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Toys “R” Us SWOT & PESTLE Analysis

Last Updated : 18 Jun, 2017

OVERVIEW

Name of the Company: Toys "R" Us

Business Sector: Retail, Toys

Operating Geography: North America, United States, Global.

About the Company: Toys "R" Us is an American Toy company based in Wayne, New Jersey. It was founded in the year 1948 by Charles P. Lazarus. It was initially started with the name of Children's Supermart with a focus on baby furniture. But as requests for toys for toddlers and older children bean to grow the brand shifted its outlook to producing more toys and renamed the brand to Toys "R" Us in 1957. The company mascot Geoffrey the Giraffe was also launched in 1957 was an important “spokes animal” for the firm, helping in promotions. The first international store was opened in 1984.

Revenue: USD11,540 million (Consolidated net sales for FY 2016)

SWOT & PESTLE Analysis

The SWOT analysis for Toys "R" Us is presented below:
Strengths
Weaknesses
1. Reach
2. Company’s popularity and efficient distribution network
3. Baby Brand
4. Strong web presence
5. Employment provider and revenue
6. Buying power
7. Toys for differently-abled kids
8. Associations with special needs organisations
1. Lacks competitive advantage
2. Heavy dependence on seasonal sales
Opportunities
Threats
1. Joint Ventures and Strategic Alliances
2. Charitable associations
3. International market exposure
4. Expansion to emerging economies like India
1. Strong Competitive Rivalry from Wal- Mart etc.
2. Low cost manufacturers like China
3. Social Networking Sites
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Strengths

1. Reach: Toys "R" Us has more than 1500 superstores in the United States and worldwide like Europe, Asia, Africa, Oceania and Canada. The store’s first retail outlet in New York is the largest toys store in the world. The company has its operations since 1948.

2. Company’s popularity and efficient distribution network: Company chain holds 840 stores in the U.S, operating in 34 other countries with 716 stores. The company’s popularity is also because of its amazing chain of franchises and licenses. It has a huge distribution network that derives benefits from advanced logistical systems.

3. Baby Brand: It also owns the baby brand, Babies R Us which adds another 200 + stores. It operates as a speciality retailer of baby products offering an assortment of products for new born, infants and toddlers.

4. Strong web presence: The brand has a strong market presence on the Web in collaboration with Amazon.com. Its well-developed e-commerce website facilitates people to purchase online (toysrus.com, babiesrus.com, etoys.com, fao.com and babyuniverse.com).

5. Employment provider and revenue: The company is providing employment to around 70,000 people around the world. Toys R Us is a high revenue operating company touching approximately $11.8 billion in 2016.

6. Buying power: Having so much shelf space implies that the company has a strong bargaining power when it comes to buying prices from manufacturers.

7. Toys for differently-abled kids: As the company is committed to all kids and families, it has published the latest edition of its Toys “R” Us Toy Guide for differently-abled kids (to stress that all children have unique skills and abilities), an easy to use toy selection resource guide featuring some special selected toys that aid in the development of children with physical or cognitive disabilities.

8. Associations with special needs organisations: The company has also partnered with several special needs organisations like Autism speaks, National down Syndrome Society etc.

Weaknesses

1. Lacks competitive advantage: Toys “R” Us lacks sustainable competitive advantage, other than the brand. In the US, the company has lost its number one position as the largest toy retailer, to Wal-Mart offering attractive packages to its customers. Being large is not enough when customers can go to another large retailer and buy the same or similar goods, sometimes getting a better deal.

2. Heavy dependence on seasonal sales: Toys “R” Us is heavily dependent upon successful sales which in turn depends on the season. They aim to make profit from Christmas. Retail is seasonal. In fact, it could be argued that since, toys are a key Christmas present product, so the company is even more likely to be dependent upon seasonal sales.

