It is without surprise that many of us bid Toys R Us farewell. The retail giant now is in a swift liquidation process as the writing of this article.
The year of 2017 has been the bearer of so many companies that have filed bankruptcy. Here is a condensed list:
If you look closely there is a trend to majority of these "Fortune 500" companies going bankrupt. Most retail giants have great store fronts that are apart of their of the business model. This business model highly revolves on the ability and habit of the customer. These customers have a great interest in visiting a store to feel, touch and try various products before purchasing.
The number one lesson that any business owner can learn from Toys R Us.
Because of this business model many people believe that these retail giants are falling. But this is not the primary reason of their downfall. In fact, the biggest catalyst of their downfall is that of their operating expenses. For many retail giants they are the anchor tenants in various shopping malls and centers.
A large retail giant with supurb credit as a retail renter consist of;
- Verizon etc.
Operating expenses is what is needed for every business to operate. The average fortune 500 company has the following view of operating expenses from Toys R Us.
As you can see the rent liabilities have crippled Toys R Us and many retailers because they lose the ability to scale small when needed for tough times. How can we learn from this? It's important that if you plan to grow a brick and mortar business to do one of the following:
1. Purchase your office location do not lease.
2. If you must lease, then you should agree to a short term lease. A short term lease may be a higher monthly rate, however it will allow you to have a definite exit without the need of bankruptcy.