Toys R Us joins a list of retailers that have filed for bankruptcy recently as Amazon exerts increasing influence over the retail world. Analysts say Toys R Us really needs to improve its online offering.
“I don’t want to grow up, I’m a Toys R Us kid.” Perhaps Toys R Us should have grown up with the world of retail and put a much greater focus on e-commerce as the rest of retail and shoppers have increasingly has moved in this direction.
On Tuesday, toy chain Toys R Us filed for bankruptcy in the US and Canada, while it confirms its Australian stores will continue to operate. The company joins a list of other online retailers that have already done so as e-commerce giant Amazon progressively gains on its share of the retailing world.
Toys R Us, crippled by US $5 billion in debt and more powerful competition, filed for protection from its creditors before the key holiday trading season. Like so many retailers that are finding it challenging to co-exist with Amazon, analysts advise that Toys R Us really needs to improve its online offering, not helped by its slow uptake of going digital, as well expanding on its in-store experience.
“The fact that Toys ‘R’ Us ceded control of its own online offering to Amazon during a period where e-commerce began to really take off meant that the retailer was always playing catch up with its online competitors,” said Jon Copestake, chief retail and consumer goods analyst at the Economist Intelligence Unit, according to MarketWatch.
“Alarm bells will have been ringing for some time but it took until May this year for an online store revamp to take effect and it is difficult to see how Toys ‘R’ Us could address the structural challenges it faced without reducing its store footprint and significantly changing its proposition,” explained Copestake.
A UBS note on Tuesday also highlighted the impact the dependency of the holiday season has had on Toys R Us.
“Increasing reliance on holiday sales, with profitability tied to successful inventory management, shifting of shopping patterns closer to holiday season and pricing pressures of more diversified discount retailers have made it particularly challenging for traditional specialised retail outlets to do well over time,” said the UBS note.