Toys R Us Canada appears to be doing just fine and some people are maybe looking to buy it. Hopefully this doesn't go down like the Blockbuster situation where the american version took the Canadian version down with it despite the Canadian stores being profitable.
This in general matches with my experience, which sound nothing like the americans talking about Toys R Us. Here it's no more expensive then anywhere else and places like Amazon.ca are way way way less useful for picking up stuff because neither the selection nor the prices are good enough to be retail destroying. The closest competition would be Walmart and on that front the two are pretty similar, with Toys R Us generally having a better baby section and having the benefit of not being Walmart. Babies R Us is very useful. That's a competitive store on both prices and selection.
Also at least young kids (preschoolers and the like) play with toys all the time, so that market seems fine overall.
This just reads like "Amazon Canada is lagging behind". This isn't a description of a healthy market - its a description of a place where the Eye of Bezos has not yet cast it's gaze. It's crazy to me to hear someone say that Amazon's selection is less than "somewhere between exhaustive and encyclopedic". From my experiences trying to ship items we've purchased in the US up to our Canadian offices, import duties are also helping a lot as it's quite expensive to just get across the border. Likewise, as soon as something enters Canada delivery seems to slow down by 1-2 days (not to mention the 2-5 days sitting at the border) over expected delivery times to a similar distance in the USA.
I guess what I'm saying is that the reason TRU Canada is competitive has little to do with TRU and a lot to do with artificial, external conditions that are preventing competitors from destroying them.
You say that like it's a bad thing.
For consumers its clearly a bad thing.
Is it?
because at no point in the time I've spent living in the better part of the american continent has the lack of an amazon monopoly come close to being a "bad thing".
This statement doesn't parse because there is no Amazon monopoly anywhere, and yet Amazon's entrance and subsequent domination of the market place in the USA has been a clear and obvious net benefit for consumers.
Except that Amazon keeps killing the businesses that give the consumers money while expressly finding every way to not have to hire them to expand their own business. Short term gains, long term fucked.
This also doesn't make any sense to me. I'm not being sarcastic - I cannot understand what you mean.
My guess is that you mean it's an even more massive wal-mart effect? Long-term, we have to solve this problem different ways because we simply don't need or want 33,000 people employed in an industry with a primary reason for existence that amounts to "employee 33,000 people doing something".
Meanwhile the gains are huge for consumers and retailers who are prepared to work in the new market.
Except we aren't going to do any of those other solutions, people are just going to get worse off in the long run.
Like in the end it fucks 33,000 people that aren't going to get saved, no one's going to do shit to help them. All they can do is move onto the next retail chain till Amazon either sends that out of business as well or buys it outright.
Long term those consumers are more fucked than helped.
idk what your point is still. That we should have a stronger social safety net for when people get innovated out of a job? I agree!
That we should not close businesses for fear of job losses? That's not tenable.
Long-term, we are still better off with less physical retail overhead and more online stores.
amazon is going to be the biggest monopoly we've ever seen, but we effectively don't have a government to regulate things anymore, so we're in for hard times employment wise
Amazon will outcompete business like walmart and sears, sure.
But it won't be the death of brick and mortar for a good long time. Millennials do love amazon, but they also love shopping experiences too.
Amazon will replace large-area and outlet stores like Sears, TRU, Wallmart, and so on. Their entire business plan is giving customers a large selection and cheap prices, and Amazon has a much larger selection at much cheaper prices.
What Amazon will not replace is smaller specialized stores, where you can get specialized products, expert advice, and experience. Specialized products are harder to find online (especially without getting slammed by shipping fees), and not everyone can understand spec sheets or find reliable sources online. And live experience always wins out over sitting in front of a computer screen.
Game stores are already adapting. Board games are the best example: board game cafés give you access to a range of obscure games you won't find at Walmart and TRU, experts who've played them and can guide you to the good games in your favourite genre, and the café portion allows you to sit down and play the game before you buy it while sipping a beer with friends (along with experts to explain the rules to you). Amazon's got nothing on that.
Except that after you are done playing the game at the cafe you go home order the game on Amazon and you don't go back to the cafe until you are looking for a new game.
You go home?
You buy it on your phone for $15 less right there at the table, and if you're lucky you just tell them to drop it off at your doorstep while you have one more drink. Then you go home and play around 2 at your house.
This is not a common feeling in the US, yet.
I live in a decent sized city that literally was built around being a transport hub (3 different interstates and another handful of state and US routes all meet), and we don't get Prime Now or anything like this. We're only now starting to get pickup/delivery on groceries, mostly thanks to Wal-Mart and Hyvee and a few other companies. Despite there being multiple distribution centers in Illinois, there's still a 2 day lag to get anything here (less than a couple hours away). Now extend that for people in rural areas...
Now, on the larger discussion, board games aren't a good analogue anyways because they are a social event. You need to experience the games with someone else, on some level, be it online or in person. Game shops cater to this. Books are generally not a social experience, beyond conspicuous consumption. But toys? Toys is something I feel fits in the middle, where people need to see what they are buying (and make sure it is appropriate) and then they can impulse buy. IF we ever get nation-wide doorstep delivery, then I can see that being the death knell of brick and mortar for the toy industry. But again - the bigger problem was the leveraged buyout hurting the experience and feel (and raising prices), not necessarily the arrival of Amazon... yet.
My version of this looks like four different companies competing to bring me groceries to my house, within 2 hours, for about $4 more than it would cost me to spend 2 hours getting them myself.
Prime now is transformative, and I absolutely, unquestionably welcome it. Big box stores are environmentally harmful, promote waste, deceive customers, and soak wealth out of the economy. They pay their employees terribly, treat them worse, and their business model is built around a combination of inertia and ignorance.
I have a deep sense of nostalgia for Toys R Us, and they were truly a part of my childhood. The store occupies A Place In My Memory. Itwas the first place I saw an intellivision. It had an entire aisle dedicated to just to video games. It had every action figure in every set I wanted! It was magical and I'm glad it existed when I was a child.
Nowadays like most things that existed when I was a child - rotary dialing, Long distance charges, broadcast television, Ozarks related fads - I'm not really upset that they're gone and I am excited to see the acceleration of brick-and-mortar closures.
We love you, goodbye. Don't come back.
I think you could fairly describe Amazon warehouses as "...environmentally harmful, promote waste, deceive customers, and soak wealth out of the economy. They pay their employees terribly, treat them worse..."
Firstly I don't think you could describe them as any of those things. Secondly, how many amazon warehouses are there? Just in terms of pure footprint, the environmental impact of the square footage of TRU is bad for the planet and we would be better off had the stores themselves never been built.
Online retail is clearly better than physical retail in terms of environmental impact. Delivery model vs individual travel, lack of physical resource consumption, efficiency gains... stores suck all around.
