The Real Reason Toys R Us Is Closing That No One Wants to Talk About: Birthrates

If you're a parent, you've had at least one passing discussion on the closure of Toys R Us. The mega-giant toy chain that ruled the childhoods of many of today's parents is shuttering nearly 200 stores this month. While bankruptcy is the official reason, it isn't the only or perhaps even the biggest reason why Geoffrey the Giraffe is being sent to the big zoo in the sky: Debt. Competition from online retailers like Amazon, as well as cheaper big-box stores like Wal-Mart and Target. Yes, bad customer service, too. All of these are the most commonly cited reasons for the ultimate failure of Toys R Us. But, hidden within their press release on the bankruptcy is a reason rooted in cultural trends, the stuff that ultimately makes or breaks economic indicators:

The decrease of birthrates in countries where we operate could negatively affect our business. Most of our end-customers are newborns and children and, as a result, our revenue are dependent on the birthrates in countries where we operate. In recent years, many countries’ birthrates have dropped or stagnated as their population ages, and education and income levels increase. A continued and significant decline in the number of newborns and children in these countries could have a material adverse effect on our operating results.

In other words, Americans just aren't having enough kids to justify the existence of that many toy stores.

Play out the low-birthrate factor and you'll realize that fewer kids over time equates to fewer consumers overall. Ten or twenty years from now we might see the same massive closures of the stores that are winning out over Toys R Us today. It isn't just that people are buying less due to the Great Recession. It's that there are fewer people to go out and buy anything at all. As The Washington Post reports:

The change in the number of children born in the previous 12 years (and thus sitting right within the Toys R Us demographic), tracks closely with the company’s changing annual revenue. ...it’s nonetheless apparent that Toys R Us’s fortunes rise and fall with the population of its target market.

And that’s why the company’s demise should worry the rest of us. Toys R Us focuses on kids, so it’s feeling the crunch from declining birthrates long before the rest of the economy. But it’s just a matter of time before the trends that toppled the troubled toy maker put the squeeze on businesses that cater to consumers of all ages.

In stark contrast to their failure in the American market, all 53 franchised Toys R Us stores in Israel will remain open. Israel is known for having the highest birth rate in the developed world. The average Israeli woman has three children, nearly double that of the average American woman. The Israeli fertility rate of 2.6 exceeds both the American rate of 1.9 and what's known as the "replacement rate" of 2.3. The "replacement rate" is what a nation needs to maintain in order to ensure long-term survival.

Nope.

The real reason is one no one, liberal or conservative wants to admit is the reason for the decline in B&M stores. Lack of customer service.

Yesterday I was in a Christian Book store. A young lady asked the clerk to recommend a fiction book she could read for a class assignment. The clerk, hardly bothering look at her, informed her that the clerk only read nonfiction and brushed by her. There was no attempt to help or find someone who could help. And yes, there were other clerk wandering around.

I asked the young lady a few simple questions and was able to find her three authors that fit her needs in under five minutes.

I gave her better customer service then the employees did.

Do you think the young lady will be back to this store?

Brick and Mortar stores especially live and die on customer service. Our customers do have alternatives. They have to want to come to see us. I have customers who drive a couple of hours to come to my little store. They know they will be greeted by name, that I will be able to help them find what they are interested in and that if they are looking for something special I am willing to try to find it for them.

And I have coffee and cookies. :)

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