Toys R Us Clearance A Concerning Sign

Toys R Us is clearly taking the "it's a marathon and not a sprint" approach with its liquidation sale. The discount level isn't moving at a blistering pace, and this is manifesting a concern.

I first checked this "going out of business sale" during the first weekend, and the store was a zoo. You could barely move. This was despite the fact that most toys were only 10% off which merely brought the prices inline with other less expensive retailers (if that). The crowd had to have been the result of morbid curiosity and novelty. Now that the bloom is off the rose, my local Toys R Us store is largely empty despite most items now reaching the 20% clearance level. I went twice this weekend, and on one visit, there were more employees in the store than customers. This is concerning.

Unlike Walmart and Target, Toys R Us must make money on the toys they sell. If they don't, they literally have no revenue stream. Walmart and Target could sell toys at cost, or at a loss, and not break a sweat. It's not their bread and butter. But when you look at Toys R Us, this clearance sale is indicating that, for a lot of toys, demand is only tepid. Even at 20% off of MSRP, it doesn't generate a lot of interest. This includes myself. A lot of the product Toys R Us has at 20% off is sitting cheaper, and in similar volumes, at my local Walmart in the clearance aisle.

We can all bemoan the death of the last national toy store, but the simple fact is that model has no place in the current market landscape. If an entity must turn a profit on the toys it sells, there is little hope for them. The public doesn't even want those toys at 20% off.

---

comments powered by Disqus