Toys Were Us

Toys R Us will be gone soon and I will mourn its passing, as I did with Borders, Blockbuster and Radio Shack. I was a Toys R Us kid. But beyond nostalgia, there are a couple of lessons to be learned from this turn of events.

One is that technology is a challenge today for all retailers and there are three reasons for that. First, changing the structure of a company is hard. It’s like changing the oil on a moving car – there is no guarantee you can do it, but trying will be really messy. Second is the corollary, that it’s easier to start a company from scratch. Carvana, for example, does what the auctions, AFSA surveys and others have told dealers to do for a decade. Finally, consumers and Wall Street tend to trust tech start-ups more than they do existing firms. Based on their capabilities, which company should be favored to mass produce electric cars, GM or Tesla? Probably the company with a century’s worth of experience.

The other lesson is that any challenge tests your existing strength and Toys R Us is weak. Why? Debt. Lots and lots of debt. Borders had the same problem. This is why many experts tell dealers not to borrow to grow their companies.

RIP Geoffrey.

 

Last modified on Tuesday, 13 March 2018 12:27