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I used to think Amazon is the problem for the failing of retails and then I was enlightened. Most of these retail failed because they failed to innovate. Toys R Us still the same Toys R Us from 30 years ago when I was a kids. So any retailers failing to innovate will not escape the faith that the market has them eliminated.
I know some very smart people will eventually figure this out and we will see retailers of the future shortly.
I think you have all the pieces right, but aren't assembling them correctly.
Of course Amazon and all the online retailers who followed its model are the reason other retail models are collapsing. Why? Because they did innovate, first by offering every book in print from one source - which is not trivial if you're one of those who many times spent four to six weeks waiting for a bookstore to get an ordered title in, at full list price.
The only way other retail can "innovate" is to follow much the same model. Discounting a few boutique niches, fewer and fewer people will patronize stores with a limited selection and inventory when they can have unlimited choice and probably a better price simply by waiting anything from a few hours to a few days. Which of course becomes the downward spiral we are already well into: the B&M retailers have smaller and smaller margins, can stock fewer and fewer items, and thus drive even dedicated customers elsewhere.
Never forget that Toys R Us was the Amazon of its day - a warehouse of nearly every toy made and more besides, at good prices, year round (instead of only expanding its selection for Christmas, as department and many toy stores did). It was a successful model for other retailers like Home Depot and even Target - but other than rearranging the aisles, there was simply no more room to innovate in the face of online retail. (Yes, some proposed turning them into kiddie-park play destinations that happened to sell toys, but outside of relatively upscale areas, that model would not be successful. FAO Schwartz was there years ago and still failed.)
But everything is cyclical. Once the online/delivery model completely matures, someone will get the bright idea to open a physical store, where customers can actually walk in and touch the goods and take them home right that same moment. It will be hailed as a wonder... in 20 years.
I'd put nearly all the other "mall rat" stores at high risk. Kids don't shop in malls any more. Unless a chain has a strong online presence and is prepared to keep cutting losses on B&M stores, they'll go under in the next few years. Even at that, only the strongest will survive the ultimate competition of online - they aren't competing only against the other girly-girl t-shirt place across the plaza.
For that matter, pretty much any of the retailers who developed and grew as mall installations - selling one or two products like candles or baskets or boutique stuff no one would go more than two steps out of their way to patronize. If they haven't found a successful online foothold, kiss 'em goodbye.
The only foot traffic I see in the malls anymore, are the "indoor walkers" The sneaker folks.
Toys R Us & Claire's are closing because they can't repay the debt they acquired in leveraged buyouts.
In a leveraged buyout a venture capitalist company pays off the shareholders & takes the company private so it can restructure and eventually go public again.
The problem is that these companies loan the money to pay the shareholders (in Toys R Us case 6.6 billion) but the troubled businesses they are "helping" have to pay back most of that money plus inflated fees. They can't make enough profit to pay the loan & fees plus online retail is taking some of their busines so they're gone.
Toys R Us & Claire's are closing because they can't repay the debt they acquired in leveraged buyouts.
A factor, but not the reason. Debt is just extra weight dragging under already-drowning companies. TRU has been declining for many years. Not familiar with Claire's corporate history but it's a mall-rat retailer, and there just aren't as many mall rats (who shop at such places) any more.
It is hard to compete and make a profit acting as a showroom for amazon.
We mostly all have smart phones, many of us have 2 day shipping from Amazon. So you see that Lego set at Toys R us for $19 and you whip out the smart phone and order it off Amazon for $13. No hassle at the cashier to get a price adjustment, you get 5% back using the Chase Amazon card and there isn't much reason to do business with most retailers selling easily found goods.
Toys R Us had no way to innovate. They were a brick and mortar that sold the same toys that Walmart and Amazon sold for less. They were a relic of the specialty era selling goods that most people don't regularly need and when they do could care less where they buy it from.
Toys R Us and Claire's have announced their closings this month as they are finding it hard to stay alive in the brick and mortar department. What are your speculations about the next retailers to meet the same fate this year?
I hope you're not in a panic. Toys 'R' Us wasn't exactly catering to every household, and Claire's caters to an even more limited market, mainly teenage girls.
