Is there a Toys 'R' Us lurking in Asia?

ALL children grow into adulthood, when grim responsibilities hit you. Toys R Us, the world's largest toy retailer, has filed for Chapter 11 bankruptcy protection. The potential collapse of this icon, which has 11 stores in Singapore, is a source of anguish for the millions of children who relish its wares. It is also a parable on the dangers of excessive leverage fuelled by childish exuberance.

Toys R Us was founded by Charles Lazarus, a determined World War II veteran, in 1948. Mr Lazarus made the prescient forecast that the post-war baby boom would lead to a craving for toys. Also, toys break easily and are constantly replaced, so demand would be easily sustained. Mr Lazarus's success was built on tactics that were novel in the 1950s but are common today. He was a pioneer in running a specialty toy store. Toys had traditionally been sold in large department stores, which sold especially large volumes in the period from Thanksgiving to Christmas.

Toys R Us would need to sell toys throughout the year to be successful. Mr Lazarus had timed his launch to perfection. Heavy advertising on television led to year-round toy sales. Children wanted toys regardless of the time of the year. Mr Lazarus ensured that parents could easily find the hot toys. He projected a limitless selection of toys in his stores. Each outlet had endless rows of shelves stacked with toys. He was also a pathbreaker in discount retailing. He sold rare items at a deep discount. In 1977, an electronic game called "Simon" was the prized toy of the day. He priced it at US$20, compared with US$30 elsewhere. The public assumed that the entire inventory of Toys R Us was available at a discount.