It was a sad news that Toys R Us had to closed down. I have read many articles pointing out that internet retailing was the main reason they had to close down, since more people now were buying from Amazon or Ebay. Some articles also said that children now prefer to play with iPads instead of physical toysz
I would disagree with this. The last time I check, Toys R Us did sell its toys online.
In my opinion, demographic changes was the main reason of this. And we haven’t really paying much attention on this subject.
Lets go back into the history for one minute. So Toys R Us was founded in 1948. This was the perfect timing, as baby boomers started to come in. As we can see from the chart below, approximately 27% of the population were between 0 – 15 years old.
Spending behavior vary among age cohort. When you were a child, your income (I mean your parents’ income) was spent more on baby food products, clothing, and toys.
When you had reached your youth, spending will be more on education, maybe more on clothing as well. Food intake will be different since you need more calories.
Then when you get married, you will spend more on durable goods such as cars, refrigerator for your new house. Then you have to start to repay your education loans. Maybe if you’re lucky, you don’t have to hire a divorce lawyer.
As you age, you will spend more on healthcare, yet again your food intake will be different too.
What I am trying to say is, no one is buying any toys anymore due to demographic changes. Spending behavior is different in our lifetime.
And this was the biggest mistake that Toys R Us had made, where they didn’t really pay attention to the demographic changes in the US. Let me show you the current population pyramid in the US:
According to the Census, the median age is around 38 years old. That goes back to the point where the spending behavior changes over time.
So where does thing bring us? The argument where “internet retailing was the cause” can’t really be used in this context from my perspective. You could open 100 Toys R Us in Japan, Germany or the UK (aging countries), and you will barely make any profit due to its demography.