Toys R Us reports full supplier backing
- A federal bankruptcy judge this week approved a $3.1 billion debtor-in-possession loan for Toys R Us. The financing, from a group of creditors led by JPMorgan, is meant to keep the toy retailer stocked and operating as normal through the all-important holiday season and beyond.
- Josh Sussberg, an attorney for the retailer with Kirkland & Ellis, said in court Tuesday that Toys R Us has its supply chain "completely back in focus," with 49 of its top 50 vendors back online and shipping on normal trade terms. He added that the company is "better than we've been stocked before."
- Sussberg also said that Toys R Us is "continuing to fix our issues," investing in its business and working on a balance sheet restructuring "in conference rooms in the deep of night." He added that the company's working "thesis" throughout the bankruptcy proceedings would be that Toys R Us is the only "toy showroom" of its reach. "You don't get this customer service at Walmart, you don't get this customer experience at Target, you certainly don't get this customer experience on your smartphone."
In court, in commercials and in press releases, Toys R Us is doing its best to remind the world that it is still open for business, despite its Chapter 11 filing this fall.
"We are continuing to provide customers outstanding service whenever, wherever and however they want to shop with us — just as we have for the past 70 years and will continue to do for decades into the future," CEO Dave Brandon said in a release this week. "Our brick-and-mortar and web stores around the world are open and continuing to serve customers."
In the same release, Brandon hinted at new giveaways and events, as well as a price-matching scheme and accompanying charity drive. This follows a rebrand that aims to position Toys R Us as a child-centric place for freeplay and a testing room for popular toys.
Just as important is the company's reassurance to the courts and customers that it has the support of its creditors and vendors. The latter group of stakeholders is especially crucial, as it was panic among Toys R Us suppliers that hastened its trip to bankruptcy court. (And even after bankruptcy, there were reports that suppliers were wary of the retailer and cutting it off.)
Good vendor relationships are necessary to the retailer's survival, and the rebranding and in-store experiments show at least that the company is trying. But, in the long run, it might take a larger investment to turnaround Toys R Us' business. Indeed, the company might need to make much bigger existential decisions about its place in the toy-selling world.
As Sussberg pointed out in court, Toys R Us is competing with — and has been losing market share to — mass merchants and Amazon, retailers that can afford to heavily discount toys because they are just one of many products they sell and inessential to their bottom line.
"They're at risk of being caught in an increasingly shrinking center," Greg Portell, lead partner for consulting firm A.T. Kearney's retail practice, told Retail Dive in an interview prior to Toys R Us' filing. "On the one hand, there are online players that can be more convenient. There are high-end bespoke toy shops that are much more curated. Then you have essentially a big box toy company that is stuck with an undifferentiated position and a cost base that doesn't reflect that."
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