Case Study Draft

Subject: Toys R Us

How did the company even start from?

 1948, Charles Lazarus had a hunch that a lot of his friends were about to start having lots
of babies, before the term ‘baby boomer’ came to light. – Pioneering idea.
 Instead of stopping at one store, Lazarus had this idea where his store’s going to be ‘a
massive store filled with every toy in existence’, hence it created a supermarket-style
approach to toy selling.
 It was a very new concept at that time! +1 points for being innovative. “What Lazarus
really captured was this sense of American abundance after the war
and after all those years of depression,” says Richard Gottlieb, founder
of Global Toy Experts and an authority on the toy business.
 The timing’s perfect, people just got back from war, Japan’s rebuilding its economy at
the time and produced inexpensive toys that Lazarus bought cheaply in bulk. It helped
Lazarus on buying and selling lots of toys that he was able to negotiate contracts to buy
toys for cheaper than his competitors. – first ‘Category Killer’.
 Parents are stumped in some ways, since their kids are captivated by Toys R Us’ sheer
promise of discovery offered by its humongous inventories. And department stores,
which had once relied heavily on seasonal toy sales, soon realized that Toys ‘R’ Us had
created a year-round demand they weren’t able to serve as effectively.
 TVs happen to be reachable by more households, Toys R Us benefited from advertising
by toy manufacturers. The mascot Geoffrey and family plus its catchy jingle also worked.
So, the conclusion from all that things?
 It worked! The company—which went public in 1978—helped turn a $500 million toy
industry in 1950 into one worth $12 billion in 1990. At the height of its power, Toys ‘R’
Us sold 18,000 different toys in 1,450 locations around the globe and controlled 25
percent of the world’s toy market. During the store’s heyday, it seemed like everyone was
a “Toys ‘R’ Us kid.
Yea great! But did it fail in one-go? No.
 Oversaturation was never a problem for Toys R Us, even the only clapback was when it
cut back its supply.
 In 1994, Lazarus stepped down as the company’s CEO.
 Toys ‘R’ Us faced other challenges over the years, like the rise of e-commerce, changing
toy tastes, a transfer to private hands in 2005, and a leveraged buyout that failed
spectacularly. The stores themselves became increasingly dated.
  In the end, Toys R Us became the casualty of the big-box model it helped create. – lost to
big-box stores that were even bigger than itself. Worried about competition from
Wal-Mart and Amazon, executives began to winnow the number of toys
the store carried and focus even more on slashing prices.
 But as Toys ‘R’ Us dialed back its offerings, it cut back on the magic, too. When Toys
‘R’ Us changed its focus from the toys themselves to undercutting the competition, “You
didn’t get the elation anymore,” says Gottlieb. “They failed because they ceased
to love toys.”

So, here’s the detailed reasons why Toys R Us failed, from the company’s acts on trying to save
itself from bankruptcy.
1. The company’s debts were too much to bear.
There’s like 5 billion dollars debt when it was approaching bankruptcy
2. Terrible timing.
The company filed for bankruptcy in September, before the holiday shopping season, and
that was a very big distraction to the operational activities for both the company and the
customers.
Filing for bankruptcy after the holidays would’ve been more ideal, but the company was
more or less forced after the rumors of struggle made suppliers to temporarily tighten up
product terms for fear of suffering huge losses.
3. Competitors turned up the heat.
Amazon, Walmart and Target all racked up toy discounts during holiday, said Toys R Us in a
court filling. That apparently sent the death blow that Toys R Us needed in order to get
complete bankruptcy.
Amazon, Walmart and Target priced toys "at low-margins or as loss-leaders" during the
holiday shopping season and offered aggressive online shipping options, Toys R Us said in a
court filing.

The retailer simply "could not compete" with those prices because it relies "exclusively on
toys for profit."

"The holiday season was disastrous" for Toys R Us, Debtwire analyst Joshua Friedman
said. "It sort of killed any hope for a reorganized, whole Toys R Us."

