“Toys R Us” is a famous and well-established toy retailer around the world. Last week, it announced that they filed for bankruptcy in the US and Canada. This is in contrast with competitor, “Mastermind Toys” who are expanding with an additional ninety retail locations across Canada by 2020. I wondered why these two retailers had different results in the same industry. I decided to research their situations further to find out what was causing the difference.
When I was younger, I was excited to visit Toys R Us and see all their latest toys. It looked well organized with many products and customers. So what happened? The Forbes article, “Toys R Us – How Bad Assumptions Fed Bad Financial Planning Creating Failure” [1], explains that the company got into trouble because of online competition like Amazon and low-price competition from stores like Walmart. The company made poor management and financial decisions so their debt grew very large. They couldn’t reduce cost by selling assets because of the decline in the value of storefront real estate. They lacked the cash to invest in keeping up with competitors, while still paying their investors.
In comparison, the article “Mastermind Toys ramps up expansion even as Toys R Us flounders”, explains that Mastermind Toys has been successful to the fact that they focus on educational and specialty offerings that are unique to their store. This has allowed them to gain a “devoted following of Canadian parents.” [2]. Mastermind was able to find a niche that was profitable in the toy business. This also allowed Mastermind Toys to charge higher prices, making them more profitable.
Mastermind is also smart to where they open stores. Quebec will house 18 of its 20 future storefronts. Quebec “has historically been a stronger market for niche businesses and slower to warm up to mass-market or online retailers.” [2]. The company’s president also stated that the “company is taking the time to research and prepare properly” [2], before they open.
Overall Mastermind wants to create an “experience” [2], and they will do this by granting customers the opportunity to try out products with the assistance of educated staff.
Overall, from conducting research on the two companies, I learned that it is very important to stay focused on what made your business a success in the beginning and plan for it. I also learned that it is important to not let debt get out of hand and to have cash available to invest in new opportunities or unexpected threats. The businesses world is experiencing changes in technology products and customers faster than ever before and businesses have to be prepared to keep up with it.
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Sources
[1] Hartung A. (2017, September 20). Toys R Us –How Bad Assumptions Fed Bad Financial Planning Creating Failure. Retrieved September 24, 2017, from https://www.forbes.com/sites/adamhartung/2017/09/20/toyr-r-us-is-a-lesson-in-how-bad-assumptions-feed-bad-financial-planning-creating-failure/#10b092658eab
Forbes article called: “Toys R Us – How Bad Assumptions Fed Bad Financial Planning Creating Failure”
[2] “Mastermind Toys ramps up expansion even as Toys R Us flounders”
Image Links:
[3] https://www.brandsoftheworld.com/logo/toys-r-us-2
[4] https://www.canadianfreestuff.com/mastermind-toys-canada-coupon/