I don't know if this is true, and I'd be interested to see any environmental studies that conclude this. There are efficiency gains in having things centrally located with access to goods in one area. One trip to get lunch and buy a bunch of things at once is vastly more efficient than a truck driving to your house multiple times a week. Having large trucks that go from factory to store is more efficient than factory to warehouse to house.
But I'm being overly reductionist I think. The environmental effects are complex, and I'd be interested to see the environmental impact from any studies done on this subject.
Toys R Us Canada appears to be doing just fine and some people are maybe looking to buy it. Hopefully this doesn't go down like the Blockbuster situation where the american version took the Canadian version down with it despite the Canadian stores being profitable.
This in general matches with my experience, which sound nothing like the americans talking about Toys R Us. Here it's no more expensive then anywhere else and places like Amazon.ca are way way way less useful for picking up stuff because neither the selection nor the prices are good enough to be retail destroying. The closest competition would be Walmart and on that front the two are pretty similar, with Toys R Us generally having a better baby section and having the benefit of not being Walmart. Babies R Us is very useful. That's a competitive store on both prices and selection.
Also at least young kids (preschoolers and the like) play with toys all the time, so that market seems fine overall.
This just reads like "Amazon Canada is lagging behind". This isn't a description of a healthy market - its a description of a place where the Eye of Bezos has not yet cast it's gaze. It's crazy to me to hear someone say that Amazon's selection is less than "somewhere between exhaustive and encyclopedic". From my experiences trying to ship items we've purchased in the US up to our Canadian offices, import duties are also helping a lot as it's quite expensive to just get across the border. Likewise, as soon as something enters Canada delivery seems to slow down by 1-2 days (not to mention the 2-5 days sitting at the border) over expected delivery times to a similar distance in the USA.
I guess what I'm saying is that the reason TRU Canada is competitive has little to do with TRU and a lot to do with artificial, external conditions that are preventing competitors from destroying them.
You say that like it's a bad thing.
For consumers its clearly a bad thing.
Is it?
because at no point in the time I've spent living in the better part of the american continent has the lack of an amazon monopoly come close to being a "bad thing".
This statement doesn't parse because there is no Amazon monopoly anywhere, and yet Amazon's entrance and subsequent domination of the market place in the USA has been a clear and obvious net benefit for consumers.
Except that Amazon keeps killing the businesses that give the consumers money while expressly finding every way to not have to hire them to expand their own business. Short term gains, long term fucked.
This also doesn't make any sense to me. I'm not being sarcastic - I cannot understand what you mean.
My guess is that you mean it's an even more massive wal-mart effect? Long-term, we have to solve this problem different ways because we simply don't need or want 33,000 people employed in an industry with a primary reason for existence that amounts to "employee 33,000 people doing something".
Meanwhile the gains are huge for consumers and retailers who are prepared to work in the new market.
What new market? Amazon is taking over the whole thing. It'll ALL be Amazon eventually!
Amazon provides the gateway for thousands of businesses to reach customers they otherwise would not be able to. Hell, you kinda have to work to find something Actually Made By Amazon on their site. They're far more enabling of small business than Toys-R-Us! You think nobody upstart toymakers can sell into their channel?
I don't think that bricks and mortar shops are a dying industry per se, just that they need to evolve with the times.
In the UK the classic example was the chain-bookshop Waterstones. Was on the verge of bankruptcy in 2010, and had the pile-em-high highly centralised business practices. New boss allows shops to make their own buying decisions (ie different books are going to be more popular in different areas) and reducing bulk ordering (they were ordering 20,000 copies then returning 18,000 unsold books). Alongside this they had more author and other events. Ends up making shopping a more bespoke event, rather than something souless
THIS THREAD IS ABOUT:
The closure of Toys R Us US, UK, and the buyout of TRU Canada\
The business practices of TRU (including working conditions, treating customers, etc.)
How toy stores can survive nowadays
How toy business works (man, remember the controversies over Breaking Bad action figures in TRU?)
The future of TRU
I don't want this to turn into "the Amazon thread" as that's not what Athenor intended, so let's try to keep discussion in the context of the OP please (which is about toy stores).
It's also kind of weird to me that we keep talking about how Amazon put TRU out of business when multiple links and sources have made it very clear that's not what happened.
Bain Capital put TRU out of business and holy shit do we need to address that.
amazon is going to be the biggest monopoly we've ever seen, but we effectively don't have a government to regulate things anymore, so we're in for hard times employment wise
Amazon will outcompete business like walmart and sears, sure.
But it won't be the death of brick and mortar for a good long time. Millennials do love amazon, but they also love shopping experiences too.
Amazon will replace large-area and outlet stores like Sears, TRU, Wallmart, and so on. Their entire business plan is giving customers a large selection and cheap prices, and Amazon has a much larger selection at much cheaper prices.
What Amazon will not replace is smaller specialized stores, where you can get specialized products, expert advice, and experience. Specialized products are harder to find online (especially without getting slammed by shipping fees), and not everyone can understand spec sheets or find reliable sources online. And live experience always wins out over sitting in front of a computer screen.
Game stores are already adapting. Board games are the best example: board game cafés give you access to a range of obscure games you won't find at Walmart and TRU, experts who've played them and can guide you to the good games in your favourite genre, and the café portion allows you to sit down and play the game before you buy it while sipping a beer with friends (along with experts to explain the rules to you). Amazon's got nothing on that.
Except that after you are done playing the game at the cafe you go home order the game on Amazon and you don't go back to the cafe until you are looking for a new game.
You go home?
You buy it on your phone for $15 less right there at the table, and if you're lucky you just tell them to drop it off at your doorstep while you have one more drink. Then you go home and play around 2 at your house.
This is not a common feeling in the US, yet.
I live in a decent sized city that literally was built around being a transport hub (3 different interstates and another handful of state and US routes all meet), and we don't get Prime Now or anything like this. We're only now starting to get pickup/delivery on groceries, mostly thanks to Wal-Mart and Hyvee and a few other companies. Despite there being multiple distribution centers in Illinois, there's still a 2 day lag to get anything here (less than a couple hours away). Now extend that for people in rural areas...
Now, on the larger discussion, board games aren't a good analogue anyways because they are a social event. You need to experience the games with someone else, on some level, be it online or in person. Game shops cater to this. Books are generally not a social experience, beyond conspicuous consumption. But toys? Toys is something I feel fits in the middle, where people need to see what they are buying (and make sure it is appropriate) and then they can impulse buy. IF we ever get nation-wide doorstep delivery, then I can see that being the death knell of brick and mortar for the toy industry. But again - the bigger problem was the leveraged buyout hurting the experience and feel (and raising prices), not necessarily the arrival of Amazon... yet.
My version of this looks like four different companies competing to bring me groceries to my house, within 2 hours, for about $4 more than it would cost me to spend 2 hours getting them myself.
