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What happened to Toys R Us?
what have they done with Geoffrey the Giraffe!?
Welcome all new MoneyLemma subscribers! This week’s post comes in video form - it’s another collaboration with our favorite YouTuber Jason from Company Insights.
Last month MoneyLemma covered the rise of e-commerce. This week’s video, another collaboration with Jason at Company Insights, tells the other side of the story: where are e-commerce sales coming from? Toys R Us is a great example of a class of companies that have all but evaporated from the United States: category killers. Before the internet, but sometime after conspicuous consumption displaced Puritanism as the national faith, specialized superstores (nicknamed category killers) began gobbling up the competition. A category killer strategy was to build huge stores dedicated to one niche. Breadth of selection and price (obtained by ordering larger volumes) made category killers preferred retailers. Of course, the internet is now the preferred destination for customers seeking breadth of selection and price. For those of us old enough to remember the 90s (we are considered boomers now), these stores may remind you of a simpler time:
What exactly happened to these once all-powerful stores? That’s what this week’s video is all about:
As the video points out, category killers weren’t just competing with e-commerce: they also had to face the rise of big box retailers like Costco. More importantly, not all category killers went extinct. Some pivoted their businesses to take advantage of e-commerce. Here’s a selection of reformed category killers that are now top 100 online retailers in the US (per Automizely):
And one last update since this video was made: Toys R Us is back! At least, for now. The New York Times reported that a new group of owners are seeking to reinvent Toys R Us four years after store-shuttering bankruptcy. If you read MoneyLemma’s post on e-commerce, you may guess what the new strategy is: experience-based shopping that can’t be replicated online. Mascots, clowns, face-paint, magicians, a ribbon-cutting ceremony, and mannequins that come to life after hours and throw hardcore raves. Geoffrey the Giant is even signing autographs, they’re bringing back the 90s! Or at least, they’re trying. Whether the new ownership team accomplishes its goal of opening 400 new Toys R Us stores remains to be seen. If they do, it could mean a new era of category killers. If they don’t, it could be the final farewell. MoneyLemma’s bet: this flops. Sorry 90s lovers, but e-commerce is a formidable foe!