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Toys R Us and its viability for the future
charlatan13
Member Posts: 118
A member posted in the most recent TRU thread that there was another ongoing thread regarding Toys R Us and its repeated failure of any significant deals week after week. I haven't been around this wonderful site for very long, but many members speak of the days where good TRU deals could be found if one knew when or where to look and were not so infrequent as they are today. I remembered reading about TRU and a failed/withdrawn IPO (initial public offering) recently and after a brief search of the web I found out that TRU has a 4 billion dollar debt that is due in 2018.
I guess I was just wondering what other members thought of Toys R Us actually surviving and thriving in the years ahead since the ridiculous prices might be an attempt to boost up their profits which are steadily declining with each quarter. One of the articles stated that one of their new strategies was to increase their online presence but I think that area is a field where many others are already winning (the recent decision of Lego [email protected] to offer free shipping for $75+ and up would only strengthen the argument that TRU has stumbled once again).
Basically my question is does Lego need Toys R Us? And if not, could that be one more obstacle for TRU going forward since I don't really see TRU offering anything that can't be found somewhere else?
I guess I was just wondering what other members thought of Toys R Us actually surviving and thriving in the years ahead since the ridiculous prices might be an attempt to boost up their profits which are steadily declining with each quarter. One of the articles stated that one of their new strategies was to increase their online presence but I think that area is a field where many others are already winning (the recent decision of Lego [email protected] to offer free shipping for $75+ and up would only strengthen the argument that TRU has stumbled once again).
Basically my question is does Lego need Toys R Us? And if not, could that be one more obstacle for TRU going forward since I don't really see TRU offering anything that can't be found somewhere else?
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Comments
Such a business plan didn't work out well for all the companies run out of business by Walmart and Home Depot, so I wouldn't suggest it for TRU, unless they offer something special in return. After all, Macy's can still exist with Walmart, they offer different services and products. The problem is, TRU sells the same stuff for the most part that Walmart does, with perhaps a bigger selection in store. But online, both companies can offer everything, so that advantage is lost.
TRU was bought a few years ago by private-equity, then stuffed with tons of debt. Those buyers probably have pocketed their profits already, what happens to TRU now hardly matters. They just need to run it long enough to give the appearance of giving it a good go, perhaps they'll spin it off or sell it in the future and pocket more cash.
I've looked at their balance sheet, it is ugly, no two ways about it. They have tons of debt, make very little profit, have very little equity, etc.
I'll be shocked if TRU is still in business in 10 years.
I won't be holding my breath though in anticipation of such an incredible sale from TRU.
I'm thinking such as how Wal-Mart generates mad profit from its "Great Value / Sam's Choice" products.
A couple of years ago, TRU sold most toys at MSRP or at a slight markup for most of the year, only raising prices around the holidays. They had great sales, and I wouldn't hesitate to let my kids buy toys there. Last year the prices never came back down after the holidays, and now markups of 40% aren't unheard of. With most of their sales, you're lucky if you can save anything off of MSRP. Now I won't even let my kids spend their money there because I'm almost positive that everything is marked up... even if there is a slight chance that it isn't. I think a lot of people are catching on to this and that's why you see their profits dropping.
The funny thing is a good chunk of my LEGO shopping has gone to the LEGO store, so it isn't like I'm saving off of MSRP... it's just that TRU has lost my trust with their dishonest 'sales' so I prefer to shop elsewhere.
But they don't, they carry stuff that Walmart will never carry.
TRU needs to carry stuff that can only be found there, then they can set the price and it won't be "inflated".
You live and learn. :)
BTW, anyone about to have their first kid, buy the "rocker chair" that BRU sells for $300, worth every single penny. Just don't buy it there, buy it from Amazon for about half the price. My wife swears by it when she was feeding.
It also partners with Mattel, Hasbro and the like for store exclusives which, unlike with LEGO, are actually store exclusives. It's also pretty much the only mass retailer for Playmobil, Calico Critters, Brio, Tomica and Thomas Wooden Railway, among dozens of other brands.