4. Vendors got skittish.

Although details were unclear, Toys R Us said it faced unexpected "delays and disruptions"
in product supplies during its bankruptcy.

As the company teetered, vendors apparently worried that the company would not make good
on payments it had promised.

For creditors that realize their investment is doomed, "it’s better to take your lumps today
rather than kick the can down the road with the hope that things get better in a few years,"
Bernstein said.

5. This time was different.

With the bankruptcy filing occurring in September, the holiday shopping season was always
likely to be absolutely critical for Toys R Us.

And it was. But the 2017 holiday shopping season was different than any other.

Between Thanksgiving and Christmas, Toys R Us said it typically would fare "well against
the competition because of significant inventory offerings" and "a strategy of selling late at
high margins after competitors sell out of 'hot' inventory and attracting last-minute shoppers
who fear that online deliveries will not be made in time."

Not this time.

"This year, however, was different," Toys R Us said. "As a result of a general decline in toy
sales, competitors had full product offerings through the end of the holiday season and same-
day and two-day delivery guarantees eased customer fears regarding online shopping."

Jadi, piye?

Gatau deng, belom ngerti.

Hhe.
Ga lah, masa uda ngetik sekalian baca tetep gangerti.
Im sorry gapake kalimat yg baku but kalo terlalu baku gue gatau bias ngejelasinnya sesuai dg
yg gue pengen kasih tau ato ngga.
 It depended on toy sales revenue to stay afloat
o Ya kan kalo zaman sekarang mah banyaknya perusahaan diversifikasi ke bidang
yang diluar dari bidang utamanya kan, nah TRU ini ngga, dia terlalu bergantung
ke revenue penjualan di poin utamanya aja.
o Terlebih lagi dia cuma jual besarbesaran di time range tertentu, yaitu cuma di
shopping holiday which is tengat waktu dari Thanksgiving sampe Natal. If we see
this from the investor’s POV, jujur aja gue gamau invest di perusahaan yg hidup
matinya tergantung di satu tengat waktu, apalagi perusahaannya gaada bidang
selain mainan kayak Walmart, Target, Amazon, etc.
 DEBT!
o Inimah gausa ditanya, utang 5 miliar Dollar pas mau menuju bankruptcy di tahun
2017. Gila. Mau reorganize tapi perusahaannya susah nyari investor bc of the
point before plus rasio utang sama revenuenya jauh beda (gaada revenue sih
katanya malah pas selain shopping holiday, $50-$100 million every month after
the said shopping holiday bby can you imagine), ga memungkinkan buat bayar
utang.
o In case you wanna know, TRU accumulated billions in debt after failing to pay
back a 2005 investment from Vornado Realty Trust.
 It took too long to adapt to e-commerce and co.
o Walaupun ga gue taro di sini, tapi di link yg ada di notes ada yg ngasi tau TRU
pengen implementasi augmented reality etc, but they joined the band wagon a bit
too late, bc kompetitornya udah take root on e-commerce world dari zaman
baheula, like Amazon. This actually saying smth abt retailers that they might not
make it if they don’t do e-commerce right away, just like TRU and Matahari
(imsorrybutthatsthetruth).

 Honestly, bad luck (lmao).
o Ih tapi forreal loh, it experienced a train of bad luck. Starting from September
dimana mereka filing buat bankruptcy protection, it raised quite a big distraction
for everyone, terus vendornya jadi nervous and eventually add an even stricter
term bc ya siapa si yg mau keilangan duit, and last but not least investornya
mundur deh when the company needs muns the most bc "it’s better to take your
lumps today rather than kick the can down the road with the hope that things get
better in a few years." Kasian ga si.
o Tbh, ini bisa punya ending yg lebih baik (which is saved from bankrupcy) by
filing the bankruptcy protection right after shopping holiday, tapi TRU was more
or less forced after the rumors of struggle made suppliers to temporarily tighten
up product terms for fear of suffering huge losses. Tl;dr TRU bisa aja selamat tapi
tangannya keburu keiket gituloh.