Toys R Us announced plans to close 182 stores nationwide, creating new opportunities for big-box stores, online retailers and mom-and-pop shops to pick up a larger share of the toy business.
The retail chain, which filed for bankruptcy protection in September, has been fighting an uphill battle to stay relevant amid growing competition from the likes of Target, Walmart and Amazon.com. It’s woes only seemed to magnify in recent months: The retail industry enjoyed its best holiday season in years, but Toys R Us struggled to find its footing.
“Target, Walmart, Amazon — they’ve smelled weakness for some time, so they’ve stepped it up in their toy selection,” said Kelly O’Keefe, a professor of brand management at Virginia Commonwealth University. “There’s no question that they’re going to benefit from Toys R Us’s failure. I mean, think about it: Why would anyone go to Toys R Us, when they can go to Target and Walmart and buy toys at the same time they buy pantyhose and celery?”
Online sales of toys have also picked up in recent years, as Amazon.com, Walmart and others have expanded their selections. Roughly 14 percent of toy purchases were made online in 2016, up from about 7 percent in 2011, according to research firm GlobalData Retail. Toys R Us, meanwhile, has been slow to adapt. The retailer offers free shipping on orders over $29, but analysts say the site feels dated and clunky. (Amazon chief executive Jeffrey P. Bezos also owns The Washington Post.)
“Toys R Us is coming off a very bad year: They did badly in stores, and they did badly on the Web,” said Jim Silver, chief executive of toy review website TTPM. “If they have another year like 2017, it’ll be very tough for them to survive.”
In all, Toys R Us says it will close about one-fifth of its 880 U.S. locations, including a dozen stores in its home state of New Jersey, 15 in New York and 27 in California. (In the greater Washington area, it is closing stores in Woodbridge, Va.; Newport News, Va.; and Clinton, Md.) Closures are slated to begin in early February and continue until mid-April. Other locations will be rebranded to include both Toys R Us and Babies R Us selections under one roof.
“The reinvention of our brands requires that we make tough decisions about our priorities and focus,” chief executive David A. Brandon wrote in a letter to customers on the retailer’s website. “As the leader of this company, I want you to know that we can and will address the gaps in the experience that you may have had when shopping this holiday.”
Overall, the holiday season was a successful one for retailers, with Americans spending $691.9 billion in November and December, marking the strongest growth in holiday retail sales since the end of the Great Recession. Holiday sales rose 6.9 percent at Kohl’s and 3.4 percent at Target. Amazon, which has yet to release holiday figures, said 2017’s Cyber Monday was its biggest sales day ever.
Despite turnaround efforts at Toys R Us, which included adding more hands-on “play labs,” retail experts say the company has been unable to get customers back into its stores. It doesn’t offer the low prices or convenience of its larger competitors, nor the fun-filled experience that many smaller outfits do.
“We know that customers are willing to pay more for an enjoyable experience — just look at the lines at Starbucks every day — but Toys R Us has failed to give us anything special or unique,” said O’Keefe, the Virginia Commonwealth University professor. “You can find more zest for life in a Walgreens.”
The latest round of closures could also eat away at the company’s buying power, analysts said, making it more difficult to snag exclusive offerings, such as its Star Wars Family Feud game and Lego Duplo Fire Boat.
They added that Toys R Us’s steady decline could create new opportunities for independent toy stores, which are seeing a revival as parents and children look for unique shopping experiences.
“Toys R Us cutting 20 percent of its stores — that’s no small number,” said Richard Gottlieb, chief executive of Global Toy Group, a research and consulting firm. “This is going to create ‘toy deserts,’ which is a great opportunity for specialty retailers to step in.”
Correction: An earlier version of this story incorrectly stated that Toys R Us would be closing a store in Potomac Mills, Va. That store is actually in Woodbridge, Va. This version has been corrected.