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  • Resurrection of Celebrated Store Chain Reminds Us: The Free Market Can Be Really Cool!

    An unexpected development in the toy-selling business provides more evidence why the free market – much maligned “capitalism”, to many – is dynamic, exciting, risky, rewarding. In short: really pretty cool.

    Bloomberg:

    About a year after shuttering U.S. operations, the remnant of the defunct toy chain [Toys “R” Us] is set to return this holiday season by opening about a half dozen U.S. stores and an e-commerce site, according to people familiar with the matter.

    Richard Barry, a former Toys “R” Us executive who is now CEO of new entity Tru Kids Inc., has been pitching his vision to reincarnate the chain to toymakers…

    The stores are slated to be about 10,000-square feet, roughly a third of the size of the brand’s big-box outlets that closed last year … The locations will also have more experiences, like play areas. The startup costs could be minimized with a consignment inventory model

    So a slightly tweaked business plan is envisioned; a leaner, more efficient operation; some innovations, new approaches, learning from previous mistakes. That often connotes positive things, right?

    It remains to be seen how much of a boost the retailer’s comeback will provide the toy industry … The original Toys “R” Us, the only national toy chain, left a huge hole when it went under. It had been generating about $7 billion in sales a year in the U.S. through more than 700 locations, including the Babies “R” Us brand.

    Walmart Inc., Target Corp. and Amazon.com Inc. have swooped in to fill the void. They have all expanded toy assortments and marketing, including a printed toy catalog from Amazon. Other non-traditional chains jumped into the category, including grocery stores and Party City Holdco Inc.

    This is typical of the kind of market churn that occurs all the time when businesses are allowed to buy, sell, grow, retool, succeed and fail.  Some product and service providers benefit, others take a hit (the technical term is “dislocation”) . Consumers generally reap the rewards of the often dizzying process: more options, dropping prices, improved service. It can be daunting … and thrilling. Yes, there are “winners” and “losers” but it all goes together.

    There is also a question of how many toymakers will do business with the new Toys “R” Us after many lost money when the former company announced liquidation in March 2018, just months after filing for bankruptcy. …

    MGA Entertainment Inc., one of the best-performing toymakers in the world, is already on board to sell at the re-imagined Toys “R” Us shops, said Chief Executive Officer Isaac Larian, who said he has been pitched the plan. … “This market needs a self-standing toy store, that’s for sure,” Larian said in an interview. “We will sell them inventory.”

    Note: some folks are seeing a need and moving to fill it. This is the stuff of which success stories are often made — and free-market capitalism makes ample room for it. Of course, risk is involved as well.

    During the chain’s bankruptcy, lenders … took control of the company’s assets. After results didn’t improve, they opted to shutter operations … The lenders then formed Tru Kids with the goal of reviving the brand in the U.S. and other regions it exited. It has since hired several industry veterans and signed a deal to bring Toys “R” Us and Babies “R” Us back to Australia through a partner.

    So, people’s talents are being put to use, creative solutions developed, capabilities challenged, team work emphasized. Time will tell if it proves successful or falls short, but this is the way things ought to work: Individuals, created in the image of God, aiming to produce, create, solve problems and meet needs. Along the way, jobs and income are generated, people’s wants satisfied.  Socialism and command/control economies usually stifle these dynamic potentials; the free market encourages and makes way for them.

    Would it be have been better if the Federal Government had created a Department of Toys back when Toys R Us first began floundering? Precedent suggests no. That approach is too often bloated, expensive and ineffective.

    The months ahead will reveal if the free-market approach proves fruitful in this case.

    Parents and their kids, no doubt, will be monitoring.

    photo credit: jjbers <a href=”http://www.flickr.com/photos/148374920@N02/27451807779″>Toys R Us (Manchester, Connecticut)</a> via <a href=”http://photopin.com”>photopin</a> <a href=”https://creativecommons.org/licenses/by/2.0/”>(license)</a>


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