Amazon's forgotten $500,000,000 deal that 'killed' Toys 'R' Us in 'cruel' move
Some of us are still grieving the loss of former toy giant Toys ‘R’ Us after the store closed all of its doors back in 2018.
It felt like the end of an era after many of us spent our childhoods wandering down the aisles begging for the latest gadget, from Tamagotchi to HitClips.
However, what might not be quite so well known is the deal that was made between the famous toy store and Amazon before going bust.
It all started when the toy company’s website crashed over Christmas 1999, meaning customers didn’t receive their orders in time.
Advert
This led to a $350,000 fine by the Federal Trade Commission (FTC) and as a result, the firm found themselves agreeing to a deal with Amazon, which was growing in popularity at the time.
Toys ‘R’ Us agreed to pay Amazon $50,000,000 a year for 10 years, plus a percentage of sales, in order to gain exclusivity on the e-commerce site for toys and baby products.
However, things don’t stay rosy as just three years later in 2003, other toy merchants started to appear on Amazon, meaning companies like Mattel and Hasbro are suddenly able to sell their products directly.
At the time, Jeff Bezos met with executives and insisted that they needed to stock a wider variety of products or competitors would be allowed to sell their items on Amazon.
In response, Toys ‘R’ Us sued Amazon for breaching their contract.
And while Amazon counter-sued for a whopping $750 million, claiming that the toy firm wasn’t stocking popular toys, Toys ‘R’ Us won its case.
Amazon was forced to pay up a settlement of $51 million but while Toys ‘R’ Us set up its own site and canceled its partnership with Amazon - it was too late.
The damage had already been done and the firm struggled to recover.
By 2017, the company had over $5 billion in debt and filed for bankruptcy, with all of its stores being closed by the following year.
Does Toys ‘R’ Us still trade anywhere after closing its doors?
It isn’t all bad news, Toys ‘R’ Us has been slowly reopening to the public - although its trading looks a lot different these days.
In the US, the firm has begun to open new standalone stores, including flagship locations within Macy’s.
Meanwhile in the UK, it has opened ‘shop-in-shop’ concessions within WHSmith stores, as well as relaunching its website.