Prime now is transformative, and I absolutely, unquestionably welcome it. Big box stores are environmentally harmful, promote waste, deceive customers, and soak wealth out of the economy. They pay their employees terribly, treat them worse, and their business model is built around a combination of inertia and ignorance.
I have a deep sense of nostalgia for Toys R Us, and they were truly a part of my childhood. The store occupies A Place In My Memory. Itwas the first place I saw an intellivision. It had an entire aisle dedicated to just to video games. It had every action figure in every set I wanted! It was magical and I'm glad it existed when I was a child.
Nowadays like most things that existed when I was a child - rotary dialing, Long distance charges, broadcast television, Ozarks related fads - I'm not really upset that they're gone and I am excited to see the acceleration of brick-and-mortar closures.
We love you, goodbye. Don't come back.
I think you could fairly describe Amazon warehouses as "...environmentally harmful, promote waste, deceive customers, and soak wealth out of the economy. They pay their employees terribly, treat them worse..."
Firstly I don't think you could describe them as any of those things. Secondly, how many amazon warehouses are there? Just in terms of pure footprint, the environmental impact of the square footage of TRU is bad for the planet and we would be better off had the stores themselves never been built.
Online retail is clearly better than physical retail in terms of environmental impact. Delivery model vs individual travel, lack of physical resource consumption, efficiency gains... stores suck all around.
I don't know if this is true, and I'd be interested to see any environmental studies that conclude this. There are efficiency gains in having things centrally located with access to goods in one area. One trip to get lunch and buy a bunch of things at once is vastly more efficient than a truck driving to your house multiple times a week. Having large trucks that go from factory to store is more efficient than factory to warehouse to house.
But I'm being overly reductionist I think. The environmental effects are complex, and I'd be interested to see the environmental impact from any studies done on this subject.
It's also kind of weird to me that we keep talking about how Amazon put TRU out of business when multiple links and sources have made it very clear that's not what happened.
Bain Capital put Amazon out of business and holy shit do we need to address that.
It's also kind of weird to me that we keep talking about how Amazon put TRU out of business when multiple links and sources have made it very clear that's not what happened.
Bain Capital put Amazon out of business and holy shit do we need to address that.
Toys R Us Canada appears to be doing just fine and some people are maybe looking to buy it. Hopefully this doesn't go down like the Blockbuster situation where the american version took the Canadian version down with it despite the Canadian stores being profitable.
This in general matches with my experience, which sound nothing like the americans talking about Toys R Us. Here it's no more expensive then anywhere else and places like Amazon.ca are way way way less useful for picking up stuff because neither the selection nor the prices are good enough to be retail destroying. The closest competition would be Walmart and on that front the two are pretty similar, with Toys R Us generally having a better baby section and having the benefit of not being Walmart. Babies R Us is very useful. That's a competitive store on both prices and selection.
Also at least young kids (preschoolers and the like) play with toys all the time, so that market seems fine overall.
This just reads like "Amazon Canada is lagging behind". This isn't a description of a healthy market - its a description of a place where the Eye of Bezos has not yet cast it's gaze. It's crazy to me to hear someone say that Amazon's selection is less than "somewhere between exhaustive and encyclopedic". From my experiences trying to ship items we've purchased in the US up to our Canadian offices, import duties are also helping a lot as it's quite expensive to just get across the border. Likewise, as soon as something enters Canada delivery seems to slow down by 1-2 days (not to mention the 2-5 days sitting at the border) over expected delivery times to a similar distance in the USA.
I guess what I'm saying is that the reason TRU Canada is competitive has little to do with TRU and a lot to do with artificial, external conditions that are preventing competitors from destroying them.
You say that like it's a bad thing.
For consumers its clearly a bad thing.
Is it?
because at no point in the time I've spent living in the better part of the american continent has the lack of an amazon monopoly come close to being a "bad thing".
This statement doesn't parse because there is no Amazon monopoly anywhere, and yet Amazon's entrance and subsequent domination of the market place in the USA has been a clear and obvious net benefit for consumers.
I would say it's hard to argue that this failure is consumer choice though. Clearly many people still purchased goods, profitably, from Toys R Us. If Toys R Us had NOT been purchased in the early 2000s with debt financing, and had instead used say, 20% of its profits on stock buybacks year on year then Toys R Us would still exist. It would be too expensive for predatory aquisition, and 33000 people would still have jobs. And I would be able to go to toys r us if I wanted. It was profitable when it was purchased. It remained profitable (excluding loan payments) until today.
So Toys R Us failed not because it failed to deliver a product consumers wanted, not because it failed to deliver that product at a price consumers wanted, but because its stock issuance in the past had been overly aggressive and had exposed it to predatory acquisitions.
Personally, I find myself buying less and less online and more and more locally. I never buy toys for my kids online because getting out of the house to go shopping is a pleasant use of an hour or so. Amazon is for boring stuff, like diapers and cat food. If Amazon had 'defeated' Toys R Us by making it unable to sell goods, then that is an outcome of consumer choice and is (in the long term, assuming Amazon does not become protectionist) good for consumers (since money is no longer being spent to provide unneeded things, and can be spent on other things). But that's not what happened.
This is far more like what happened with say, Starbucks and their acquisition of the 'La Boulangerie' bakery chain in SF. A small (50 stores or so) chain of local bakery shops with a French theme existed on the west coast. They had their own supply chain where the chain owned the central bakery to assure quality. Starbucks purchased the chain, and found it was very profitable and for a while was happy with it. Then, deeper analytics found that starbucks stores NEAR La Boulangerie stores were making less profits. And that while La Boulangerie stores were profitable and popular, they actually cost Starbucks profits because pastries are less profitable than selling cheap coffee. Starbucks announced the closure of the chain, and the original owner offered to buy it back, for more than he had sold it for. Starbucks refused, and knowing that the chain was a functional competitor if still alive, Starbucks sold and bulldozed the central bakeries, and sold the leases on the key locations at discount rates to non-competitors to make sure that the previous owner could not easily restart the business.
In that case, just like this one, the market HAS spoken to maximize profits vs effort, but the will of the consumer has been reversed.
"That is cool" - Abraham Lincoln
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HerrCronIt that wickedly supports taxationRegistered Userregular
It's also kind of weird to me that we keep talking about how Amazon put TRU out of business when multiple links and sources have made it very clear that's not what happened.
Bain Capital put Amazon out of business and holy shit do we need to address that.
Should we buy them a cake, or will a heartfelt thank you card be enough?
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AthenorBattle Hardened OptimistThe Skies of HiigaraRegistered Userregular
I would love it if TRU had, say, an international product area. I've talked before about how stale TRU's product can get, but imports are fairly evergreen - well, a hell of a lot more evergreen than the endless shelves of Funko POPs. So international items would be absolutely welcomed, especially as our local hobby shops go out of business (or are opposed to the cooler stuff out there).
