Toys "R" Us

The final days of Toys "R" Us were heartbreaking. Parents who'd grown up at Toys "R" Us were bringing their kids to the going-out-of-business sale, and the store was basically empty. Empty pegs. Empty shelves. The warehouse feeling of abundance had become the warehouse feeling of abandonment. Kids didn't understand why Geoffrey the Giraffe had abandoned them. The company filed for bankruptcy in 2017 and liquidated its U.S. stores in 2018.

Charles Lazarus founded Toys "R" Us in 1957, but the real genius was recognizing that by the 1980s, children had too many toys to fit in a normal store. You needed a warehouse. Cathedral ceilings. Aisles so wide you could push a cart without bumping the person next to you. You needed the sense that they had EVERYTHING. The jingle — "I don't wanna grow up, I'm a Toys 'R' Us kid" — was insidious because it was actually true. Who wanted to grow up? Growing up meant leaving Toys "R" Us, the one place where everything was optimized for joy and acquisition.

Walking into a Toys "R" Us store in the late 1980s and early 1990s felt like walking into a temple. The store was probably 50,000 square feet. Action figures were organized by brand — entire walls of He-Man, entire sections of Star Wars. There were entire walls of Lego. Video games had their own section with demo stations where you could actually play. Bikes were assembled and hanging. Baby dolls filled an entire quadrant. The store smelled like plastic and industrial air freshener. Geoffrey the Giraffe — orange with a blue tie — was everywhere: on the logo, on the shopping bags, in commercials, in your head. The stores were the epicenter of childhood acquisition.

Toys "R" Us had the best negotiating position with manufacturers. They could demand low prices because they had shelf space manufacturers desperately needed. They were wildly profitable. By the 1990s, they were the biggest toy retailer in America by a wide margin. Parents went there out of habit. Kids went there to look at the things they wanted. For about two decades, Toys "R" Us was inevitable. Birthday parties ended at Toys "R" Us. Christmas shopping meant Toys "R" Us. It was woven into American childhood.

The decline was partially Amazon's fault but not entirely. Amazon started selling toys in the late 1990s. Walmart and Target added toy sections that were large enough to be competitive. But the real problem was a leveraged buyout in 2005. A consortium of investors bought Toys "R" Us for $6.6 billion and immediately saddled the company with $5 billion in debt. For the next thirteen years, the company was bleeding cash just servicing that debt, unable to invest in stores, unable to keep up with Amazon's logistics, unable to compete on price with Walmart. The company was hollowed out from the inside.

By 2017, Toys "R" Us was collapsing. The stores were not being remodeled. Inventory seemed thin. Checkout lines were long. The magic was gone. The company filed for bankruptcy in 2017 and liquidated its U.S. stores in 2018. The final days were sad — parents who'd grown up at Toys "R" Us were bringing their kids to the going-out-of-business sale, and the store was basically empty.

What makes Toys "R" Us haunting is that the business model itself wasn't broken. Kids still wanted toys. Toys still existed. The stores could have worked if they hadn't been crushed by debt service, if they'd invested in e-commerce earlier, if they'd been allowed to think beyond the next quarterly earnings call. It's a story about private equity and financial engineering more than it's a story about the Internet. The Internet didn't kill Toys "R" Us; incompetent owners did. The brand still exists in limited form — a few small shop-in-shop locations, a pop-up store here and there. But the big warehouse stores are gone. And with them, that particular flavor of American childhood acquisition is gone too.