Toys R Us filed for bankruptcy. After an extremely disappointing 2017 holiday season, the company realized there was no way out of this hole, and it was pointless delaying the inevitable. In March 2018, Toys R Us announced it would close or sell all of its over 700 remaining U.S. stores. Efforts to find a buyer for the whole business, or to restructure its debt, had failed. Soon, the iconic Toys R Us name vanished from the American retail landscape. [00:18:29] Speaker 5: Here you go. Thanks. The biggest toy store chain in the world. I'm a Toys R Us kid. [00:18:37] Speaker 4: Now facing a very grown-up problem, filing for bankruptcy and $5 billion in long-term debt. [00:18:44] Speaker 6: To make matters worse. Sad news from one of the happiest places on Earth. Charles Lazarus, the founder of Toys R Us, has died. There have been many sad moments for Toys R Us in recent weeks. Toys R Us said in a statement to InsideEdition.com. The company's founder, Charles Lazarus, died just [00:19:04] Speaker 1: weeks later. Just like that. The magical place, like a fairy tale kingdom, that was an escape from the gray. A world of color for kids across America was no more. Charles Lazarus, gone with it. The magic kingdom he built crumbling in his final days. That isn't, however, where our story ends. Time is [00:19:24] Speaker 7: running out. We're in the last days of Toys R Us history going out of business liquidation. Now take our biggest savings ever. 50 to 70% off store-wide. 50 to 70% off. 50 to 70% off. 500 million dollars [00:19:37] Speaker 5: of the best brand names. 70% off? Wow, this is crazy. It all has to go now. The sales are great. [00:19:44] Speaker 7: You gotta fill up a cart. Before these 50 to 70% off savings and all Toys R Us and Babies R Us are gone [00:19:51] Speaker 1: forever. Get in here. Like all good fairy tales, the hero doesn't stay down forever. And Toys R Us is no different. It might not be the same paradise of childhood memories it once was, but Toys R Us did [00:20:03] Speaker 8: come back from the dead. Well, a group of investors planning a comeback for Toys R Us. They've canceled a bankruptcy auction that was set to sell off intellectual property assets, including the famous giraffe mascot. The investors say they're going to work with potential partners to develop new ideas for stores in the United States and other countries. Some good news ahead of your holiday [00:20:25] Speaker 1: there. Just like those kids' stories, sometimes you need a fairy godmother to pick you up when you've been knocked down. For Toys R Us, that came in the shape of WHP Global, who bought out the True Kids Incorporated Holding Company in 2021 and began exploring ways the iconic brand could be reborn. But it wasn't as simple as just reopening stores. The 2018 bankruptcy threw out a harsh reality. The traditional big box model wasn't cutting it anymore. The rise of e-commerce giants like Amazon completely destroyed that market. WHP Global saw this changing retail landscape and grasped the importance of experience in today's market. Their solution? A complete revamp. Gone were the sprawling aisles. Instead, smaller interactive stores opened, prioritizing creating a playful atmosphere. Interactive displays, demo areas, and staff dedicated to engaging with children took over from regular sales techniques. This teaches an important lesson in modern retail. Experiences can be just as important, if not more so, than simply having a wide variety of products on shelves. In today's world, where kids are bombarded with digital entertainment, creating a fun and engaging in-store experience is key to capturing their attention and fostering a love for physical play. The funniest thing is, that's exactly what drew kids in when Toys R Us was at its peak in the 1980s. The experience. Unfortunately, the company lost its way. The WHP seems to have put it back on the right track. That's not the only old school Toys R Us marketing trick they've used either. Mr. Beast opened a burger joint next to a store in 2023, and Toys R Us made sure to use his visit to create a huge buzz. "Yourself, Jeffery. Mr. Beast really liked your gift. You are sure to be fast friends. Speaking of friends, you have quite a few yourself." "Jeffery! Jeffery! Jeffery!" Fast forward to 2024, and WHP Global is building on the long-lasting power of the Toys R Us brand. While the standalone stores closed back in 2021 due to mixed levels of success, the company isn't shying away from the retail landscape altogether. Instead, they've recognized Macy's established customer base and prime retail locations and built a strategic partnership. These shop-in-shop formats offer a curated selection of Toys R Us favorites, allowing the brand to keep its identity while benefiting from Macy's foot traffic. This strategy reflects a growing trend in retail, synergistic partnerships. By collaborating with complementary brands, companies can expand their reach, optimize resources, and ultimately create a more compelling shopping experience for consumers. A new flagship store opened in the Mall of America at the start of 2024, showing WHP are looking to bring back standalone stores, where the placement and [00:23:37] Speaker 4: opportunity is right. This isn't a one-off strategy. The retail landscape is rife with [00:23:51] Speaker 1: examples of successful partnerships. Target, for instance, has teamed up with Disney to offer exclusive merchandise and themed shopping experiences, creating a win-win situation for both brands. Similarly, Ulta Beauty collaborates with NYX Professional Makeup, providing customers with a wider range of beauty products under one roof. The Toys R Us and Macy's partnership is just another example of how collaboration can be a powerful tool for growth and innovation in the ever evolving retail landscape. Revenue in 2023 was a respectable $21 million. It's a long way away from taking back its throne at the top of the toy market, but this is reassuring and the iconic and magical brand is slowly making a recovery, meaning it may still inspire those memories for some future generations, but perhaps in a different way. The Toys R Us story is a roller coaster that ranges from making magical memories to the nightmare of the nightmare of going under. The fall and resurrection of this brand can teach lessons relevant to businesses of all sizes. The most important lesson lies in innovation. Customer preferences and markets are changing all the time. Businesses that fail to adapt risk becoming relics of the past. Toys R Us didn't change with the times and paid the ultimate price. But the transformation from big box stores to interactive experiences as the company was brought back from the dead shows how innovation can bring the right results. Experience reigns supreme in today's retail landscape. Modern consumers, especially the younger generations, crave experiences alongside products, creating a memorable and engaging experience as Toys R Us did with their interactive stores can be a powerful differentiator. The story of Toys R Us is far from over. Their continued adaptation and evolution highlight the importance of evolving management practices. Modern leadership demands a commitment to continuous learning, embracing data-driven insights and fostering a culture of innovation within the organization. So, if you can remember Toys R Us at its peak, how much of their hard-earned cash do you think you got your parents to part with in those colorful nostalgic stores? Let's have a competition in the comments below. And if you enjoyed reminiscing about your childhood, hit that like button as if it's a bop-it. And remember to subscribe to our channel so you don't miss even more stories about huge brands that remind you of your childhood. Remember, if you don't want to grow up, you must be a Toys R Us kid.