... But this may be my recent upkick of interest in Gunpla talking.
The talk of looting TRU actually reminded me of something I loved watching as a kid: the Shopping Spree. Some lucky kid was brought to TRU, given a shopping cart, and told that everything they put in that cart in the next five minutes was theirs to keep.
Lord did I dream of being on that show. I mentally plotted out my course of attack watching all these other kids, developing techniques for hooking entire racks of action figures in one fell swoop as they careened around the store like a budget Mad Max.
I would love it if TRU had, say, an international product area. I've talked before about how stale TRU's product can get, but imports are fairly evergreen - well, a hell of a lot more evergreen than the endless shelves of Funko POPs. So international items would be absolutely welcomed, especially as our local hobby shops go out of business (or are opposed to the cooler stuff out there).
... But this may be my recent upkick of interest in Gunpla talking.
TRU actually got into Gunpla early (like we're talking early 2000s here), and did a few other releases of Bandai releases from Japan.
I would love it if TRU had, say, an international product area. I've talked before about how stale TRU's product can get, but imports are fairly evergreen - well, a hell of a lot more evergreen than the endless shelves of Funko POPs. So international items would be absolutely welcomed, especially as our local hobby shops go out of business (or are opposed to the cooler stuff out there).
... But this may be my recent upkick of interest in Gunpla talking.
TRU actually got into Gunpla early (like we're talking early 2000s here), and did a few other releases of Bandai releases from Japan.
They were also the first retailer I saw that carried other Gundam franchise products like the Bandai America re-carded MSiA.
Meanwhile the gains are huge for consumers and retailers who are prepared to work in the new market.
There isn't a new market.
Tell that to the Chuck Tingle.
There isn't a new market, man. From today to a week ago nothing has changed except another brick and mortar retailer went under.
Nothing is going to replace it because it's getting replaced with automation.
Something will replace it. The question is what, where and when. It's about what the transition costs are and where the benefits accrue. Where are the new jobs forming, what kind are they, what skills do they require and all that and when are they gonna form. Cause the answers to that can be "far away", "different then retail jobs", "different ones then these people have" and "not for another decade". But those 33,000 TRU employees need to buy food, you know, today. They need to make rent this month. They need a job now. But the new market is not right here right now. That's the problem. That's why shit like this is so catastrophic.
shryke on
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AbsoluteZeroThe new film by Quentin KoopantinoRegistered Userregular
TRU was my go-to for hard to get vidya games. They are the reason I was able to get my hands on Metroid Prime Trilogy without having to get scammed by Gamestop.
I'm also being laid off (unrelated) so I feel their pain.
Meanwhile the gains are huge for consumers and retailers who are prepared to work in the new market.
There isn't a new market.
Tell that to the Chuck Tingle.
There isn't a new market, man. From today to a week ago nothing has changed except another brick and mortar retailer went under.
Nothing is going to replace it because it's getting replaced with automation.
Something will replace it. The question is what, where and when. It's about what the transition costs are and where the benefits accrue. Where are the new jobs forming, what kind are they, what skills do they require and all that and when are they gonna form. Cause the answers to that can be "far away", "different then retail jobs", "different ones then these people have" and "not for another decade". But those 33,000 TRU employees need to buy food, you know, today. They need to make rent this month. They need a job now. But the new market is not right here right now. That's the problem. That's why shit like this is so catastrophic.
The problem with this type of sentiment is that without a proposed solution, the default assumption is that the status quo would be better than the "catastrophy." I don't think it is ever better to reduce or stifle innovation. It should be possible for a society to use safety nets to catch those put into bad situations by innovation, without giving up on the opportunities afforded by it. I'm not saying I have an answer, but I reject the implied answer of just maintaining the status quo because it's hard to transition people.
"The world is a mess, and I just need to rule it" - Dr Horrible
Meanwhile the gains are huge for consumers and retailers who are prepared to work in the new market.
There isn't a new market.
Tell that to the Chuck Tingle.
There isn't a new market, man. From today to a week ago nothing has changed except another brick and mortar retailer went under.
Nothing is going to replace it because it's getting replaced with automation.
Something will replace it. The question is what, where and when. It's about what the transition costs are and where the benefits accrue. Where are the new jobs forming, what kind are they, what skills do they require and all that and when are they gonna form. Cause the answers to that can be "far away", "different then retail jobs", "different ones then these people have" and "not for another decade". But those 33,000 TRU employees need to buy food, you know, today. They need to make rent this month. They need a job now. But the new market is not right here right now. That's the problem. That's why shit like this is so catastrophic.
The problem with this type of sentiment is that without a proposed solution, the default assumption is that the status quo would be better than the "catastrophy." I don't think it is ever better to reduce or stifle innovation. It should be possible for a society to use safety nets to catch those put into bad situations by innovation, without giving up on the opportunities afforded by it. I'm not saying I have an answer, but I reject the implied answer of just maintaining the status quo because it's hard to transition people.
But the failure of toys r us had nothing to do with innovation and change, but instead, had to do with predatory acquisition practices. Toys R Us made money. Bain capitol didn't use the debt to finance growth, so success was impossible.
The correct replacement for Toys R Us, is another company just like toys r us which doesn't need to change anything about its stores, rates of employee pay, or stocking practices but without a predatory agency leaching off all the profits and saddling it with debt. That store could then do better by making its stores better using the profits it now doesn't have to give to Bain Capitol.
Meanwhile the gains are huge for consumers and retailers who are prepared to work in the new market.
There isn't a new market.
Tell that to the Chuck Tingle.
There isn't a new market, man. From today to a week ago nothing has changed except another brick and mortar retailer went under.
Nothing is going to replace it because it's getting replaced with automation.
Something will replace it. The question is what, where and when. It's about what the transition costs are and where the benefits accrue. Where are the new jobs forming, what kind are they, what skills do they require and all that and when are they gonna form. Cause the answers to that can be "far away", "different then retail jobs", "different ones then these people have" and "not for another decade". But those 33,000 TRU employees need to buy food, you know, today. They need to make rent this month. They need a job now. But the new market is not right here right now. That's the problem. That's why shit like this is so catastrophic.
The problem with this type of sentiment is that without a proposed solution, the default assumption is that the status quo would be better than the "catastrophy." I don't think it is ever better to reduce or stifle innovation. It should be possible for a society to use safety nets to catch those put into bad situations by innovation, without giving up on the opportunities afforded by it. I'm not saying I have an answer, but I reject the implied answer of just maintaining the status quo because it's hard to transition people.
Converse, change for the sake of change is not good either. Just look at the sort of damage we've seen from "disruption".
I'm curious why TRU is closing instead of selling though. Every report makes it seem like it was a profitable company (except for outstanding debt interest). So presumably a rich investor(s) could buy TRU, paying off the debt in the process, and continue running a profitable toy store. Unless the unspoken part was that they were profitable, but just barely, and not for long. In which case it seems silly to put all the blame on Bain capital.