There's no way Claire's can compete with local tattoo parlors that also offer piercings. If you're a teenage girl, it's way more cool to tell your friends you got pierced at a tattoo parlor, instead of Claire's, and Claire's didn't really offer much else, except for cheap costume jewelry, not to mention being located in a shopping mall is equivalent to being located in a Black Hole where no one wants to go.
Quote:
Originally Posted by cw30000
I used to think Amazon is the problem for the failing of retails and then I was enlightened. Most of these retail failed because they failed to innovate. Toys R Us still the same Toys R Us from 30 years ago when I was a kids. So any retailers failing to innovate will not escape the faith that the market has them eliminated.
I know some very smart people will eventually figure this out and we will see retailers of the future shortly.
The CEO, CFO and COO of Toys 'R' Us were stupid, because they failed to keep at least 1/3 of their assets in cash.
Without any cash, they couldn't stop KKR and Bain Capital from buying up their stock, and in the end they were saddled with debt and couldn't get out from under it.
Kroger's provides an instructive lesson on how to deal with the likes of KKR. Kroger's has historically always kept large masses of cash on-hand, so when KKR came calling, which would have meant Kroger's eventual death, Kroger's simply took the cash they kept on-hand and started buying back their own stock, which drove up the price and put out of reach for KKR.
The people of Cincinnati were fortunate, not only because Kroger's is headquartered there providing thousands of jobs, but also because the company re-invests in the community and sponsors the arts and many non-profit organizations, which rely heavily on the generous gifts from Kroger's to continue operating.
Quote:
Originally Posted by 5-all
Toys R Us & Claire's are closing because they can't repay the debt they acquired in leveraged buyouts.
In a leveraged buyout a venture capitalist company pays off the shareholders & takes the company private so it can restructure and eventually go public again.
Toys R Us and Claire's have announced their closings this month as they are finding it hard to stay alive in the brick and mortar department. What are your speculations about the next retailers to meet the same fate this year?
I am monitoring Sears Holdings and Southeastern Grocers.
Sears Holdings will come down to Sears or Kmart disappearing first. I see Kmart disappearing as it lost to Walmart and Target years ago. Sears could survive with more assets divested. I fear Sears Auto Center will be its next divestiture.
Southeastern Grocers, consisting of supermarkets BI-LO, Fresco y Más, Harvey's Supermarket, and Winn-Dixie, announced the closing of ninety-four stores in Alabama, Florida, Georgia, Lousiana, Mississippi, North Carolina, and South Carolina. It is projected to operate 582 stores after Monday, 30 April. Having approximately $1,000,000,000 in debt, I could see another round of stores closing, stores divested, and exits from irrelevant and distant markets. BI-LO exiting North Carolina and Winn-Dixie exiting Louisiana and Mississippi should not be a surprise.
Macys/Nordstroms are still trying to reinvent themselves and stay relevant. They seem to be doing ok, I think they had to sell a bunch of their stores though. Walmart is fine, home depot is fine. Cheap places like TJ Maxx are fine
Sears, blockbuster, toys r us, kmart, never stood a chance. They weren't "cool enough" and got embarrassed by Amazon and other online services like netflix.
Toys R Us & Claire's are closing because they can't repay the debt they acquired in leveraged buyouts.
In a leveraged buyout a venture capitalist company pays off the shareholders & takes the company private so it can restructure and eventually go public again.
The problem is that these companies loan the money to pay the shareholders (in Toys R Us case 6.6 billion) but the troubled businesses they are "helping" have to pay back most of that money plus inflated fees. They can't make enough profit to pay the loan & fees plus online retail is taking some of their busines so they're gone.
I actually had thought about that while I was out and about yesterday. I was driving by a Guitar Center and wondered, "How on earth do those stores stay in business?" As for Claire's, after reading OP's post, I couldn't initially remember what the store was at all; it's that forgettable. And I shopped there years ago! Maybe that is its problem.
Toys R Us and Claire's have announced their closings this month as they are finding it hard to stay alive in the brick and mortar department. What are your speculations about the next retailers to meet the same fate this year?
Sears/Kmart
J C Penney
J Crew
Charlotte Russe
Barnes and Noble
Payless
G N C
Vitamin World
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