Amazon Has Considered Buying Some Toys ‘R’ Us Stores

https://www.bloomberg.com/news/articles/2018-03-19/amazon-is-said-to-have-mulled-acquiring-some-toys-r-us-stores

by TwoFactor • 8 years ago

97 107 8 years ago

bloomberg.com

DanCarvajal• 8 years ago

I mean there has to be an non-dilapidated Toy 'R' Us location somewhere right?

ribosometronome• 8 years ago

I imagine they're more interested in the location and store size than how recent the tile has been replaced.

mc322• 8 years ago

These are. I've been to one. Not a bad store at all. Resurrecting a highly nostalgic brand may be a viable option, if Amazon has some trick up their sleeves. The one thing they can't fix is low birth rates though, so it would have to transform the stores a bit.

__abc• 8 years ago

Whole Foods me.

As a parent, put a craft beer/craft coffee in my hand (mark that up too, I'll pay) and give my kids and myself an experience, more than just a static display.

Blicks, a store for art supplies has done this with wine nights, painting lessons (with wine), etc.

Ignoring all the damn alcohol, it's brands that will compete by creating an experience that may stand a chance (IMO)

vinceguidry• 8 years ago

Toys'R'Us was the victim of a leveraged buyout in 2005. The business hasn't been doing all that poorly, just not well enough to pay off all the debt. So capex is taking a backseat to debt servicing. It's a slow-motion train wreck.

The same thing just happened to Clear Channel. The bankruptcies aren't likely to kill off the business, but hand ownership over to the debt holders.

tclancy• 8 years ago

The one in Portsmouth, NH is perfectly nice inside and not dated-looking.

praneshp• 8 years ago

There are, I live near one in Sunnyvale, CA, and it's awesome. It's got more hot wheels cars than I ever want to play around with.

joezydeco• 8 years ago

The Canadian stores were very well kept and actually performed so well that MGA Entertainment (Bratz dolls, etc) was trying to get a group of other toymakers together to try and keep those stores open.

jgh• 8 years ago

On the topic of toy stores / toy store innovation, that American Girl doll store is insane. My wife and I went there to buy a doll for our friend's daughter for Christmas and holy hell is that place busy / kinda weird. It's like a Bloomingdale's or something for dolls. Kids can even sign up for "doll spas" and bring their dolls in to have their hair and nails done and stuff. Obviously I don't really get it because I'm not an 8 year old girl, nor do I have any kids but that place must be making a ton of money.

CodeCube3• 8 years ago

This is part of the reason that IMO a lot of retail is failing ... customers don't want or need a static display of inventory; they can easily get that from their already-installed Amazon app. Retail needs to evolve to be an event destination ... a place that gives the consumer a _reason_ to get out of the house and go there. A place where they can experience something other than just simple consumption.

Obviously, not every single storefront needs to be that (grocery stores come to mind) ... but for the average mall, no one wants to actually go there and walk around any more. The mall needs to be a place that entices people to go there and simply exist ... do stuff, hang out with people, even if they spend no money at all.

jpindar• 8 years ago

Radio Shack should have tried to evolve into maker spaces rather than cell phone stores.

jonknee• 8 years ago

FWIW American Girl is owned by Mattel and Mattel is not doing well at all, in large part because American Girl is dying.

https://www.marketwatch.com/story/mattel-shares-plunge-as-no...

empath75• 8 years ago

Additional stores would give Amazon space to showcase its popular Echo line of devices, which run on the Alexa voice-activated platform.

I'm pretty sure they're not going to buy a big box retailer to jam a bunch of echos into it.

kevindqc• 8 years ago

Would be fun to say something over intercom, then hear hundreds of echos answer back.

6ak74rfy• 8 years ago

The article is full of speculations like these. It's as if they didn't have enough content but needed to hit certain number of words.

libria• 8 years ago

They already have one in Seattle with a large section dedicated to Echos and Kindles, so it's not without precedent for them.

Now why an ecommerce giant is retrogressing to brick and mortar I can't imagine.

CodeCube3• 8 years ago

It's just an additional sales channel ... if they can have a place where a) people can go to physically preview inventory, and b) can go to immediately obtain merchandise when they can't wait for it.