"The world is a mess, and I just need to rule it" - Dr Horrible
I'm curious why TRU is closing instead of selling though. Every report makes it seem like it was a profitable company (except for outstanding debt interest). So presumably a rich investor(s) could buy TRU, paying off the debt in the process, and continue running a profitable toy store. Unless the unspoken part was that they were profitable, but just barely, and not for long. In which case it seems silly to put all the blame on Bain capital.
Bain put $4.4B of debt on the books of TRU. Their annual debt service was somewhere around $400M/year.
I'm curious why TRU is closing instead of selling though. Every report makes it seem like it was a profitable company (except for outstanding debt interest). So presumably a rich investor(s) could buy TRU, paying off the debt in the process, and continue running a profitable toy store. Unless the unspoken part was that they were profitable, but just barely, and not for long. In which case it seems silly to put all the blame on Bain capital.
I believe they were looking for buyers, but not that actively. This last holiday season was lackluster, so the dam burst.
I stopped by my local one today. Busiest I have seen it ever outside of a holiday, but that might be due to it being Thursday when they offer discounts on their credit card. Even still, I saw a lot of people just scoping things out, and one kid with an amazingly strong set of lungs.
I'm curious why TRU is closing instead of selling though. Every report makes it seem like it was a profitable company (except for outstanding debt interest). So presumably a rich investor(s) could buy TRU, paying off the debt in the process, and continue running a profitable toy store. Unless the unspoken part was that they were profitable, but just barely, and not for long. In which case it seems silly to put all the blame on Bain capital.
Toys R Us has outstanding debts to multiple people, not just the big loan from Bain, but that loan is the biggest part of it. That massive loan is also about the same as the total 'no debt' value of the business.
So if a new buyer comes in, they will look at the assets, subtract the debts big AND small and conclude that Toys R Us is worth less than nothing. However, Bain capital know that since the bank is the single biggest debtor, the bank gets paid first in bankruptcy. So they go bankrupt, asset strip the company, and use that money to pay off the bank.
Bain is happy, and the bank will happily loan to them again. All the small debt holders get the shaft.
Meanwhile the gains are huge for consumers and retailers who are prepared to work in the new market.
There isn't a new market.
Tell that to the Chuck Tingle.
There isn't a new market, man. From today to a week ago nothing has changed except another brick and mortar retailer went under.
Nothing is going to replace it because it's getting replaced with automation.
Something will replace it. The question is what, where and when. It's about what the transition costs are and where the benefits accrue. Where are the new jobs forming, what kind are they, what skills do they require and all that and when are they gonna form. Cause the answers to that can be "far away", "different then retail jobs", "different ones then these people have" and "not for another decade". But those 33,000 TRU employees need to buy food, you know, today. They need to make rent this month. They need a job now. But the new market is not right here right now. That's the problem. That's why shit like this is so catastrophic.
The problem with this type of sentiment is that without a proposed solution, the default assumption is that the status quo would be better than the "catastrophy." I don't think it is ever better to reduce or stifle innovation. It should be possible for a society to use safety nets to catch those put into bad situations by innovation, without giving up on the opportunities afforded by it. I'm not saying I have an answer, but I reject the implied answer of just maintaining the status quo because it's hard to transition people.
Except in the meantime, without an implemented solution, those people are just left for dead.
Until those solutions are implemented shit like this is pretty fuckin far from awesome for anyone involved except for the bank and Bain capital.
I thought that while Amazon wasn't helping their situation at all, the primary cause of the problems was that TRU (and KB Toys for that matter) were saddled with a metric ton of debt from other companies, that wasn't even their own 'fault', but rather that of the company that bought them.
Kinda like how the USPS has to prefund their pensions for like 80 years, and then people talk about how it's failing because it's operating under completely ridiculous parameters that no one else has?
Meanwhile the gains are huge for consumers and retailers who are prepared to work in the new market.
There isn't a new market.
Tell that to the Chuck Tingle.
There isn't a new market, man. From today to a week ago nothing has changed except another brick and mortar retailer went under.
Nothing is going to replace it because it's getting replaced with automation.
Something will replace it. The question is what, where and when. It's about what the transition costs are and where the benefits accrue. Where are the new jobs forming, what kind are they, what skills do they require and all that and when are they gonna form. Cause the answers to that can be "far away", "different then retail jobs", "different ones then these people have" and "not for another decade". But those 33,000 TRU employees need to buy food, you know, today. They need to make rent this month. They need a job now. But the new market is not right here right now. That's the problem. That's why shit like this is so catastrophic.
The problem with this type of sentiment is that without a proposed solution, the default assumption is that the status quo would be better than the "catastrophy." I don't think it is ever better to reduce or stifle innovation. It should be possible for a society to use safety nets to catch those put into bad situations by innovation, without giving up on the opportunities afforded by it. I'm not saying I have an answer, but I reject the implied answer of just maintaining the status quo because it's hard to transition people.
Except in the meantime, without an implemented solution, those people are just left for dead.
Until those solutions are implemented shit like this is pretty fuckin far from awesome for anyone involved except for the bank and Bain capital.
And their competition and consumers looking for a deal.
I'm curious why TRU is closing instead of selling though. Every report makes it seem like it was a profitable company (except for outstanding debt interest). So presumably a rich investor(s) could buy TRU, paying off the debt in the process, and continue running a profitable toy store. Unless the unspoken part was that they were profitable, but just barely, and not for long. In which case it seems silly to put all the blame on Bain capital.
Bain put $4.4B of debt on the books of TRU. Their annual debt service was somewhere around $400M/year.
Sure, but the underlying issue is that the people who paid for TRU were not the people who owned TRU, and the loan interest outpaced profits. But the profits were not 0, and it seems like a decades old company still turning a profit is a great way to invest safely since it is well established. So all that was needed was someone (not Bain) willing to buy TRU and accept the lower return on investment.
I'm curious why TRU is closing instead of selling though. Every report makes it seem like it was a profitable company (except for outstanding debt interest). So presumably a rich investor(s) could buy TRU, paying off the debt in the process, and continue running a profitable toy store. Unless the unspoken part was that they were profitable, but just barely, and not for long. In which case it seems silly to put all the blame on Bain capital.
Toys R Us has outstanding debts to multiple people, not just the big loan from Bain, but that loan is the biggest part of it. That massive loan is also about the same as the total 'no debt' value of the business.
So if a new buyer comes in, they will look at the assets, subtract the debts big AND small and conclude that Toys R Us is worth less than nothing. However, Bain capital know that since the bank is the single biggest debtor, the bank gets paid first in bankruptcy. So they go bankrupt, asset strip the company, and use that money to pay off the bank.
Bain is happy, and the bank will happily loan to them again. All the small debt holders get the shaft.