Close to half the toys there, you can't buy anywhere else.
I don't shop there outside of Playmobil (which is all sold at retail), but I expect the brand to be around for a long, long time.
Yes, I get that if you want to walk into a toy store, you are correct. But there is this thing called the Internet. :)
http://www.amazon.com/Playmobil-Princess-Carrying-Case-Playset/dp/B003VW59SM/
Just one example...
In addition, I would imagine TRU requires a certain population/demographic to set up shop in an area and those numbers almost surely mean that at least one Walmart and possibly a Target will also be within an acceptable driving distance of TRU. I find that those two stores offer a decent selection of Lego for your average shopper.
If TRU's Lego draws are poly bags, CMF (during sales) and exclusives (which I just buy at a Lego store or [email protected] since I at least can use my VIP card) you really have to consider their future going forward.
I blame the deterioration of the TRU BOGO on those that repeatedly bought out dozens of the high value, now-excluded sets, causing TRU to rethink their profitability of running BOGOs with them included. Selling a few hundred Death Stars at $267 is going to eat away any marketing manager's desire to run them in future BOGOs.
Is it the consumer's fault? No, it's TRU's for not setting and enforcing reasonable limits (like Amazon does - we've been over this before). As a result, anything today that is worthwhile to actually get via a BOGO is excluded.
It's a shame that TRU is viewed like it is by savvy adults. Kids LOVE going in there. There's no other retail store that I can say to my boys "Hey, you wanna go to ________" that gets the same reaction of joy, even when I don't let them buy anything. LFT was right about the Home Depot/Walmart example, in that you can rest on your brand and reputation laurels for only so long. What it all comes down to is reasonable pricing - everything else is secondary.
Until TRU stops using BOGOs as their chief marketing tool to manipulate consumers into thinking they are getting a deal, they will continue to slide downward. I haven't bought a significant Lego set at TRU for many months now, and certainly not even close to as much as I have in years past. From post after post here and on other sites, many others feel the same.
To TRU: You can only rely on ignorant holiday shoppers to clear out your shelves so much, until the consumers finally shift for good. As a result, other retailers, internet and otherwise, will continue to chip away at your market share until you either fix the problem, or die.
There are MANY reasons as to why TRU is failing.
One main one is what LFT said, a group bought it out to squeeze money out of it and quite frankly want to let it fail (why else bump up prices 40% over MSRP all the while the stores look in disrepair and employees do not care.. or is that because of the high volume buyer too?)
Because price increases and bans were really due to 'high volume buyers' then Id have to say that TRU would have lowered prices by now and loosened the restrictions as I'm guessing much of their profits are gone with the loss of people buying multiples of the hard to find sets.
I would say that the owners want it to go to bankruptcy, perhaps there is more money to be had somehow if that occurs, who knows.
But I do not think this is not due to people 'over buying'.
People buying sets makes TRU money, a lot more than bumping prices up 40% over RRP IMO.
It does not matter if someone buys multiple of a Hard to find set, they make their dough.. Do they make as much as if it sells RRP? No, but they still make their money.
And again TRU can limit BOGO sales in general.. Back in the 'good ol' days' TRU had a BOGO50 at least once a month before their insane price markups.
If TRU Really wanted to clean up its act it would restructure, cut stores and clean up the ones that are left.. Seriously, many of the ones by me are starting to look like KMarts.That and put em back the way they were lay'ed out.. Every TRU by me is laid out differently. To me this is just silly. I think it would be better if people knew where to find what they want regardless of the location of the store.
But BOGOs are dead because TRU got the bright idea to raise all of their regular prices, not due to the lack of hard to find items.
B2G1, 3 Death Stars, at $267 each, both shipped free.
I don't believe for a moment that TRU actually makes a profit in either of those scenarios. I think you're underestimating the effect this could have in bulk.
I don't shop there often but I do step in to pick up the exclusive poly bags.
1) Although I never buy Lego from there, I dont wanna grow up...I'm a TRU kid
2) They will be around in some form. Just like the machines in the Matrix--
The Architect: "There are levels of survival we are prepared to accept."