Additionally, it can help to simplify logistics ... if there are more locations where they person can go pick up their package rather than having to deliver it, surely that can be a boon to their operations.

slouch• 8 years ago

So they can same-day-deliver to my house in [not a big city].

excalibur• 8 years ago

Obviously they would sell other things too.

But the Echos would likely be front and center. The toys for enriching young children would be replaced by toys for enriching young AI. It's like a private hell designed specifically for a toy store.

wongarsu• 8 years ago

The Echo has amazing potential for toys. There's already a large selection of "speaking" toys for boys and girls of all ages, from dolls to board games. All would profit from an Alexa-like technology level. But unless you want your children to order a few pounds of ice cream from Amazon Fresh, you would have to remove the Amazon store part from the kid's Echo (or have much better voice recognition).

It would be beneficial for Amazon in the long run (making people more at ease with voice assistants), but I doubt that this would be the reason for Amazon to buy ToysRUs

vinhboy• 8 years ago

I think Amazon should do it.

I personally believe Toys R Us just missed an opportunity to run a proper business. They have a ton of retail space, but every time I've been there, it's run like Walmart. Shit everywhere, no one to help you find anything, etc...

There's nothing suburban parents like me want more than an indoor play space for my kid (for extremely hot or cold days). If they properly utilized their store and made it more like a play space, I would bring my kid there every weekend.

Right now I am paying money to go to those "kids museum". Why didn't Toys R Us think to capitalize on that market?

Also, if they had people to playfully demo the toys to my kid, I am pretty sure we would buy way more toys instead of just leaving frustrated because we can't find what we wanted.

tonyedgecombe• 8 years ago

Shit everywhere, no one to help you find anything, etc...

It would fit right in with Amazons style of business then.

jimmy1• 8 years ago

Amazon has a search engine, recommendations, and 24/7 customer support to help you find what ever you need.

filoleg2• 8 years ago

After visiting retail Amazon bookstores on more than one occasion, I have to strongly disagree with your vision of possible Amazon retail ventures.

nolok• 8 years ago

But that's the whole point, if both are the same on that aspect, and amazon has a larger catalog size, and I already have evening/next day delivery from amazon anyway, why would I bother going the to the toy store ?

The whole point he was making is, once amazon existed, they failed to compete with it. You're a physical store, you have the possibility to interact with people, offer them things they can't have over the internet, use it. If you don't, you're wasting a lot of money on prime rent.

MadBohr4• 8 years ago

It's important to note that a lot of the failure of Toys R Us has to do with private equity buyout rather than a poor business model. Of course, their business model was flawed, but remember that Toys R Us was bought in 2005, and the toy market was MUCH simpler back then. Amazon was hardly the player it is now. The private equity firm then loaded them up with crippling debt. Move forward a few years, and enter Amazon et al, and market situations shifted drastically. Toys R Us, loaded with debt from the private equity buyout, could not invest in their own infrastructure and improvements. Even if they had the perfect business model to capitalize on, they would have no cash to execute, and regardless, they would be forced to bankruptcy. In this case, they had so much debt that they couldn't escape chapter 11 and had to resort to chapter 7. And so it goes.

ceejayoz• 8 years ago

Cite for the above: https://www.bloomberg.com/news/articles/2018-03-16/who-kille...

Buy company. Take out massive debts on company's books. Withdraw hundreds of millions in "fees". Let company collapse. Rinse, repeat.

rubicon33• 8 years ago

Can you or someone else explain to me why a firm would buy a company, and then "load them with debt"?

Was the debt intended to help them grow?

gedy• 8 years ago

Issue is, a company does that and then parents still search and buy the toy for cheaper on Amazon from their phone.

I have family members who run a small retail store with excellent inventory and service, and they barely scrape by due to people show rooming. They are not in toys, but they simply cannot compete on price, as Amazon, etc sells it cheaper than they can buy from the suppliers.

xapata2• 8 years ago

If Amazon sells it cheaper, they could act somewhat as an Amazon affiliate. Or at least buy from Amazon instead of their more expensive suppliers.

