Bad News

Well, it looks like Geoffrey the Giraffe’s pockets aren’t so deep after all. This past week, Toys “R” Us filed for bankruptcy protection after decades of financial instability. This filing allows retailers to now focus on managing the company’s $5 billion debt. Toys “R” Us has to pay off $400 million of the debt by 2018.

Mounting Problems

The most recent sign of trouble surfaced last week. The company cancelled appointments with manufacturers on short notice. Holiday merchandise was supposed to be discussed. As a result of the Chapter 11 filing, Toys “R” Us has been granted $3 billion to prepare for the upcoming shopping season. Stores should be running normally though December.

Sales, though, have not been stable for the company. In the last year, Toys “R” Us lost $29 million in revenue. Poor performance and financial trouble are not the only problems with the company. Toys “R” Us has also been dealing with unsatisfactory customer service reports, website malfunctions and overpriced items.

The End of an Era?

This filing speaks to much more than just a large retailer losing steam. It gives great insight into the drastic culture changes between past and present generations. The rise of online shopping sites has severely impacted the sales of numerous stores across the country.

Convenience takes priority over the possible joys of a physical shopping experience. Another important, and somewhat obvious, fact is that more children and teenagers play with digital entertainment than classic toys. A smartphone, gaming console, tablet, or computer is more likely to be in a young person’s possession than, say, a stuffed animal. With a fiercer interest in technology, the need for toy stores are not as necessary.

So What’s Next?

While David A. Brandon, the company’s Chief Executive Officer, announced that Toys “R” Us is not trying to close any of its 1,600 stores in the U.S., the company plans to downsize some of them. Larger flag ship stores in the meantime will get revamped, a process named “Project Sunrise” by the company. “Project Sunrise” includes creating faster shipping routes, combining online and in-store shopping experiences, giving pay raises to employees, and improving customer service. Brandon also wants to add stores in other populous urban areas. “Project Sunrise” will have only a few months to gain traction. Similarly, retailers will only have a few months to decide whether to maintain or reject the leases in bankruptcy.