Opportunities

1. Joint Ventures and Strategic Alliances: There are numerous opportunities for joint ventures and strategic alliances. Toys "R" Us works closely with its competitor Amazon.com and baby products category. This not only plays to the strengths of both companies, but also provides opportunities to both the companies to excel. Amazon is already strong at the online part of the business in warehousing products and delivering them to customers in time. Toys "R" Us will use its buying power, but ultimately carries the risk of physical stacking (i.e. if it doesn’t sell its products, its money is tied up in physical inventory).

2. Charitable associations: Toys "R" Us has been very helpful in the sense that in 2005, it went out of its way to help the Louisiana victims struck down by hurricane Katrina and donated six trucks full of toys and baby supplies like diapers, wet wipes, medicines, baby formulas, batteries and water to multiple locations housing evacuees.

3. International market exposure: The citizens of emerging nations such as China and India are getting more educated and wealthier every day. In that case, consumers have more disposable income and leisure time, and these could increase over the coming years. So, the types of goods and services retailed by the company could be marketed more aggressively overseas to capture the international market.

4. Expansion to emerging economies like India: The diversity of locations if expanded to Asian countries like China and India, that are emerging economies of the world and have huge potential for toy market, too would enhance the revenue of the company.

Threats

1. Strong Competitive Rivalry from Wal-Mart etc: There is a strong competitive rivalry in the toy market, not only from Wal-Mart, but also from other retailers like KB Toys and Target. The toy brand is usually not associated with the retailer. So, if a kid’s toy has grabbed the imagination of the kid and in turn the spending power of its target consumer, then, any retail outlet is as good as another. Differentiation becomes difficult, and toy retailers generally compete on price, range and availability.

2. Low cost manufacturers like China: China and other similar low-cost manufacturing paradises are where toys are made. Low costs of manufacturing are important if margins are to be retained. The problem and potential weakness lies in the fact that many countries and trading communities tend to impose quotas and tariffs to protect the local manufacturers. In fact, all countries do it. In that case, Toys R Us would not have the toys, people want to buy in countries such as China.

3. Social Networking Sites: Further, online games and the emerging social networking sites specially, Facebook can divert the interest of kids from toys.

To get the complete detailed SWOT report on Toys “R” Us please mail us at: support@swotandpestle.com. or contact us here.

Toys “R” Us SWOT analysis has been conducted by Himani Wadhwa and reviewed by senior analysts from Barakaat Consulting.

References

Download Analysis Report




The PESTLE analysis for Toys "R" Us is given below:
Political
Economical
1. Safety Measures
2. Brexit
3. Counterfeiting
4. High Labour Cost
1. Increase in Chinese Economy
2. Translation of Currency
3. Economy Health and Diversification
Social
Technological
1. Decline in Birth Rate
2. Decline in children’s play time
3. Products to increase profitability
1. Need to Innovate
2. Usage of Predictive Analysis
3. Manage their own website
Legal
Environmental
1. Rules and regulations 1. Eco-friendly toys
Get Your Free Copy of the SWOT & PESTLE
Analysis Report
Get origional SWOT & PESTLE.com report delivered straight to your email inbox for free.
Our insightful and holistic reports have helped corporate,academia and researchers to take their research forword. Like us on Facebook to stay updated with the latest published SWOT & PESTLE Report.

Download Analysis Report




Strengths

1. Reach: Toys "R" Us has more than 1500 superstores in the United States and worldwide like Europe, Asia, Africa, Oceania and Canada. The store’s first retail outlet in New York is the largest toys store in the world. The company has its operations since 1948.

2. Company’s popularity and efficient distribution network: Company chain holds 840 stores in the U.S, operating in 34 other countries with 716 stores. The company’s popularity is also because of its amazing chain of franchises and licenses. It has a huge distribution network that derives benefits from advanced logistical systems.

3. Baby Brand: It also owns the baby brand, Babies R Us which adds another 200 + stores. It operates as a speciality retailer of baby products offering an assortment of products for new born, infants and toddlers.

4. Strong web presence: The brand has a strong market presence on the Web in collaboration with Amazon.com. Its well-developed e-commerce website facilitates people to purchase online (toysrus.com, babiesrus.com, etoys.com, fao.com and babyuniverse.com).