You're assuming the new buyer would have to pay for the business and pay off the debt, which I don't think is true. The owners are basically middle men. Once the debt to Bain is paid off, who ever paid that off now owns TRU (basically although I'm sure there are many complexities). The owners get nothing except for getting out from under the original loan they took. And if the new owners are willing to accept a smaller return on investment then bain, then they should be able to continue keeping TRU open.
Jebus314 on
"The world is a mess, and I just need to rule it" - Dr Horrible
Athletics hugely influenced me. While growing up, I was usually elected captain of the team in whatever sport I was playing. Eventually, I wanted to be captain of everything because that responsibility felt good to me.
For the most part, I picked my team. As a new leader, you must have people around who you can trust, so I have specific criteria for who will make it and who won’t.
I was a quarterback in high school. When there’s four minutes to go and you’re ahead by three touchdowns, everyone in the huddle is happy, confident, and supportive. But when you’re two touchdowns behind and you step into that huddle, you can look into your teammates’ eyes and see who you want on your team. They’re the ones looking back at you and saying, “We can do this and I will help you.” The others are already thinking about the excuses they’ll make in the locker room about why this didn’t work. You can’t win with those guys.
I have always answered my own email – hundreds a day – and get them all done before I go to bed each day. I refuse to give up on that. It lets people know I’m open, available, and engaged. I think it’s very important for me to stay in touch with my people. I’m like a blind dog in a meat house right now.
I knew I was going to be a bit of a shock to this place. I move fast and my expectations are high. My executive assistant (who came with me from Domino’s) has been very valuable in managing that. People would come to her in the first two weeks and say, “Does he really work that hard?” “Is his office always that clean?” “Does he expect our offices to look like that?” “Is that how he wants all of us to dress for work?” She became my ambassador of information. Yes, he works that hard. Yes, he expects your office to look professional. No, he doesn’t like blue jeans at work. She became this trusted figure that really eased the transition around here with a level of professionalism.
When we got here, the office itself was a mess. The Friday before I started, my wife, my assistant, and I came in after everybody left and worked all weekend. We ripped everything off the walls, painted, cleaned the carpet, emptied cupboards, put new art on the walls, wiped stains off the conference tables… When everyone walked in here on Monday, they couldn’t believe what they saw.
That was the smartest thing we ever did because people immediately understood there was a new sheriff in town and things would be different. It’s amazing how most people respond when you display an attitude like that.
But who's going to buy a company that's going to take multiple decades to pay off an enormous debt its been saddled with?
I guess I was presuming that the debt was roughly equal to the value of the company. Like I buy a house for 500k with a loan. I immediately can't make full payments and live for a while just paying interest. A few years down the line and I can't make any payments. With interest maybe the loan has 550k outstanding now. The next person who buys the house doesn't have to pay me 500k for the house and then the bank 550k for the loan, they just have to pay the 550k for the loan*, which is roughly equal to what the house was worth.
I suppose it's possible that the interest on the loan to buy TRU was so large that the outstanding debt ballooned between when TRU was bought and now, but I that seems like it would be a bad loan to start with (and why would bain agree to it). But then I don't really know the details.
*technically they just have to pay whatever I/the bank is willing to accept. But it seems like selling for little to no profit (selling at the loan price) is better than just eating bankruptcy.
Jebus314 on
"The world is a mess, and I just need to rule it" - Dr Horrible
A group of toymakers led by Isaac Larian, chief executive of MGA Entertainment, the giant behind brands such as L.O.L. Surprise!, Little Tikes and Bratz, on Wednesday submitted a bid to buy Toys R Us’s Canadian arm, which includes 82 stores, according to Larian. He added that he is also looking into buying as many as 400 U.S. stores, which he would seek to operate under the Toys R Us name
But who's going to buy a company that's going to take multiple decades to pay off an enormous debt its been saddled with?
I guess I was presuming that the debt was roughly equal to the value of the company. Like I buy a house for 500k with a loan. I immediately can't make full payments and live for a while just paying interest. A few years down the line and I can't make any payments. With interest maybe the loan has 550k outstanding now. The next person who buys the house doesn't have to pay me 500k for the house and then the bank 550k for the loan, they just have to pay the 550k for the loan*, which is roughly equal to what the house was worth.
I suppose it's possible that the interest on the loan to buy TRU was so large that the outstanding debt ballooned between when TRU was bought and now, but I that seems like it would be a bad loan to start with (and why would bain agree to it). But then I don't really know the details.
*technically they just have to pay whatever I am willing to accept, and I have to deal with the loan. But it seems like selling for little to no profit (selling at the loan price) is better than just eating bankruptcy.
Why? Because they never intended to pay it off, they were going to make it someone else's problem.
But who's going to buy a company that's going to take multiple decades to pay off an enormous debt its been saddled with?
I guess I was presuming that the debt was roughly equal to the value of the company. Like I buy a house for 500k with a loan. I immediately can't make full payments and live for a while just paying interest. A few years down the line and I can't make any payments. With interest maybe the loan has 550k outstanding now. The next person who buys the house doesn't have to pay me 500k for the house and then the bank 550k for the loan, they just have to pay the 550k for the loan, which is roughly equal to what the house was worth.
I suppose it's possible that the interest on the loan to buy TRU was so large that the outstanding debt ballooned between when TRU was bought and now, but I that seems like it would be a bad loan to start with (and why would bain agree to it). But then I don't really know the details.
Bain agreed to the loan because they weren't on the hook for it. That's how a leveraged buyout works - you take out debt (hence the "leveraged" part) to buy the company, then you put the debt on their books.
Athletics hugely influenced me. While growing up, I was usually elected captain of the team in whatever sport I was playing. Eventually, I wanted to be captain of everything because that responsibility felt good to me.
For the most part, I picked my team. As a new leader, you must have people around who you can trust, so I have specific criteria for who will make it and who won’t.
I was a quarterback in high school. When there’s four minutes to go and you’re ahead by three touchdowns, everyone in the huddle is happy, confident, and supportive. But when you’re two touchdowns behind and you step into that huddle, you can look into your teammates’ eyes and see who you want on your team. They’re the ones looking back at you and saying, “We can do this and I will help you.” The others are already thinking about the excuses they’ll make in the locker room about why this didn’t work. You can’t win with those guys.
I have always answered my own email – hundreds a day – and get them all done before I go to bed each day. I refuse to give up on that. It lets people know I’m open, available, and engaged. I think it’s very important for me to stay in touch with my people. I’m like a blind dog in a meat house right now.
I knew I was going to be a bit of a shock to this place. I move fast and my expectations are high. My executive assistant (who came with me from Domino’s) has been very valuable in managing that. People would come to her in the first two weeks and say, “Does he really work that hard?” “Is his office always that clean?” “Does he expect our offices to look like that?” “Is that how he wants all of us to dress for work?” She became my ambassador of information. Yes, he works that hard. Yes, he expects your office to look professional. No, he doesn’t like blue jeans at work. She became this trusted figure that really eased the transition around here with a level of professionalism.
