While retailers are accustomed to market fluctuations, fickle customers and waiting until the fourth Friday in November to turn a profit, they face increasingly strong headwinds and complex challenges to compete and stay relevant in today’s marketplace.
Among the biggest challenges to brick-and-mortar establishments are the disruptive effects of e-commerce and shoppers’ desire for more engaging and personalized in-store experiences.
Toys R Us is a case in point. The retailer’s website delivered a suboptimal online shopping experience when compared with the websites of other major retailers. And its stores lacked the workers or the environment to guide shoppers toward optimal purchasing decisions. In addition, its price-match policy was not communicated well to shoppers, and its peak holiday season pricing strategy — keeping prices above those of competitors until they sold out of the merchandise, leaving Toys R Us as the only option at a premium price — backfired when other major retailers were able to maintain a sizable inventory and undercut on price.
Ultimately, Toys R Us, which commenced a “free fall” bankruptcy case in September 2017 (leading up to the biggest selling season of the year), was unable to fix its operational issues, stem losses or develop a feasible restructuring plan, resulting in a sudden decision to close all of its U.S. stores. This unprecedented liquidation will undoubtedly be the subject of investigations and, ultimately, lessons for future distressed retailers. Kramer Levin, representing the unsecured creditors committee in Toys R Us, has a key role in preserving the rights of vendors, landlords and other creditors as well as in maximizing the ongoing business value of Toys R Us’ international operations.
Other recent retail-industry bankruptcies in which we played a key role include Nine West, Aeropostale, BCBG, Gymboree and The Limited — all underscoring our ability to apply market-leading restructuring experience to distressed retail.