Is the Toys “R” Us Bankruptcy the Worst Moment in the Toy Industry’s History?

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We all hope for Toys R Us to survive, grow and prosper. We all fear it won't.

I received a call from a long time toy industry veteran this morning? He blurted out: "Is the Toys "R" Us bankruptcy the worst moment in the toy industry's history?" I was a bit thrown back by the suddenness and the import of the question.

In answer to his question I had to admit that It certainly doesn't look good. NorthJersey.com in its article, "Toy manufacturers owed millions by Toys "R" Us", details just some of what is owed by Toys "R" Us to its suppliers:

  • Mattel owed $135.6 million
  • Hasbro  owed $59 million
  • Graco owed $59 million
  • Spin Master owed $32.7 million
  • Lego owed $28.9 million
  • Just Play owed $28.9 million
  • MGA Entertainment owed $21.6 million
  • VTech electronics owed $17.7 million
  • JAKKS Pacific owed $14 million
  • Radio Flyer owed $12.2 million

Yet, its important to have perspective and my mind immediately went back to earlier bankruptcies that impacted the industry. Certainly the Child World bankruptcy in 1992 was a big blow to the industry. At that time, Child World was the number 2 toy retailer (Toys "R" Us was number 1). Lionel Kiddie City, the number 3 toy retailer, went bankrupt the following year. 

Another rough moment occurred in the 2000's when mall toy operator, K&K Toys sold its stores to KB Toys which in turn went out of business in 2009. Hugely important for the specialty manufacturers was the bankruptcies of Noodle Kidoodle and Zany Brainy, two specialty toy chains that went out of business in 2001.

I think there is something more psychologically damaging to the industry in the Toys "R" Us bankruptcy. As painful as the Child World and Kiddie City bankruptcies were, there were many more retailers to pick up the lost business. Here are just some of the major retailers which were active in the 1990's: Best Products, Service Merchandise, Woolco, Murphy Mart, Jamesway, Bradlees, Ames and Caldor.  And let's not forget that KMart was a major player at that time. There were also large toy wholesalers, a class of trade that is largely extinct: MW Kasch, Tash and Distributoy to name just a few.

Today, however, there are only four major toy retailers left: Toys "R" Us, Walmart, Target and Amazon. In that kind of environment, any one of these retailers going out of business is a major blow.  Not only because there are fewer stores to sell but because Amazon and the Internet are a dramatically growing  form of retailing that still seems foreign to many industry veterans who came of age prior to the 21st century.

So, is this the worst moment in toy industry history?


I think its more just part of a continuing decline in the number of major retailers offering toys that began in the early 1990's and continues through today. As a result, the retail funnel that connects toy companies to their consumer has gotten smaller and smaller. This has never been a good situation for toy companies or for consumers.

Yet, just as the industry survived prior emergencies, we will survive this one as well. E-commerce is going to grow and there are entrepreneurs out there waiting to open a store, on-line or off-line. What happens next to Toys "R" Us and what is to follow is still unknown. We all hope for Toys "R" Us to survive, grow and prosper. We all fear it won't. It may or may not be the worst times but it certainly isn't much fun.

10 thoughts

  1. Good insight. Without a doubt retail is declining and toy manufacturers need to find new channels to deliver toys to consumers. Seems like e-commerce sites (e.g. Amazon) and toy subscription services (e.g. Pley.com ) are the obvious winners from this decline.

  2. Richard, excellent and thoughtful question and answer. Here is what I see as the key to TRU’s future success. Change the people or change the plan. The retail toy industry is controlled by millennials, but the toy industry (including TRU) is managed by baby boomers. Every day more Millennial Moms and Dads are created. They want a very different shopping experience. TRU needs to figure this out right away or they will be irrelevant in 2018 and beyond. I want to see them rise, but I can it happen without a radical change in how they do business with suppliers and consumers.

  3. From what I have read, there was a “special $325 Million Dollar fund” that was a condition of the bankruptcy to pay Mattel, Hasbro and other larger trade creditors. Nobody is talking about that and how those guys are managing to come out OK in this process while the little guys are not.

  4. Do you find it strange that Mattel is owed more than twice as much as Hasbro? Caught my eye.
    It’s a very impactful blow to not only these big manufacturers listed with millions of dollars, but for small vendors who scrapped together the funds needed to fill a large order (probably their largest single order) from Toys R Us months ago, have shipped the order to the retailer, and now are learning they won’t be paid, it can be almost impossible to move forward since they can’t be made whole.

  5. Add to this the fact that age compression is taking a bite out of traditional toy sales and kids getting hooked on iPads and other electronic items certainly makes this more of a challenge than the industry had faced previously at least for traditional toys.

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