Online Shopping Has Crushed U.S. Retail Industry, Toys ‘R’ Us Files For Bankruptcy Protection

After struggling to keep its customers against competition from the online shopping industry for more than 10 years, the largest toy chain store in America finally surrenders. Reportedly, Toys ‘R’ Us has filed for bankruptcy on Monday, Sept. 8 in the U.S. Bankruptcy Court for the Eastern District of Virginia in Richmond. Thus, ending the story of the toy store that has enticed Americans for 69 years.

The surprising news, according to Reuters, is the latest indication of the current turmoil in U.S. retail business. Toys ‘R’ Us has become the latest retailer following Payless, Gymboree, Perfumania, and many others that have already filed the Chapter 11 document.

The company’s CEO David Brandon, who took the helm of the company in 2015, has made a tremendous effort to keep Toys ‘R’ Us afloat. Unfortunately, the pressure from online shopping and discount chain stores was too hard to handle. According to Bloomberg, Toys ‘R’ Us has not reported a profit in a single quarter since 2013.

Furthermore, in the latest quarter, the company suffered a $164 million net loss. Failing to make a profit for four consecutive years has entangled Toys ‘R’ Us in billions of dollars of debt.

Prior to filing for bankruptcy, the company had secured another $3 billion financing in the form of debtor-in-possession from the bank syndication led by JPMorgan. The management decided to file for bankruptcy protection to maximize the usage of the financing to keep its stores open until the holiday season.

For the past five years, traditional brick and mortar retailers have suffered an ultimate blow from the online shopping industry that has changed the retail customers’ buying habits. In the late 1990s, Toys ‘R’ Us had tried to adapt to the customers’ buying habits by establishing its own online store.

However, the New Jersey-based company failed to manage the online store. Subsequently, Toys ‘R’ Us signed an exclusive partnership with Amazon to sell toys. But the partnership turned sour in 2006 after Amazon allowed other retailers to sell the same products in its online store. Hereafter, the failure to enter the online shopping business has forced Toys ‘R’ Us to pay a huge price that affects its business.

Since its founding in 1948, Toys ‘R’ Us has been synonymous with the toy business. In the past 69 years, Toys ‘R’ Us became the most famous and largest toy store chain in the U.S. and the world. During the height of its success, Toys ‘R’ Us operated a gigantic flagship store in Times Square New York that mesmerized both kids and their parents. However, the company had to close down its 110,000-square-foot store two years ago to reduce its loss.

Now, Toys ‘R’ Us faces a bitter reality of its failure to deal with the changes in the business landscape. To attract customers, the company has to take a drastic measure to keep its stores open until the holiday season. In order to do that, Toys ‘R’ Us has secured $3 billion in financing and filed for bankruptcy protection.

[Featured Image by Mary Altaffe/AP Photo]