Xinhua News Agency commented on the bankruptcy of Toys R Us: reflecting the impact of the Internet economy on the traditional retail industry
Xinhuanet reported on September 19 that the famous American toy chain toy, R Us, officially filed for bankruptcy protection on the 18th and initiated bankruptcy liquidation procedures in the US bankruptcy court in Virginia. Analysts believe that in addition to the company's own debt dragging, this incident also reflects from one aspect the impact of the Internet economy on the traditional retail industry.
It is reported that Toys R Us Canada Branch has also initiated bankruptcy protection procedures, while the other 255 franchise stores and Asian joint ventures outside the US and Canada are not listed for bankruptcy protection.
Toys R Us Chairman and CEO David Brandon said that Toys R Us hopes to restructure the company’s financial position and increase the company’s investment flexibility through bankruptcy protection procedures and creditors’ restructuring of up to $5 billion in long-term debt. Better respond to the new situation and new challenges in the retail market and maintain the competitiveness and sustainability of the company's development.
In recent years, with the rapid development of the Internet economy, the traditional retail market share is constantly being swallowed up by online business. According to statistics from retail industry analyst One Click Retail, Amazon's toy sales in 2016 were as high as $4 billion, more than three times higher than that of R Us. In terms of growth, Amazon's toy sales increased by up to last year. 24%, the entire toy industry increased by only 5% during the same period, while the sales of R Us have been declining for five consecutive years.
Toys R Us was originally a publicly traded company. In 2005, it was jointly acquired and privatized by private equity funds KKR, Bain Capital and Werner Real Estate Investment Corporation for $6.6 billion. Before the company announced its application for bankruptcy protection, the consortium such as JPMorgan Chase promised to provide more than $3 billion in funding to support its debt restructuring.
In fact, due to the fierce impact of online marketing by e-commerce giants, Toys R Us’s application for bankruptcy protection is not a case. This year, a number of physical retailers such as children's clothing retailers Gymboree, Payless ShoeSource and rue21 filed for bankruptcy, and many retailers were forced to lay off employees and close their stores.
Although Toys R Us has filed for bankruptcy protection, its more than 1,600 stores and online platforms around the world are still open as usual. Analysts believe that filing for bankruptcy protection does not necessarily mean closing down or closing a branch, and retailers such as Macy's have also continued to operate after filing for bankruptcy protection.
Toys R Us is an important toy sales channel, but experts believe that its bankruptcy may not have much impact on the toy industry.
Glick Johnson, an analyst at Bank of Montreal Capital Markets in Canada, said that the traditional sales season is approaching, and some rumors and uncertainties about Toys R Us will make many suppliers wait and see. But after officially filing for bankruptcy protection, its $3 billion financing commitment will help eliminate uncertainty and increase supplier confidence.
Fuguo Securities also mentioned that the impact of Toys R Us's filing for bankruptcy protection on the toy industry may be lower than expected, as the lost market share of Toys R Us will soon be replaced by sales channels such as Amazon and Wal-Mart.
For traditional retailers, the current situation is like "going against the water, not going back," trying to attract more consumers and seize the market with e-retailers is an important part of the company to avoid oversight. Wal-Mart announced that it will join forces with Google to launch a voice shopping service, which was interpreted by analysts as an important strategy for the two giants to jointly challenge Amazon.
In the new retail era, online retailing is growing faster and faster, undoubtedly crowding out the traditional physical retail market. Only companies that can integrate online and offline business can be invincible. As Elizabeth Ryan, chief marketing officer of short-term rental company Appear Here New York, said: “Now the online and offline developments are becoming more and more assimilated, and the future trend of retail development is the perfect integration of the two.â€
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