MadBohr4• 8 years ago

People will generally pay a premium for better service, but in the case of retail, it's usually hard to beat the service of "instant purchase with free two day delivery to my doorstep". I for one, very rarely buy something w/o checking if it's cheaper on Amazon (or some other online retailer) first. It's gotta be a tough market that's for sure.

jerrysievert• 8 years ago

it's been a couple of years since I went into a toys r us, but the reason why I stopped going wasn't the very messy store, nor the lack of inventory, but the prices being about 20% above MSRP, especially when I can go to a specialty store a couple of blocks away and pay MSRP for a lot more inventory.

I think that the idea of a "destination store" has been dying a slow death, and making them a lot more unattractive is accelerating this.

as for toys, I found myself paying a little over MSRP (not 20%) at my local walking-distance boutique store, but mostly because it was in my neighborhood.

aswanson• 8 years ago

Youre right. There's something unclean and bad about the aesthetics...its like stuck in the 1980s. They need someone that can redesign and modernize it. Whoever did that work for Target would probably know what precisely to do.

kirykl2• 8 years ago

That Target guy is Ron Johnson, the same one who built Apple retail and tried to help JC Penney

portofcall• 8 years ago

I think it’s the grid layout, the modular, beige metal racks, and linoleum, and the fluorescent lights. Plus their color scheme where there is color seems to be from the Ronald McDonald school of design. Finally, tired and miserable people at supermarket-like checkout lanes doesn’t help.

mox1• 8 years ago

Their current business model is (was?) to price everything in the store 5-20% higher than elsewhere, but then offer coupons, sales, etc. to offset that.

When our daughter was born we price compared them for a lot of big ticket items, but ultimately just bought online or at Target / Walmart.

A few times a year they have a good deal on something (again with coupons) so we purchase, but walking into the store blind shopping is basically just paying a 15% corporate convenience fee.

If they were price competitive with others, I would have stopped in there a lot more, but oh well.

filoleg2• 8 years ago

Their abhorrent aka non-existent return policies too. I am not a serial returner, but the inability to do so doesn't help in their favor when I am making a decision on where to buy.

lph3• 8 years ago

They will price match with other stores. I was in there last weekend to spend a gift card and knocked about 20% off the prices by price matching Amazon.

daxorid• 8 years ago

Maybe their operations were suboptimal, I don't know - but the PRIMARY reason they went under is because Bain Capital conducted an LBO, sucked a ton of value out from coupon payments, pushed its own debt obligations back onto Toys R Us, then left it to die.

jobu• 8 years ago

I personally believe Toys R Us just missed an opportunity to run a proper business.

Toys R Us has been struggling to pay off $6 billion in debt from the Bain Capital takeover in 2005. They didn't have the capital or the margins to invest in maintaining their stores, let alone competing with Amazon.

Buying a company with debt and then forcing that company to pay off that debt is fairly common, but for some reason it surprises me that it's actually legal. Why isn't Bain forced to pay off the debts when the company goes under?

https://www.forbes.com/sites/walterloeb/2018/03/19/bain-capi...

lbotos• 8 years ago

Isn't that the nature of a business in America? It acts as a "corporate veil" and as long as you aren't using business funds inappropriately, the business is the "last stop".

stupandaus• 8 years ago

To answer your question, the debt holders take precedence over the equity holders like Bain Capital, and generally being an equity holder and having your equity stake wiped to $0 is not a good outcome for a private equity firm. Bain does have to pay off debts - that is what the liquidation of assets is being done for - to pay off debts to the debt holders. Bain doesn't get to keep those assets.

hkmurakami• 8 years ago

Well the natural extension of what you ask, is a world like Japan where banks ask small and medium business owners for personal guarantees over business loans, bankrupting many SMB owners and entrepreneurs.

ikeboy3• 8 years ago

It's not mom and pop lenders that put up 6 billion. It's grownups that have a contract with a specific set of things/entities they can collect from. Don't waste tears over them.

TorKlingberg• 8 years ago

How does running a play space with lots of staff fit into Amazon's business model?

jasonjayr• 8 years ago

How may physical stores complain that shoppers go in, examine the objects on the shelf, and then compare to Amazon via their phone to just finish the purchase there?