There is no way TRU can duplicate BRU's model since TRU's items are considered luxury/non-essentials vs BRU's items of necessity.
Once BRU is split from TRU, one will prosper while the other will share the same fate as Blockbusters.
http://www.buybuybaby.com/store/
A new one was just built here and it is a far nicer store than BRU. Expensive, to be sure, but they aren't selling to price sensitive customers, those people go to Target/Walmart/Amazon.
Well, it may well be, you can still order from them online, but all the local Blockbuster stores around here are gone.
TRU won't survive in its current form, the name might, but unless they change something pretty major, they are doomed.
There isn't enough space on the Toy side, so products are jammed together and selection is often poor. On the Babies side, when they first opened they had a staff member working in each department, plus staff working the registers/customer service (my wife worked there until my daughter was born). Now if you are lucky there are two staff covering the entire Babies side at most times. The current management seems content to staff the two stores with the same number of employees that were usually staffing just the Toys side before the expansion. So both sides have bad customer service and poor selection. It's a shame really, had they built a BRU across the street in an old vacant Best Buy, they could have had two great stores. Now they have two below average stores.
That kind of strategy and management isn't going to save the company.
I only reason I step foot into one anymore, is when there's a 30% off coupon in the local paper. When I do, it's awkward for two reasons:
A) I'm an adult in a toy store during hours when other adults are typically working
B) The stores are always barren
The latter makes complete sense given the prices and shitty attitudes of the employees. I've never encountered more miserable clerks.
So in a way I'm hoping they are not doing any business in Europe anymore, because if they still do, their marketing must really, really, really suck. I have hundreds of sets, obtained via easily a dozen different channels, but TRU is not one of them.
On a more general note, in the last couple years or so, general-purpose brick-and-mortar toy stores around these parts have been closing down at an alarming rate. And we now have an actual LEGO Store instead. And as of the time of this writing it has 20+ sets marked down 30%+, across the board. And when it doesn't, it's always amazon this, mytoys that. There simply is no room for TRU's business model in this scenario. Like, at all.
As far as toy stores go, does anyone remember 'Toy Chest'? It may have just been a St. Louis store. It was like TRU but maybe a little smaller. Anyway, I have many memories of going there with my mom after doctor's appointments to get a new toy.
I visit my TRU routinely, but seldom buy beyond a BOGO on CMFs or Polys. My store manager knows me well and is well aware of the premium the store charges for lego (they still have Cars II sets on "Clearance" over RRP). I'm not sure what the answer is for TRU, but I think their market strategy is doomed to fail over the long term due to lack of competitive prices and a significant and reliable online presence.
What is killing TRU is greed, pure and simple, and preying on the uninformed or impulse buyers. Because maybe the theory explains the 'hard to find' restriction, but how does it explain the 40% markup across the board? Because the only time sets are on 'sale' (Ie at retail) now is when there is no BOGO50 sale. THAT is what is killing BOGO50 deals, that and I think LEGO must somehow restrict price increases of certain 'hard to find' sets and maybe they do not allow TRU to 'up' the retail on them or something. That would explain how everything but the 'hard to find' have 20-40% increase in price.
It really is as simple as that.
So the question becomes, what will it take to get people to pay 10-20% more at TRU than at Amazon?
If I were in charge, I'd be talking to LEGO about doing a series of exclusive polybags, 1 per month, with a poster attached showing all 12 in a series, collect them all during the year. Give customers a reason to visit every single month to collect them, only at TRU. Offer them free for any LEGO purchase over $75.
Then reset all the LEGO prices to RRP, nothing is more insulting to a customer than charging more than the local LEGO store does. You don't have to put everything on sale all the time, and sales don't have to be BOGO, often 10-20% is enough all by itself.
The fact that Technic is exclusive to TRU in the US is nice, except that a lot of Technic can't be found at my local TRU store, their selection is pretty bad considering that fact, they should carry every Technic set.
How about DS and SSD? TRU is a specialty toy store, even KB Toys had 10179 UCS Falcon in their stores, why doesn't TRU have DS and SSD in their stores?
