Toys "R" Us chief executive Dave Brandon says the chain's bankruptcy filing marks "the dawn of a new era" that will free it from crushing debts.
Unfortunately, debt is a symptom of much deeper woes for Toys "R" Us and other traditional retailers.
It's a new era all right. But probably not the one Mr. Brandon envisions.
The industry is grappling with the relentless onslaught of Amazon and Alibaba, excess retail space, the retreat of department-store mall anchors and intense price competition. Meanwhile, consumers are shifting their spending from things to experiences, including entertainment and dining-out.
The harsh reality for Toys "R" Us and other big-box stores is that they aren't indispensable any more as North Americans discover new and different ways to shop. You don't have to schlep to a suburban shopping strip to find the newest Lego set, video game or electronic gadget. Order it online, and you can have it delivered to your door, often for free the next day, at the best price available anywhere.
For years, retail experts have warned that a tipping point was coming for the industry as more and more shopping moved online. This looks like the year.
Analysts predict that a record 9,000 retail stores will close across the United States in 2017. That would eclipse 2016, when roughly 6,200 stores closed.
Retailers have been filing for protection from creditors at a faster pace this year than at any time since the 2008-09 recession. Toys "R" Us joins a long list of famous retail casualties of 2017 in Canada and the U.S., including Sears Canada, The Limited, Wet Seal, BCBG, Payless Shoes, Sports Authority, Gymboree, Aéropostale and American Apparel. And there are still three-plus months to go.
U.S. department stores have been shedding workers at a faster rate than mining or manufacturing since 2000.
Most worrying for retailers is that this is all happening amid a pretty decent economy. GDP is growing, in both Canada and the U.S. So are jobs, wages and retail sales.
The rise of Amazon is proof that consumers are embracing new ways of buying. The company's North American sales grew five-fold to $80-billion (U.S.) between 2010 and 2016. Half of U.S. households now subscribe to Amazon Prime, a fee-based service that offers free two-day shipping, music and video streaming plus other perks.
If there is any silver lining for Canada, it is that we are behind the U.S. in online shopping, and we have a lot less shopping space per capita.
Slightly more than 8 per cent of total U.S. retail sales are now made online, according to the U.S. Census Bureau. In Canada, roughly 2 per cent of retail sales are online, but that number isn't directly comparable because it excludes sales made through non-Canadian online retailers, as well as travel, accommodation and entertainment spending. The Retail Council of Canada estimates that online sales represent approximately 6 per cent of the total.
The U.S. is also significantly more over-stored than Canada, suggesting the potential for a much bigger shakeout south of the border. Americans have more mall space per capita than Canadians: 23.6 square feet of retail space exists per person south of the border, compared with 16.5 square feet here, according to the International Council of Shopping Centers. Some analysts estimate that a quarter of U.S. malls could close over the next five years.
What's alarming isn't so much the share of shopping that has moved online, but the speed at which it's moved.
Legendary investor Warren Buffett of Berkshire Hathaway sold off nearly $1-billion worth of Walmart stock earlier this year, explaining that traditional retailing is "too tough" a business in the age of Amazon. "The world has evolved, and it's going to keep evolving, but the speed is increasing," Mr. Buffett said.
Amazon and China's Alibaba won't be the only winners in this new era. A vast array of other businesses feed off the online industry, including shippers and logistics companies, plus a vast network of technology companies, including store platforms (Shopify), analytics companies and app makers.
Consumers will always need to touch and feel some things before buying, but the products and services that can't be purchased more efficiently online are becoming a rarity.
There is a new dawn coming. But many of the biggest names in retailing may not be there to see it.