In recent months, the iconic U.S. toys-and-games seller Toys “R” Us was forced to shutter its U.S.-based stores. In the aftermath of the decision, the media has been quick to assign blame to its private equity owners.
But the truth is far more complicated than the greed of rapacious investors as portrayed by a media conditioned to knee-jerk skepticism of the finance industry. The real culprit in this corporate morality play is online retail behemoth Amazon, whose bad faith (surprise!) and financial shenanigans (nooooo!) set the stage for the decimation of America’s favorite toy store.
For decades, Amazon has methodically pursued predatory business practices that would make The Iceman blush, with the explicit intention of fostering the “bricks vs. clicks” retail crisis that is currently underway. When online retail really started to ramp up around the turn of the millennia, Amazon finagled an exclusive seller contract with Toys “R” Us, as well as some of America’s other now-disappearing icons, such as Borders Books and RadioShack.
The retailers allowed Amazon to subsume their online entities while providing the still-fledgling online company with the ability to leverage their more-established brands and wholesale networks. All the while, the traditional retail partners like Toys “R” Us carried all inventory risk.
But while these retail partners seem to have stayed true to the agreements, Amazon’s “conduct blatantly demonstrated their pattern of behavior of misleading Toys ‘R’ Us” and “since 2004 has been a breach of that exclusivity” (with horrendous results: RadioShack filed for bankruptcy in March 2017, and Borders did the same way back in 2011).
In doing so, Amazon effectively quarantined these businesses from the booming e-commerce marketplace while inviting their competitors onto their platform Amazon.com in direct breach of their contract which, in the case of Toys “R” Us, gave the company exclusive rights to sell toys and games on Amazon’s site. This led the toy purveyor to sue Amazon in 2004 and find some vindication in a scathing 2006 judgment by a New Jersey court.
Over and over, Amazon has used ethically questionable (at best) business practices to crush their competition and fuel their spectacular growth (from $8 billion in revenues in 2005 at the time of the buyout to a staggering $180 billion today). And there are few reasons to expect the company to stop any time soon—in fact, it is likely already casing its next victim (lookin’ at you, Best Buy).
While other companies will hopefully learn from this sad story of malfeasance, there is little hope for Toys “R” Us after such brutal Amazonian treatment. But other traditional retailers aren’t the only ones with lessons to learn.
Media and activist types looking to hang the demise of Toys “R” Us solely around the necks of private equity are failing to critically evaluate the underlying facts and either ignorant of the facts or advancing their own agenda.
Assigning blame is natural, even constructive—but only if blame is assigned fairly (“passes the giggle test,” if you will). There is certainly plenty of it to go around, but the truth is most of the blame should fall on the shoulders of Amazon, which keeps decimating partners and rivals alike with a “cry-me-a-river” attitude behind that A-to-Z smile.
Christian Josi is the Founder and Managing Director of C. Josi & Company and a frequent columnist
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.
