How would such a move impact the game industry?
If Toys R Us follows through on its announced plan to sell its 1262 stores (683 in the United States and 579 in other countries, according to Business Week), there will be a dramatic impact on significant portions of the toy and game industries.
Exactly what the impact will be -- if it happens -- is uncertain, and many believe that there's no way a Toys R Us sale will happen until at least 2005. But opinions already are forming as to whether this change would be good or bad.
Background
When Toys R Us started building mega toy stores -- the first store owned by company founder Charles Lazarus was built in 1957; the company went public in 1978 -- it was seen as a "category killer," and over the years many independent toy stores folded under the intense competition.
(Not to mention other chains: remember Kiddie City and Child World?)
Today, Toys R Us is itself being "killed" by competition from Wal-Mart, Target and other big-box retailers. Wal-Mart's income is almost 25 times greater than that of Toys R Us ($259 billion to $11.6 billion), giving them a fantastic ability to put pressure on the price of popular toys. In fact, Wal-Mart became the top toy seller in the United States in 1998.
The potential sale of Toys R Us stores is the latest announcement in the company's reorganization attempts. In November 2003, Toys R Us announced plans to close 146 freestanding Kids R Us stores, and to close 36 Imaginarium toy stores.
It's possible that Toys R Us won't be able to find a buyer interested in running toy stores and could sell off individual properties. Potential buyers for the real estate include Wal-Mart, Home Depot and Lowe's.
Toys R Us isn't the first to feel the intense pressure created by Wal-Mart. Both FAO Inc. (owner of FAO Schwartz and Zany Brainy stores) and KB Toys have filed for Chapter 11 bankruptcy, and analysts believe that Wal-Mart is a large part of the reason. It has been reported that Toys R Us has about $1.5 billion in cash reserves, so the company is unlikely to follow suit into bankruptcy anytime soon.
What would the game landscape be like without Toys R Us?
The Future is Bleak
Some decry the limited selection of games in TRU stores, and it's true that they concentrate on games from large publishers with mass appeal, predominantly children's games and party/trivia games, along with staples like Monopoly, Scrabble and Clue. But the fact is that a typical Toys R Us has many times more game titles available than a typical Wal-Mart.
Toys R Us carries games from the relatively new publisher Eagle Games, for example, a company whose products I've never seen in a Wal-Mart. There are even games published by the Hasbro divisions Parker Brothers and Milton Bradley that I've never seen in a Wal-Mart. And Wal-Mart is likely to be even less patient than Toys R Us for a new game to catch on.
In the Aug. 14 issue of the Palm Beach (Fla.) Post, Jim Arpe, owner of specialty toy store Palm Beach Gardens, said, "We see [a potential TRU sale] as not a good thing for the specialty toy market."
Arpe is concerned because Toys R Us provides a lot of revenue for a lot of toy and game manufacturers. Without TRU, this theory holds, those companies will be forced to either sell to Wal-Mart -- and meet the giant's price demands -- or go under.
The Future is Bright
Others see the potential demise of Toys R Us as an opportunity. Those independent toy stores that do remain viable today found a way to live with brutal price competition, often by targeting specific niches or offering better service. Without Toys R Us, more customers may seek them out to find what they can't get at Wal-Mart.
In that same Palm Beach Post article, the manager of another independent store said, "Toys R Us customers are not really our customers. Toys R Us basically carried the hot-at-the-moment toys."
The manager also believes there's a place for stores where the employees can talk intelligently about the products, which is not always the case in the toy departments at big-box stores.
The Future is Yet to be Written
My guess is that if Toys R Us closes its doors, the result will be a bit of both scenarios above. Some toy and game companies will be impacted greatly, and some probably won't be able to recover and will go out of business themselves.
But others will rise up, able to grow and find a stronger market for their products. The same will hold true for independent retailers.
Of course, for many game publishers, the impact will be nothing or next to it. They don't sell into Toys R Us or Wal-Mart now, and they won't next year or the year after that.
Many of the best, most creative games published today are coming out of relatively small publishers who are thrilled to sell 50,000, 25,000 or even 10,000 copies of a game.
So no matter what happens with Toys R Us, I absolutely believe that the future remains bright for game lovers. You'll have to know where to look to find the gems, but the gems will still be there.
