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5 min readWhat Really Killed Toys R Us? (It Wasn’t Amazon)
By 2018, Toys R Us had vanished. Over 700 stores closed, roughly 30,000 jobs disappeared, and it felt like a piece of childhood had been erased. The conventional story blames Amazon, but the real culprits were three avoidable mistakes the company made over two decades — mistakes that any business owner can learn from.
The Rise of the Category Killer
Toys R Us began in 1948 when Charles Lazarus opened a children's furniture store in Washington, D.C., betting on the post-World War II baby boom. He quickly spotted a bigger opportunity in toys and, in 1957, opened the first Toys R Us in Rockville, Maryland. The problem was that neighborhood toy stores already existed everywhere. So Lazarus invented something new: the toy superstore. Massive spaces, floor-to-ceiling aisles, 18,000 different toys. It was a kid's dream and a competitor's nightmare. Lazarus became known as the inventor of the "category killer" — a business that dominates its entire market, the way Hobby Lobby dominates crafts or Best Buy dominates electronics. At its peak, Toys R Us had roughly 1,600 locations worldwide and $13.9 billion in sales. It looked unstoppable.
Mistake One: Forgetting What Made You Special
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What you'll learn
- 1 (00:31) **The Fall of a Category Killer** - The episode opens by framing Toys R Us as an iconic brand that vanished in 2018, and immediately states the core thesis: the cause was not Amazon, but three avoidable mistakes.
- 2 (01:25) **How Toys R Us Won: The Origin Story** - Charles Lazarus capitalizes on the post-WWII baby boom by inventing the toy superstore, creating the "category killer" business model.
- 3 (03:32) **Mistake #1: Panicking and Losing Identity** - When Walmart and Target undercut them on price and convenience, Toys R Us tried to compete on their terms instead of doubling down on their unique value.
- 4 (05:16) **The Takeaway: Defining Your True Value** - The host pivots to a practical exercise for listeners, using Dave Ramsey's Financial Peace University and a plumber example to illustrate the concept.
- 5 (06:34) **Mistake #2: The Crushing Debt of the Leveraged Buyout** - In 2005, investment firms bought Toys R Us with massive debt, jumping from $2 billion to $5 billion, which strangled the company's ability to invest.
- 6 (08:31) **The Takeaway: Build at the Speed of Cash** - The host reinforces the EntreLeadership principle that debt is risk, and cash creates stability and margin for when things go wrong.
- 7 (10:24) **Mistake #3: Complacency and the Amazon Deal** - Toys R Us got complacent, assumed they were safe, and made the catastrophic decision to let Amazon exclusively sell their toys online.
+ Full timestamped outline available in the app
Show Notes
The decisions that helped you grow your business could be the same ones holding it back. In this episode, discover how three costly mistakes turned Toys R Us from an industry giant into a bankrupt company—and learn why protecting your competitive advantage, staying out of debt, and continually improving are essential to long-term success.
Next Steps:
· 📺 Watch this video What Really Killed Spirit Airlines? (It Wasn’t Fuel Prices)
· 🎥 Watch this video 5 Signs You’re Ready to Add Another Location
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