The bankruptcy filing of Toys “R” Us partially reflects tough competition with the discount giants, but the changing digital landscape appears to be the single most pressing challenge the retailer will face once it emerges from bankruptcy protection.
According to eMarketer’s Retail and Ecommerce database, Toys “R” Us has slogged through at least five straight years of revenue declines, even as its store count edged higher.
The company’s ecommerce sales rose 12.3% in fiscal 2016, the first double-digit gain since 2012. That put ecommerce at 13% of total revenues.
At that level, Toys "R" Us trails the ecommerce sales share for the toys and sporting goods category overall, according to Kantar Retail data. In 2016, ecommerce made up 19% of total toy and sporting goods sales in the US. Kantar projects that digital's share will grow to 28% by 2021.
Meanwhile, ecommerce growth at Toys "R" Us appears to be trailing the wider category as well. eMarketer estimates that digital sales of toys and hobby products rose 16.2% in 2016, outpacing the company’s growth in that area by almost 4 percentage points.
eMarketer projects that digital sales for the toys and hobby category will continue to see growth rates above 16% this year and next.