When we got here, the office itself was a mess. The Friday before I started, my wife, my assistant, and I came in after everybody left and worked all weekend. We ripped everything off the walls, painted, cleaned the carpet, emptied cupboards, put new art on the walls, wiped stains off the conference tables… When everyone walked in here on Monday, they couldn’t believe what they saw.
That was the smartest thing we ever did because people immediately understood there was a new sheriff in town and things would be different. It’s amazing how most people respond when you display an attitude like that.
... the company was taken private by KKR, Bain Capital and real estate firm Vornado. The $6.6 billion purchase left it with $5.3 billion in debt secured by its assets and it never really recovered...
When Toys "R" Us filed for bankruptcy in September 2017, it disclosed it had about $5 billion in debt and was spending about $400 million a year just to service that debt.
So in 2005 TRU was worth 6.6 billion (or at least that was what bain and a few other companies were willing to pay for it). By 2017 the outstanding debt was only 5 billion. To me that seems like someone with 5 billion could buy TRU (paying off all outstanding debts) and continue to run it. So long as they don't require a ridiculous $400 million a year in return, they have a stable income and a profitable company.
Jebus314 on
"The world is a mess, and I just need to rule it" - Dr Horrible
Athletics hugely influenced me. While growing up, I was usually elected captain of the team in whatever sport I was playing. Eventually, I wanted to be captain of everything because that responsibility felt good to me.
For the most part, I picked my team. As a new leader, you must have people around who you can trust, so I have specific criteria for who will make it and who won’t.
I was a quarterback in high school. When there’s four minutes to go and you’re ahead by three touchdowns, everyone in the huddle is happy, confident, and supportive. But when you’re two touchdowns behind and you step into that huddle, you can look into your teammates’ eyes and see who you want on your team. They’re the ones looking back at you and saying, “We can do this and I will help you.” The others are already thinking about the excuses they’ll make in the locker room about why this didn’t work. You can’t win with those guys.
I have always answered my own email – hundreds a day – and get them all done before I go to bed each day. I refuse to give up on that. It lets people know I’m open, available, and engaged. I think it’s very important for me to stay in touch with my people. I’m like a blind dog in a meat house right now.
I knew I was going to be a bit of a shock to this place. I move fast and my expectations are high. My executive assistant (who came with me from Domino’s) has been very valuable in managing that. People would come to her in the first two weeks and say, “Does he really work that hard?” “Is his office always that clean?” “Does he expect our offices to look like that?” “Is that how he wants all of us to dress for work?” She became my ambassador of information. Yes, he works that hard. Yes, he expects your office to look professional. No, he doesn’t like blue jeans at work. She became this trusted figure that really eased the transition around here with a level of professionalism.
When we got here, the office itself was a mess. The Friday before I started, my wife, my assistant, and I came in after everybody left and worked all weekend. We ripped everything off the walls, painted, cleaned the carpet, emptied cupboards, put new art on the walls, wiped stains off the conference tables… When everyone walked in here on Monday, they couldn’t believe what they saw.
That was the smartest thing we ever did because people immediately understood there was a new sheriff in town and things would be different. It’s amazing how most people respond when you display an attitude like that.
amazon is going to be the biggest monopoly we've ever seen, but we effectively don't have a government to regulate things anymore, so we're in for hard times employment wise
Amazon will outcompete business like walmart and sears, sure.
But it won't be the death of brick and mortar for a good long time. Millennials do love amazon, but they also love shopping experiences too.
And they'll kill employment in their brick and mortar stores. Amazon is currently investing billions towards the destruction of labor annually.
Thanks Bezos!
Yeah we really need to preserve those sweet sweet retail jobs. Everyone is always talking about how great they are and clamouring get one and keep it for life...
Posts
idk what your point is still. That we should have a stronger social safety net for when people get innovated out of a job? I agree!
That we should not close businesses for fear of job losses? That's not tenable.
Long-term, we are still better off with less physical retail overhead and more online stores.
I don't know if this is true, and I'd be interested to see any environmental studies that conclude this. There are efficiency gains in having things centrally located with access to goods in one area. One trip to get lunch and buy a bunch of things at once is vastly more efficient than a truck driving to your house multiple times a week. Having large trucks that go from factory to store is more efficient than factory to warehouse to house.
But I'm being overly reductionist I think. The environmental effects are complex, and I'd be interested to see the environmental impact from any studies done on this subject.
Amazon provides the gateway for thousands of businesses to reach customers they otherwise would not be able to. Hell, you kinda have to work to find something Actually Made By Amazon on their site. They're far more enabling of small business than Toys-R-Us! You think nobody upstart toymakers can sell into their channel?
In the UK the classic example was the chain-bookshop Waterstones. Was on the verge of bankruptcy in 2010, and had the pile-em-high highly centralised business practices. New boss allows shops to make their own buying decisions (ie different books are going to be more popular in different areas) and reducing bulk ordering (they were ordering 20,000 copies then returning 18,000 unsold books). Alongside this they had more author and other events. Ends up making shopping a more bespoke event, rather than something souless
I don't want this to turn into "the Amazon thread" as that's not what Athenor intended, so let's try to keep discussion in the context of the OP please (which is about toy stores).
Bain Capital put TRU out of business and holy shit do we need to address that.
It's pretty much "it's very complicated and there are a number of factors that change the calculation."
Shit they moved fast after TRU.
:biggrin:
Bain is Good Now
I would say it's hard to argue that this failure is consumer choice though. Clearly many people still purchased goods, profitably, from Toys R Us. If Toys R Us had NOT been purchased in the early 2000s with debt financing, and had instead used say, 20% of its profits on stock buybacks year on year then Toys R Us would still exist. It would be too expensive for predatory aquisition, and 33000 people would still have jobs. And I would be able to go to toys r us if I wanted. It was profitable when it was purchased. It remained profitable (excluding loan payments) until today.
So Toys R Us failed not because it failed to deliver a product consumers wanted, not because it failed to deliver that product at a price consumers wanted, but because its stock issuance in the past had been overly aggressive and had exposed it to predatory acquisitions.
Personally, I find myself buying less and less online and more and more locally. I never buy toys for my kids online because getting out of the house to go shopping is a pleasant use of an hour or so. Amazon is for boring stuff, like diapers and cat food. If Amazon had 'defeated' Toys R Us by making it unable to sell goods, then that is an outcome of consumer choice and is (in the long term, assuming Amazon does not become protectionist) good for consumers (since money is no longer being spent to provide unneeded things, and can be spent on other things). But that's not what happened.
