The article describes an issue with Toys “R” Us having to close numerous retail locations. At its peak, the stores attracted high customer traffic and sales. This increased the company’s worth to $7.5 billion in 2005, largely due to the valuable real estate properties which the retail locations occupied. The value of real estate inherently defines a company’s financial viability, thus making it easier to engage in financial dealings, including borrowing credit. With the rapid transition to online shopping in recent years, Toys “R” Us is forced to close many of its stores to remain operational. However, the sale of retail space for adequate prices is difficult since the commercial sector as a whole is being hit by the transition to online venues which has resulted in value depreciation for the properties. Therefore, moving forward, Toys “R” Us must be able to maintain its operational capabilities while balancing the issue of declining retail sales and value of its numerous real estate properties.
It is evident that the company, similar to many in the retail industry, failed to accommodate the changing trends and consumer behaviors. As the article points out, despite Amazon overtaking a substantial portion of the market by consolidating all products into an online marketplace, it cannot be blamed for poor operations management practiced by traditional retailers. In fact, the most prominent online corporations are rapidly expanding various brick and mortar locations. Therefore, it can be argued that the demise of Toys “R” Us occurred due to impractical management.
Financial analysts agree that the company led irresponsible fiscal practices, borrowing heavily and not doing enough to restructure its business. The retail chain also had inadequate supply chain management and cooperation with toy suppliers. Its most popular products would often be out of stock, and the rest of the offerings did little to appeal to customers. Inventory management was faulty with improper product segmentation and price optimization. As the company faced crippling debt and falling revenue, vendors and suppliers sought to cease shipments that further impacted what its stores could offer. Finally, without any clear strategy in recent years or noticeable change to its practices in order to attract consumers.
The main issue of real estate discussed in the article is, unfortunately, one of the last outcomes for the failing company which is currently facing bankruptcy. Retail space thrives on customer traffic. Toys “R” Us needs to radically revitalize its business model to combine a seamless transition between online and brick and mortar shopping experiences. That is particularly relevant in the toy industry where many customers may be reluctant to purchase goods, especially large and expensive ones, without hands-on experience. The company should strive to offer a unique approach to buying kids products since many other non-specialized stores (Walmart) sell them as well. Store space should be used as a demonstrative showroom, and an attractive online experience can be developed where customers can purchase a wider selection of products after leaving the store. By creating a purpose for its retail space in the business, the real estate value will increase substantially and create revenue for the company.
Unfortunately, such radical changes in the business model require substantial capital which Toys “R” Us does not have. It is currently undergoing court guided bankruptcy which consists of liquidating its assets. That process should be considered as a positive step to rid the company of unnecessary and expensive to upkeep assets, streamline its operations, and improve supply chain management. The leading corporations maintain well-managed supply chain systems that allow to deliver products to consumers based on accurately forecasted demands. A clear strategic plan should be developed for future business models in order to assure investors that the company is maintaining a vision of innovation in line with changing consumer behaviors.