It’s Monday, March 19, 2018 and today we’re talking about: Toys”R”Us to Liquidate All US & UK Assets, the Concept of Category Killers, Putin Preserving Power, and Dropbox to IPO on Friday.
Toys”R”Us Liquidation
Toys”R”Us filed to liquidate all of its US and UK assets last week after filing for bankruptcy last September. The 70-year-old retail toy store has 875 stores in North America, 100 stores in the UK, and 64,000 employees.
I was a Toys”R”Us Kid. My parents never took me there or bought me toys, but I sure loved their commercials growing up. I can hear the jingle now. But what happened to all of those happy snaggletoothed 80’s and 90’s kids with their beloved over-priced plastic? Apparently they grew up, had kids themselves, and then didn’t take them to Toys”R”Us either.
Customers have been choosing Walmart, Target, and Amazon over the past few decades, systematically demolishing several brick and mortar retail sectors: records, books, consumer electronics, office supplies, and now toys. That’s Tower Records (defunct), Virgin Records (defunct), Barnes & Noble (Feb 2018: layoffs), Borders (defunct), Best Buy (March 2018: shutting down 250 Best Buy Mobile stores), Staples (March 2014: closing 225 stores), and OfficeMax (May 2014: closing 400 stores).
Now, my childhood dream of simply stepping foot inside of a Toys”R”Us is crumbling before my eyes. It seems likely that all 1600 stores world wide will be closed, franchised, or liquidated. And I predict that any franchises will be doomed from the start without the ongoing support of the corporate brand.
I guess we’re all Amazon kids now..
Category Killers
Like the top dogs of each of the other industries above, Toys”R”Us was considered a “category killer.” Category Killers are deep specialists in a sector who leverage their narrow focus to gain a competitive edge over less focused firms through increased bargaining power, pricing tactics, large selection, and strong branding.
UPDATE: Category Killers came up again in detail here. and I’ve added the term to the Strategy Glossary.
76.6% of Votes For Putin
Vladimir Putin was re-elected Sunday as President of Russia for another 6 year term. He has been either President or Prime Minister of Russia since 1999 when Boris Yeltsin resigned and choose Putin as his successor.
It’s widely believed that – despite Putin’s popularity in Russia – the results are not what they seem. The 67.5% turnout is suspiciously high and reports of ballot-box stuffing and forced voting have already surfaced.
Alexei Navalny, Putin’s biggest political opponent, was barred from even running in the election after being convicted of embezzlement. The charges are believed to be politically motivated and retaliation for Navalny’s anti-corruption campaigns. The 7 other candidates in the race appealed only to niche populations and had no serious hopes of winning the election.
And while term limits (of 2 consecutive 6-year terms) prevent him from running for President again in 2024, Putin can just “sit out” for a term as Prime Minister – exactly like he did in 2008. Assuring that one of his puppets would become President and allow him to govern from the Prime Minister’s seat was easy in 2008 and could be just as easy in 2024.
But regardless of interference allegations, Putin was already assured victory before the election. I mean, he only held one campaign event. So why interfere with a race you’re supposed to win?
Mandate. Putin and his allies can now point to a 67.5% voter turnout and a 76.6% victory as a mandate from the Russian people to rule however he sees fit. Keep an eye out for new policies and announcements as Putin enters his 2nd “lame duck” term.
Putin consistently proves that in order to maintain power you must get the right pieces to the right place at the right time. Being secretive and covert is a nice-to-have.
Dropbox IPO
Dropbox is poised to IPO this Friday. Offering shares at a price of $16-18, the cloud-storage company is attempting to raise up to $650 million. On the high end, the company would be valued at $7.1 billion – 30% lower than it’s peak in 2014.
While I like Dropbox and am one of the 11 million paying customers (of 500 million), the competition is fierce in the cloud storage market and the company has really struggled to clearly differentiate itself from competitors and launch other high-value services for small and medium size businesses.
To me, Dropbox is yet another case of Silicon Valley Hot Potato… it’s fun to get your hands on stock for a bit, but if you want to make money after the first few rounds, you’d better not be left holding it when the music stops. The question for current and would-be investors is: Has the music already stopped?