Toys ‘R’ Us: the predator that became the prey

I remember the arrival of Toys ‘R’ Us in Britain, because as a young banker
in 1984 I was tasked with devising a menu of exciting financial products to offer a brash American retailer that was clearly going to take a bite out of our sleepy — and in those days still Christmas-seasonal — domestic toy market. How we sneered at that childlike reversed R in the logotype; likewise the Guardian, commenting on insatiable demand for Cabbage Patch dolls, derided the chain’s huge stores as ‘-cathedrals to kiddie gratification’. But however tacky its image, this was the ultimate ‘economic disruptor’, to use The Spectator’s current favourite phrase: a business that utterly transformed its marketplace.

It did so by offering a cornucopia of toys at deep-discount prices — the more sought-after the item, the more aggressive the pricing — and brainwashing children into begging parents for more, all year round. To deploy another phrase from management science, it was the ‘category killer’ of its sector, rapidly building competitive advantage over rivals large and small. And whatever financial playthings we provided in support, they were not so toxic as to impede its onward march, trampling traditional shopkeepers along the way.

But now the category killer has itself been killed off by a combination of competitive might, bad finance and the power of the internet. First Toys ‘R’ Us was overtaken in sales volumes by Walmart, a discounter with colossal clout across the whole US retail sector; then it took on Amazon. When the online seller was still an up-and-comer back in 2000, it agreed to be a sales channel for selected Toy ‘R’ Us products: Amazon founder Jeff Bezos kept an empty chair at the negotiating table ‘for the customer’, to remind both sides of their ultimate purpose.