If Amazon ran the store, they could just buy it right there @ Amazon prices, and within the Amazon ecosystem That would kill the other stores.

s73v3r_7• 8 years ago

Toys R Us had a proper business. If they didn't get saddled by debt thanks to private equity, they'd still be around.

The private equity practice of saddling the company you're buying with the debt you used to buy it should be banned. There is absolutely nothing worthwhile that comes from it.

drdeadringer• 8 years ago

There's nothing suburban parents like me want more than an indoor play space for my kid (for extremely hot or cold days)

Funny enough, a new cafe opened up a few blocks from where I live with this in mind. About half of the customer space is a play area for smallish children, and the other half is "normal" with tables and chairs... My point being that it doesn't need to be limited to toy stores or kiddie museums, even if this particular cafe boards up shop.

0x4f3759df• 8 years ago

Reminds me of the story of Disneyland:

"The concept for Disneyland began when Walt Disney was visiting Griffith Park in Los Angeles with his daughters Diane and Sharon. While watching them ride the merry-go-round, he came up with the idea of a place where adults and their children could go and have fun together, though his dream lay dormant for many years"

It seems like in this experience economy when we all have enough basic material goods, there should be a market for something like what your describing.

mikeleeorg• 8 years ago

Amazon seems only interested in buying the real estate, not the Toys R Us brand or business. Here's a quote from the article:

"The online giant isn’t interested in maintaining the Toys “R” Us brand, but has considered using the soon-to-be-vacant spaces for its own purposes, said the people, who asked not to be identified because the talks are private."

spike021• 8 years ago

This sounds like a nightmare, though. Obviously people go to mall play areas and whatnot already for the scenarios you mentioned, but the germs and everything to deal with would be even worse for this IMO.

InclinedPlane• 8 years ago

Once more, for those in the back:

Toys R Us was profitable. Period.

They were acquired by predatory capital companies (Bain Capital) via a leveraged buyout which loaded them down with huge debt repayments. The new owners extracted massive amounts of money from Toys R Us and then let them die as they were crushed under their debt burden.

This is not a story of a company that failed to keep up with modern times, Toys R Us had a long profitable life ahead of it. This is a story of corporate predation, one company killing another in order to feast on the carcass. Bain Capital basically pocketed hundreds of millions of dollars while leaving Toys R Us customers and employees as well as private banks holding the bag.

acct1771• 8 years ago

Since nobody else thought it appropriate to mention, I'll bite the bullet: the person you're imagining being playful with the toys to see which one your kid likes has historically been you.

bob_theslob646• 8 years ago

People are not getting it.

If they are going to get into the business ( acquiring retail space) it will be one that fits into their equation for their last mile problem and be at fire sale prices.

If they choose to purchase retail real estate, it will most likely be a combination of retail/grocery/banking all in one, sort of like a Walmart, but way better experience.

This most likely will be their approach to get baby boomers to shop and to learn how to shop online.

As everyone knows, Amazon loves getting things cheaply and will do so if they can.

Webvan was an online grocery business that went bankrupt in 2001 after 3 years of operation and was later folded into Amazon.com.
CNET named Webvan one of the largest dot-com flops in history
Webvan placed a $1 billion order with engineering company Bechtel Corporation to build its warehouses, and bought a fleet of delivery trucks.
In 2000, Webvan bought HomeGrocer, a competitor that was also losing money, for $1.2 billion in stock.[11][12] At its peak in 2000, Webvan had $178.5 million in sales but it also had $525.4 million in expenses.

(https://en.wikipedia.org/wiki/Webvan)

lph3• 8 years ago

As a parent of young kids, I've been in to Toys R Us twice in the past few years. The first time it was really depressing: prime-time hours for retail and the store was practically empty. The second time was last weekend, and it was bustling with people hoping for fire sale prices. Probably the best weekend that store has had in years.

anigbrowl• 8 years ago

They should buy all of them, use them as display space for a wide variety of Stuff, and continue shipping normally except for small items that can be sold at point of sale and stored at low overhead.

Amazon Has Considered Buying Some Toys ‘R’ Us Stores

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