It's not over until it's over, but unfortunately for the beleaguered Toys "R" Us Inc., the end is here—and not even Amazon.com Inc. (AMZN) could save it.
Known for its unpredictability, the e-commerce giant has been eyeing brick-and-mortar expansion, which Toys "R" Us could offer right now at liquidation-level prices. It's unlikely, however, that Amazon—or any other strategic player—would be interested in 70-year-old toy chain, multiple industry sources told TheStreet Thursday, March 15.
"The time has come for Toys "R" Us. There's too much water under the bridge," said Bob Phibbs, a retail consultant.
Jim Fosina, CEO of Fosina Marketing Group, agrees. "It is highly unlikely that Amazon would be interested in the overhead issues that the Toys 'R' Us business will place on the company," he wrote in an email statement. The fact that it's closing will help Amazon, he added, because more customers will "begin doing all their shopping online."
"Expect that Amazon will expand their inventory in the area of toys around peak buying season online to capture that 'lost' Toys 'R' Us customers," he said.
Amazon, for one, already outperforms not only Toys "R" Us but also Walmart Inc. (WMT) and Target Corp. (TGT) in online toy sales, according to data from Edison Trends, a research firm that specializes in e-commerce. Amazon's toys and games sales orders were more than 36 times higher than those at Toys "R" Us, in fact.
"The Toys 'R' Us brand name still holds some nostalgic power," said Edison co-founder Hetal Pandya, pointing to its famous jingle that was named as an asset in the bankruptcy filing. But, she added, its real estate would have been more attractive to Amazon before it successfully acquired Whole Foods.
"With their brick-and-mortar strategy underway, there may be less need for Amazon to find Toys 'R' Us very attractive," Pandya said.
Not to mention, Toys "R" Us and Amazon share a troubled track record. In 2004, the toy chain sued the latter over its exclusive sales agreement. Amazon countersued, claiming that Toys "R" Us routinely failed to keep products in stock. The lawsuit lasted years, with Toys ultimately prevailing and Amazon paying $51 million in settlement fees.
"They kind of had a not-so-happy history, and Amazon obviously was part of what expedited Toys 'R' Us' demise," said Barbara Kahn, a professor of marketing at the University of Pennsylvania's Wharton business school.
Now that Toys "R" Us will be closing all 735 of its stores in the U.S., retailers like Costco Wholesale Corp. (COST) and Walmart will also expand their selections, as Amazon will, according to Fosina.
Consumers, meanwhile, have already moved on.
"Toys 'R' Us was built for the children of Baby Boomers. They wanted their kids to have the possibility of everything," Phibbs said. "But young moms don't want that anymore. They're going to discount channels and smaller, local stores. The whole big box model just doesn't work anymore."