Lessons from Toys are us Closure

Lessons from Toys are us Closure

It is a sad hear about the collapse of Toys R Us in 2018. Especially a major one like Toys R us which is closing down 100 of its stores in the UK. It has not been long since Carillon went into administration. The famous Toys R Us was originally set up in the US during the baby boom era of 1950. In Britain Toys R Us was the World’s leading Family Leisure stores in the UK with 100 stores and over 1500 stores worldwide in 33 countries. Toys R Us was founded in the UK in 1985 with the opening of 5 stores and grew rapidly through with store openings in England, Scotland, Wales and Northern Ireland.

The business model was the building of big retail stores out of town where they offered free parking and baby changing facilities. Toys R Us was the proud winner of the Tommy Parent Friendly Award 9 times.

The different departments included:

Babies R Us at Toys R Us

Providing for the needs of parents, parents-to-be and their family. Stock included, furniture, car seats, bedding, strollers, safety products, nappies and baby food.

Teentronics and Video Games at Toys R Us

A selection of technology products suitable for everyone from kids to teenagers to Mum and Dad.

Bikes and Outdoor at Toys R Us

A range of wheeled goods and bikes from Trikes and Go-Karts to pavement cycle to hi-tech, hi-spec bikes. This included a range of products needed to have fun in the sun and in the garden: swings, slides, pools, sandpits, playhouses and gym-sets.

Toys “R” Us Direct

From the outdoors to the online, before the likes of amazon became popular, toysrus.co.uk had commenced trading on-line. They made the leap in 1996 making their range available to millions more customers across the UK.

What Happened to Toys R Us

Toys are us predicament seem to have been from the on set with a staggering debt balance from the parent company of a $5bn long term debt. Interest charges and pay back amounted to $250m a year cycling away all their profits to their creditors.

In September 2017 the US filed for bankruptcy. The US arm is believed to be going into liquidation as the company failed to pay their creditors.

On December 2017 the pension protection fund (pension fund backer) threatened to block restructuring plans by the Toys r Us but back tracked when Toys r us promised to contribute £9.8m to the pension fund over a three year period. That is now a distance reality. PPF has confirmed that the pension of the employees are guaranteed. The calculated deficit by PPF’s calculation stands at £38m with a membership of 640 members.

Current Business Trading at Toys R Us

By the 15th of March, 25 stores out of the 100 Toys R Us stores will be closed. All trading has now ceased online. The rest of th 75 Toys R Us stores will close in 2018, as to when stocks last. 2000 Toys R Us staff are still in employment. By the close of play on 14th of March, 67 staff members of the company will be made redundant at the HQ in Maidenhead. As for the UK shops as a whole the number of people made redundant now stands at 377.

Generated Interest in Toys R Us Sale

The decision to go and into administration whilst the administrators sought for buyers generated interest for the UK arm of Toys R US. The administrators spoke to 121 interested parties. Out of the 121 about 60 of them were interested in stock. Another half were interested in fixtures and fittings. Some were interested in whole business or part of it. The last known interested party of the now closing down Toys R Us in 2018, left the negotiation table on the 13th of March 2018.

Opportunity for employees after Toys R Us Closes

Overall reviews about working for Toys R Us is good. The indeed review site gives Toys R Us a 76% rating out of 11.5k reviews. That is pretty good. Many of the Toys R Us employees have worked for long a time and would have acquired great skills for their next jobs. In 2018 my advice is not only look at opportunities within the retail and wholesale industry. An immediate fit may be to work at Amazon. However, my challenge to you to day is even if you decide to look at getting work immediately to support yourself, start thinking outside the box and learn how you can use the experts you have acquired after the long employment history with Toys R Us.

Your long term knowledge of toys whatever department of Toy R Us you worked in helps you to be among st the most knowledgeable in your field or niche. You can use your knowledge to sell on Amazon, eBay or have your own e-commerce website. This can be a second income for you whilst you learn the trade. With the knowledge you have acquired from your long term service with Toys R Us you can earn as much as £2000 upwards a month. However, a word of caution it requires a lot of dedication and hard work. You can start learning how free of charge. Alternatively if you want to attend a hand on training where you are thought the skill whilst you practice the skills there are world leading trainers who don’t only know their stuff but have tried and tested it. Every unfortunate circumstance brings with it an opportunity and its yours to grab it.

Toys R Us Lessons for Business Owners

Toy R Us may have been a large company but the ramifications may affect small business suppliers across the country. Last year revenue for the US arm was $7bn. If a $7bn plus revenue company can go down, then small ones should take heed. The main issue here with Toys R Us was their huge debt burden of $5bn. Businesses need money to expand and business owners sometimes think the answer is going to the bank for a loan. It is a perfectly plausible answer but my advice is for business owners to look at their working capital and work out where their money is tied in if any before they visit their bank manager. I have seen many cases where the cash is tied into receivables or debtors. If the business has a history of not chasing their debtors for outstanding balances the situation will only get worse when they expand. An expansion that increases sales by £200,000, assuming all customers pay on credit. Increased sales means £200,000 increment on debtors or receivables. If the customers average payment term is 60 days then it will take 60 days to get paid the extra increase in sales. If you have a customer like Toy R Us or Carillon during that 60 days you may end up writing the sales off as a bad debt. For any business but especially small businesses cash flow management should be their number one priority. Part of that management is ensuring that your working capital is healthy and not dependent on a bank.

There are readily available of accounting software and templates that will help you reduce the credit risk. I can understand there are certain large companies like the likes of Tesco’s or Toy R Us who seek longer credit terms because they are such a large company and like to call the shots. In the unfortunate circumstance where you have a client who wouldn’t barge shortening the credit terms but a key customer of yours, take up a credit insurance if you feel the need to reduce your risk. Credit insurance can be expensive but with the right help you can get it at an affordable cost.

Conclusion

A great company with great staff and products but failed to tackle its long term debt and competitors will soon be hanging its boots. But as great as it is, we must all learn from its mistakes. Staff should use this as an opportunity and take advantage of the very competitor that drove its employer into administration. Businesses should do a health check of their business with the understanding that no matter who your customer is the business must mitigate itself against any eventuality.

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2018-05-22T14:48:11+00:00
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