5. Employment provider and revenue: The company is providing employment to around 70,000 people around the world. Toys R Us is a high revenue operating company touching approximately $11.8 billion in 2016.

6. Buying power: Having so much shelf space implies that the company has a strong bargaining power when it comes to buying prices from manufacturers.

7. Toys for differently-abled kids: As the company is committed to all kids and families, it has published the latest edition of its Toys “R” Us Toy Guide for differently-abled kids (to stress that all children have unique skills and abilities), an easy to use toy selection resource guide featuring some special selected toys that aid in the development of children with physical or cognitive disabilities.

8. Associations with special needs organisations: The company has also partnered with several special needs organisations like Autism speaks, National down Syndrome Society etc.

Weaknesses

1. Lacks competitive advantage: Toys “R” Us lacks sustainable competitive advantage, other than the brand. In the US, the company has lost its number one position as the largest toy retailer, to Wal-Mart offering attractive packages to its customers. Being large is not enough when customers can go to another large retailer and buy the same or similar goods, sometimes getting a better deal.

2. Heavy dependence on seasonal sales: Toys “R” Us is heavily dependent upon successful sales which in turn depends on the season. They aim to make profit from Christmas. Retail is seasonal. In fact, it could be argued that since, toys are a key Christmas present product, so the company is even more likely to be dependent upon seasonal sales.

Opportunities

1. Joint Ventures and Strategic Alliances: There are numerous opportunities for joint ventures and strategic alliances. Toys "R" Us works closely with its competitor Amazon.com and baby products category. This not only plays to the strengths of both companies, but also provides opportunities to both the companies to excel. Amazon is already strong at the online part of the business in warehousing products and delivering them to customers in time. Toys "R" Us will use its buying power, but ultimately carries the risk of physical stacking (i.e. if it doesn’t sell its products, its money is tied up in physical inventory).

2. Charitable associations: Toys "R" Us has been very helpful in the sense that in 2005, it went out of its way to help the Louisiana victims struck down by hurricane Katrina and donated six trucks full of toys and baby supplies like diapers, wet wipes, medicines, baby formulas, batteries and water to multiple locations housing evacuees.

3. International market exposure: The citizens of emerging nations such as China and India are getting more educated and wealthier every day. In that case, consumers have more disposable income and leisure time, and these could increase over the coming years. So, the types of goods and services retailed by the company could be marketed more aggressively overseas to capture the international market.

4. Expansion to emerging economies like India: The diversity of locations if expanded to Asian countries like China and India, that are emerging economies of the world and have huge potential for toy market, too would enhance the revenue of the company.

Threats

1. Strong Competitive Rivalry from Wal-Mart etc: There is a strong competitive rivalry in the toy market, not only from Wal-Mart, but also from other retailers like KB Toys and Target. The toy brand is usually not associated with the retailer. So, if a kid’s toy has grabbed the imagination of the kid and in turn the spending power of its target consumer, then, any retail outlet is as good as another. Differentiation becomes difficult, and toy retailers generally compete on price, range and availability.

2. Low cost manufacturers like China: China and other similar low-cost manufacturing paradises are where toys are made. Low costs of manufacturing are important if margins are to be retained. The problem and potential weakness lies in the fact that many countries and trading communities tend to impose quotas and tariffs to protect the local manufacturers. In fact, all countries do it. In that case, Toys R Us would not have the toys, people want to buy in countries such as China.

3. Social Networking Sites: Further, online games and the emerging social networking sites specially, Facebook can divert the interest of kids from toys.

To get the complete detailed SWOT report on Toys “R” Us please mail us at: support@swotandpestle.com. or contact us here.

Toys “R” Us SWOT analysis has been conducted by Himani Wadhwa and reviewed by senior analysts from Barakaat Consulting.

References

Download Analysis Report




Copyright

Copyright of Toys "R" Us SWOT and PESTLE Analysis is the property of Barakaat Consulting. Please refer to the Terms and Conditions for usage guidelines.