I just ran across a CNBC piece on a potential Toys’R’Us bankruptcy filing. The toy retailer may not necessarily plan to go out of business, but a bankruptcy filing could allow it to restructure its massive load of debt so it can stay in operation.
At first glance, this doesn’t seem to have a whole lot to do with ebooks, but on a closer read, it’s really interesting to observe some of the parallels between Toys R Us’s situation and things that have been happening to bookstores over the last few years.
For example, there’s this paragraph:
A Toys R Us bankruptcy does not necessarily mean the company will close stores, and retailers such as Macy’s have operated through bankruptcy before. For the major toy companies, there may be vested interest in Toys R Us successfully coming out the other end of a debt restructuring.
This puts me in mind of something on The Passive Voice yesterday, when he was discussing Nate Hoffelder’s post on The Digital Reader contending that the Big Five and Barnes & Noble are doomed by their reliance on print books over ebooks. Passive Guy wrote:
When Borders, the second largest bookstore chain in the US, went bankrupt in 2011, that shocking event should have set alarm bells ringing in CEO offices of every publisher.
The second-largest bricks-and-mortar customer for every major US publisher had just imploded. Perhaps it was time for some new thinking? Would the future be a lot different than the past? What a silly thought.
Borders would have been happy to sell its assets to virtually any willing purchaser, but smart money was not interested. Neither was dumb money and about 650 retail bookstores in the US just disappeared.
And in a comment, Nate adds that Borders “died because its creditors (the major publishers) would not let it be saved.” You would have thought publishers would have had a “vested interest” in preventing the second-biggest bookstore chain in the US go under, wouldn’t you? Are the toy companies going to be smarter than the publishers?
The CNBC piece goes on to say:
Beyond offering the toy companies a place to sell their products, the retailer often does so without marking their prices down as much as big box retailers like Target. The retailer’s vast space and toy-centered raison d’etre give toy companies a unique venue to sell their product.
“They’re the only true showroom the industry has,” said toy industry analyst Richard Gottlieb.
You could replace “toy companies” with “publishers” and “toy-centered” with “book-centered” and you’d perfectly describe the role of bookstore chains like Borders—and, for that matter, Barnes & Noble. The bookstores don’t mark their book prices down as much as big-box stores, but they have a much bigger selection. It’s that selection of books that people can look at and browse and flip through in person that publishers and their advocates bemoan losing as sales migrate more and more toward on-line. They’re also “the only true showroom the industry has,” if you’re talking about the publishing industry. Of course, Amazon can outdo both the toy stores and bookstores on both price and selection.
Another odd toys-to-books connection is that, elsewhere, the CNBC article mentions that another problem toy stores face is “children who increasingly prefer tablets to toys.” But the article never goes on to elaborate on that point, even though it entitled the whole article section “Tablets over toys.” (If you look elsewhere, though, you can find articles about research showing that kids are playing with tablets more than traditional toys—even as they seem to prefer to read books on paper rather than the screen.) Certainly tablets like the Fire 7 are getting cheap enough that they cost less than some children’s toys, and they do have a broader range of uses than an articulated chunk of plastic.
The piece does touch directly on Amazon, though, at the very end—when it discusses how toy companies could wean themselves away from dependence on Toys’R’Us by turning to alternative sales channels.
One of the quickest growing channels: Amazon. The e-retailer is the “beneficiary of [the] millennial parent,” said [Jefferies analyst Stephanie] Wissink, as Amazon is “quickly becoming the No. 2 toy retailer behind Wal-Mart.”
You would think, from the way the publishers allowed Borders to die and don’t seem to be doing a lot to try to save Barnes & Noble, that they should be trying to wean themselves over to alternate channels than big bookstore chains. The problem is, they have that love-hate relationship with Amazon, the mega-store that sells more than half of their books for them at the moment. The last thing they would want to do is give Jeff Bezos even more power.
The odd thing is that the CNBC article never directly touches on the way that Amazon’s ascendancy to “the No. 2 toy retailer” position might also be responsible for some of the financial troubles Toys R Us finds itself in. This stands in stark contrast to Barnes & Noble’s situation—no article about Barnes & Noble’s struggles can seem to resist poking in a mention of how Amazon is cleaning B&N’s clock. And if Amazon is indeed “quickly becoming the No. 2 toy retailer behind Wal-Mart,” it must surely be renovating Toys R Us’s chronometer as well. But the closest this piece comes seems to be the cryptic mention of how kids are coming to prefer tablets to toys. Otherwise, it places all the blame on “cheaper off-shore imports” and “margin-squeezing big box retailers.”
It’s also funny to consider that I almost never read scare pieces about how badly Toys R Us’s failure could affect the toy industry, whereas I run across pieces discussing how badly B&N’s failure could hurt the publishing industry almost every day. And yet, I don’t know of very many other toy store chains on a par with Toys R Us. Shouldn’t it be a major blow to the industry if they go away? Why isn’t the industry belly-aching and bemoaning all this the way the big publishers are? Or conspiring to force Amazon to sell its toys at higher prices to save the brick and mortar stores?
But then, toys don’t have all the cultural baggage that books do, so I suppose it’s not surprising they get treated differently. It is surprising I don’t see more places remarking on these obvious parallels, though.
I wonder how long it will be before Barnes & Noble has to declare bankruptcy?