I remember how I used to always look forward to going to the local Toys R Us store when I was a child. I was therefore suprised, and disappointed, to read the news that Toys R Us is filing for bankruptcy earlier this week. I imagine that many adults who relied on the retailer for their childhood toys felt the same way.
Most of the stories covering the bankruptcy have focused on Toys R Us’ inability to pay off its debts as the source of the bankruptcy. While that is indeed the final manisfestation of the problem which led to the company’s bankruptcy filing, this final manifestation of the problem is actually the result of the company’s profits not being large enough to cover its debts.
And the shortfall in profit is the result of the primarily offline toy retailer losing sales to two alternatives. The first is online toy retailers and the second is smartphone and tablet apps that offer children an alternative source of entertainment to toys. These are the core problems, and both of these core problems are examples of technological progress.
As tough as it is to see Toys R Us go, the fact that technology is responsible both for the company’s departure and as an alternative to the products it sold, is a small consolation.