This is far more like what happened with say, Starbucks and their acquisition of the 'La Boulangerie' bakery chain in SF. A small (50 stores or so) chain of local bakery shops with a French theme existed on the west coast. They had their own supply chain where the chain owned the central bakery to assure quality. Starbucks purchased the chain, and found it was very profitable and for a while was happy with it. Then, deeper analytics found that starbucks stores NEAR La Boulangerie stores were making less profits. And that while La Boulangerie stores were profitable and popular, they actually cost Starbucks profits because pastries are less profitable than selling cheap coffee. Starbucks announced the closure of the chain, and the original owner offered to buy it back, for more than he had sold it for. Starbucks refused, and knowing that the chain was a functional competitor if still alive, Starbucks sold and bulldozed the central bakeries, and sold the leases on the key locations at discount rates to non-competitors to make sure that the previous owner could not easily restart the business.
In that case, just like this one, the market HAS spoken to maximize profits vs effort, but the will of the consumer has been reversed.
Should we buy them a cake, or will a heartfelt thank you card be enough?
... But this may be my recent upkick of interest in Gunpla talking.
Lord did I dream of being on that show. I mentally plotted out my course of attack watching all these other kids, developing techniques for hooking entire racks of action figures in one fell swoop as they careened around the store like a budget Mad Max.
TRU actually got into Gunpla early (like we're talking early 2000s here), and did a few other releases of Bandai releases from Japan.
They were also the first retailer I saw that carried other Gundam franchise products like the Bandai America re-carded MSiA.
Something will replace it. The question is what, where and when. It's about what the transition costs are and where the benefits accrue. Where are the new jobs forming, what kind are they, what skills do they require and all that and when are they gonna form. Cause the answers to that can be "far away", "different then retail jobs", "different ones then these people have" and "not for another decade". But those 33,000 TRU employees need to buy food, you know, today. They need to make rent this month. They need a job now. But the new market is not right here right now. That's the problem. That's why shit like this is so catastrophic.
I'm also being laid off (unrelated) so I feel their pain.
The problem with this type of sentiment is that without a proposed solution, the default assumption is that the status quo would be better than the "catastrophy." I don't think it is ever better to reduce or stifle innovation. It should be possible for a society to use safety nets to catch those put into bad situations by innovation, without giving up on the opportunities afforded by it. I'm not saying I have an answer, but I reject the implied answer of just maintaining the status quo because it's hard to transition people.
But the failure of toys r us had nothing to do with innovation and change, but instead, had to do with predatory acquisition practices. Toys R Us made money. Bain capitol didn't use the debt to finance growth, so success was impossible.
The correct replacement for Toys R Us, is another company just like toys r us which doesn't need to change anything about its stores, rates of employee pay, or stocking practices but without a predatory agency leaching off all the profits and saddling it with debt. That store could then do better by making its stores better using the profits it now doesn't have to give to Bain Capitol.
Converse, change for the sake of change is not good either. Just look at the sort of damage we've seen from "disruption".
Bain put $4.4B of debt on the books of TRU. Their annual debt service was somewhere around $400M/year.
I believe they were looking for buyers, but not that actively. This last holiday season was lackluster, so the dam burst.
I stopped by my local one today. Busiest I have seen it ever outside of a holiday, but that might be due to it being Thursday when they offer discounts on their credit card. Even still, I saw a lot of people just scoping things out, and one kid with an amazingly strong set of lungs.
Toys R Us has outstanding debts to multiple people, not just the big loan from Bain, but that loan is the biggest part of it. That massive loan is also about the same as the total 'no debt' value of the business.
So if a new buyer comes in, they will look at the assets, subtract the debts big AND small and conclude that Toys R Us is worth less than nothing. However, Bain capital know that since the bank is the single biggest debtor, the bank gets paid first in bankruptcy. So they go bankrupt, asset strip the company, and use that money to pay off the bank.
Bain is happy, and the bank will happily loan to them again. All the small debt holders get the shaft.
Except in the meantime, without an implemented solution, those people are just left for dead.
Until those solutions are implemented shit like this is pretty fuckin far from awesome for anyone involved except for the bank and Bain capital.
I mean as a grown man it was already a longshot, but still.
https://www.ebay.com/usr/toysrus
Kinda like how the USPS has to prefund their pensions for like 80 years, and then people talk about how it's failing because it's operating under completely ridiculous parameters that no one else has?
And their competition and consumers looking for a deal.
Sure, but the underlying issue is that the people who paid for TRU were not the people who owned TRU, and the loan interest outpaced profits. But the profits were not 0, and it seems like a decades old company still turning a profit is a great way to invest safely since it is well established. So all that was needed was someone (not Bain) willing to buy TRU and accept the lower return on investment.
-edit
You're assuming the new buyer would have to pay for the business and pay off the debt, which I don't think is true. The owners are basically middle men. Once the debt to Bain is paid off, who ever paid that off now owns TRU (basically although I'm sure there are many complexities). The owners get nothing except for getting out from under the original loan they took. And if the new owners are willing to accept a smaller return on investment then bain, then they should be able to continue keeping TRU open.
Rock Band DLC | GW:OttW - arrcd | WLD - Thortar
I guess I was presuming that the debt was roughly equal to the value of the company. Like I buy a house for 500k with a loan. I immediately can't make full payments and live for a while just paying interest. A few years down the line and I can't make any payments. With interest maybe the loan has 550k outstanding now. The next person who buys the house doesn't have to pay me 500k for the house and then the bank 550k for the loan, they just have to pay the 550k for the loan*, which is roughly equal to what the house was worth.
I suppose it's possible that the interest on the loan to buy TRU was so large that the outstanding debt ballooned between when TRU was bought and now, but I that seems like it would be a bad loan to start with (and why would bain agree to it). But then I don't really know the details.
*technically they just have to pay whatever I/the bank is willing to accept. But it seems like selling for little to no profit (selling at the loan price) is better than just eating bankruptcy.
Toy makers apparently.
Why? Because they never intended to pay it off, they were going to make it someone else's problem.
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Bain agreed to the loan because they weren't on the hook for it. That's how a leveraged buyout works - you take out debt (hence the "leveraged" part) to buy the company, then you put the debt on their books.
This is a better encapsulation of the small, petty, incredibly vain and narcissistic man. (It's linked in that post)
If you enjoy people shitting on Dave Brandon for a very long time, here you go.
So in 2005 TRU was worth 6.6 billion (or at least that was what bain and a few other companies were willing to pay for it). By 2017 the outstanding debt was only 5 billion. To me that seems like someone with 5 billion could buy TRU (paying off all outstanding debts) and continue to run it. So long as they don't require a ridiculous $400 million a year in return, they have a stable income and a profitable company.
Every single word in that Quote made me so angry I got a nosebleed
Yeah we really need to preserve those sweet sweet retail jobs. Everyone is always talking about how great they are and clamouring get one and keep it for life...