Why Did Toys “R” Us Go Out of Business?

Toys “R” Us, one of the largest toy and baby products retailers in the United States, went bankrupt in 2017, leading to the closure of hundreds of stores across the US. The company’s failure was a surprise to many, given its longstanding presence in the retail market. However, several factors led to the company’s downfall, including increased competition from online retailers, financial mismanagement, and a failure to pivot to e-commerce. In this article, we’ll take a closer look at why Toys “R” Us went out of business and what lessons can be learned from this retail giant’s collapse.

A Brief History of Toys “R” Us

Toys “R” Us, founded in 1948, was originally a children’s furniture store called Children’s Bargain Town. The company’s founder, Charles Lazarus, later rebranded the store to focus on toys, eventually leading to the creation of the iconic “Toys “R” Us” brand. Over the years, Toys “R” Us grew to become one of the largest toy retailers in the world, with over 1,500 stores in 33 countries.

Despite its success, Toys “R” Us made several mistakes that contributed to its downfall. For example, the company’s expansion into large, warehouse-style stores in the 1990s led to high operating costs and excessive inventory. Additionally, some of the company’s branding decisions, such as its focus on the outdated mascot Geoffrey the Giraffe, contributed to a lack of relevance among younger consumers.

The Global Retail Market and Increased Competition

The rise of e-commerce and online retailers like Amazon was a significant factor in Toys “R” Us’s bankruptcy. While the company offered an extensive selection of toys and baby products, consumers increasingly turned to online retailers for lower prices and more convenient shopping. This trend was especially prominent among younger consumers who grew up using technology and were accustomed to digital-first shopping experiences.

Additionally, the 2008 financial crisis further weakened the retail market, leading to declining sales for many brick-and-mortar stores. This downturn, coupled with the rise of discount stores like Walmart and Target, left Toys “R” Us struggling to compete.

Retrospective on Toys “R” Us’s Customer Experience

Toys “R” Us’s inability to provide a seamless and enjoyable customer experience was another contributing factor to the company’s bankruptcy. According to former employees and disillusioned shoppers, the company’s stores were often disorganized and understaffed, leading to frustrating shopping experiences. The company’s online presence was also lacking, with its website plagued by long load times and a confusing layout.

Debt Load and Financial Mismanagement

Perhaps one of the most significant factors in Toys “R” Us’s bankruptcy was its massive debt load. The company was heavily leveraged following its 2005 buyout by private equity firms Bain Capital, KKR, and Vornado Realty Trust. The $6.6 billion buyout was financed primarily with borrowed money and left the company struggling to pay off its debt amid declining sales. Additionally, the company’s leadership was criticized for its financial mismanagement, including overpaying executives and underinvesting in technology and e-commerce.

The Changing Landscape of Brick-and-Mortar Retail

Brick-and-mortar retail has undergone significant changes in recent years, with many traditional retailers struggling to adapt. One of the trends that has emerged is the rise of discount stores like Walmart and Target, which offer lower prices than specialty retailers like Toys “R” Us. Additionally, consumers are showing a preference for smaller stores with more curated selections, eschewing the “big box” style of retail that Toys “R” Us focused on.

Failure to Pivot to E-Commerce

Another key issue that contributed to Toys “R” Us’s downfall was the company’s failure to pivot to e-commerce. While other retailers like Walmart and Target invested heavily in their online presence, Toys “R” Us struggled to keep up. The company’s website was notoriously difficult to navigate, and its online selection was limited compared to online retailers like Amazon. Additionally, the company’s leadership was slow to adopt new technologies like mobile shopping apps and personalized product recommendations.

Interviews with Experts and Industry Insiders

Experts and industry insiders have weighed in on Toys “R” Us’s bankruptcy, offering insights into the lessons that can be learned from the company’s failures. One key takeaway is the importance of adaptability and agility in the modern retail market. Retailers must be willing to pivot quickly in response to changing consumer trends and preferences. Additionally, retailers must embrace technology and e-commerce to remain competitive in an increasingly digital-first world.


Toys “R” Us’s bankruptcy serves as a cautionary tale for retailers of all sizes. The company’s downfall was the result of numerous factors, including increased competition from online retailers, financial mismanagement, and a failure to pivot to e-commerce. Retailers must be willing to adapt and evolve in response to changing consumer trends, and they must prioritize customer experience and technology to remain competitive. By learning from the mistakes made by Toys “R” Us, retailers can position themselves for success in the rapidly evolving retail landscape.

By Riddle Reviewer

Hi, I'm Riddle Reviewer. I curate fascinating insights across fields in this blog, hoping to illuminate and inspire. Join me on this journey of discovery as we explore the wonders of the world together.

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