If you're going to remain a B&M toy store, you have to offer something special, and they aren't doing it.
All B&Ms need to do this OR LEGO needs to put better seals on their boxes.
That is really why I do not buy much, if any, LEGO from B&M stores now (unless it is a LEGO store).
I almost got burned on two Passenger trains that had been dumped and replaced with Turbo tank parts.
And again Clean up the stores, and make them all the same layout.
It is a toy store, parents should not be afraid of the kids crawling on the floor, mop/buff it every single day.
They just built a new megastore here, a massive BRU and TRU combined.
I know TRU for LEGO purchasing doesn't apply to about 99% of us in this forum, but for a kid, the experience of going into a store and being able to touch the LEGO box and view the attention-grabbing images on it is an irreplaceable sensation and not something that a website (no matter how many images and zoomable they may be) can replace.
There's also the immediate satisfaction of instantly being able to take home a toy and start playing that no online presence can duplicate (even next-day shipping for a child is forever).
And most kids won't understand the economics of consumption and many parents would just pay the premium (knowingly or not) to placate their children.
It's a shame about TRU. Like many of you have said, it is a unique shopping experience, a giant store that specializes in nothing but toys. For many of us adults, it's holds some magic and nostalgia. It's too bad they're replacing all those good vibes with what we now perceive to be greed and bad business.
As far as not understanding the economics of consumption, shame on those parents. My son is 7 years old and is well aware of what stuff costs. He also knows that deals can be had and knows that the more money we save buying LEGO, the more money we have for other things.
I took my kids on a cruise this spring on the Carnival Magic, my son loved it and has been asking to go back. He has even asked me if we can sell a few sets to pay for another trip.
He knows it costs money, when he grows up, he'll be well ahead of the game compared to most kids who, sadly, are raised without any knowledge of money and how to use it. Why? They have refused to change with the times, have allowed themselves to coast on their past, and have done little to nothing to adapt to the 21st century.
100 years ago Buggy Whip makers had the same problem, most went the way of the dodo, some adapted and are actually still around today making other things.
It leaves a bitter taste in people's mouths, sure they can do it, but customers can also shop elsewhere. TRU isn't entitled to remain in business.
If you look at their balance sheet, their cash and debt positions, and look at the past 3 years, they are going in the wrong direction. Perhaps the new owners don't care, but that is what it is...
If something doesn't change, TRU will be out of money and buried in debt beyond any reasonable level in the next 3-5 years. Bankruptcy is the next step. Can they do a Chapter 11 and come back? Only with fresh new money, and the question becomes, does anyone want to put new money into this?
Or it pulls a Circuit City, converts Chapter 11 to Chapter 7, and goes away completely.
Or has everyone forgotten Circuit City? :) BTW, if Best Buy doesn't do something soon, they'll be in the same position.
Also, are we just talking from a LEGO perspective? Do they charge similar markups across the board on other toys/videogames?
The only thing I gather from TRU is that they must make a huge profit off batteries. That seems to be the only things the workers there are concerned about: "Would you need batteries today?"
**Enough bragging and back to lurking :p**
I think it's important for my son to understand (and he does) that he can get more for his money (usually its a gift card that brings us in) in regard to Lego if he shops somewhere else. I, like many of you, have also explained to friends, and even strangers in the aisle, that you can find better prices on Lego almost anywhere else. Add in Smartphones and TRU is facing an uphill battle on not only their Lego prices, but many of their other brands. I'd say the two items that our family still looks at are Skylanders (TRU has the best selection and sometimes has exclusives) and Barbies (they have a wider selection than most other stores).
It just seems to me as if the TRU playbook is out of ideas and competitors are beating them at their own game. LFT mentioned Best Buy and I know that we will sometimes go 'showrooming' (looking at the product in a B&M store but purchasing it somewhere else) at TRU when the latest Lego catalog comes to our house (our closest Lego store is an hour away and the main route to get there is under horrible construction). It's fun to see those brand new sets in person, but we aren't buying them at TRU.