![]() This is the environment in which Toys “R” Us thrived. Massive big-box stores, providing lower prices and greater selection, crushed small-scale retailers in town squares and shopping malls. As families moved out to the suburbs, and interstate highways improved distribution and logistics, a single location focused on a particular product area made a lot of sense. Then, as now, economics were shifting abruptly. Toys “R” Us emerged in a wave of category killers and discount stores that arose in the 1950s and 1960s. Automobiles created suburbs and shopping malls. The rise of urban centers led to department stores. So, clearly, the problem isn’t with retail itself but with the inability of legacy firms to adapt to a new model.Īs Darrell Rigby argued in a 2011 HBR article, every 50 years the retail industry goes through a major disruption. Other firms with large digital presences, ranging from Apple to Warby Parker, have moved into physical stores. Amazon has made a big push into physical retail, capped off by its $13.7 billion purchase of Whole Foods. Take a closer look, however, and the prevailing narrative isn’t quite what it seems. The rise of e-commerce, combined with a shift in consumer preference toward dining out over shopping and with years of overbuilding, has made for distinctly unattractive economics in traditional retail. The news is part of a larger trend of closings that some are calling the retail apocalypse. The firm was taken private in a $6.6 billion leveraged private equity buyout in 2005, with the aim of turning the chain around, but the resulting debt has proved to be unserviceable. Yet the struggles at the company are not new. The recent bankruptcy filing at Toys “R” Us has roiled the toy industry. ![]()
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