Failure pattern · United States · 2000–2018
Toys R Us: debt, Amazon, and the end of a toy giant
Toys R Us outsourced its online store to Amazon, then was bought in a $6.6 billion leveraged buyout that loaded it with debt. Unable to invest, it went bankrupt in 2017 and closed its US stores.
By Shivam Bhandari · Reviewed 31 October 2026 · How we write
by the numbers
- Amazon exclusive deal
- 2000, ten years
- Leveraged buyout (2005)
- about $6.6 billion
- Annual interest payments
- around $400 million
- US stores closed (2018)
- about 735
What happened
Toys R Us was once the dominant US toy retailer. In 2000 it signed a ten-year deal making Amazon its exclusive online toy seller, which effectively handed Amazon its online customer relationships. It later sued Amazon, but had lost years of e-commerce learning.
In 2005 private equity firms Bain Capital, KKR, and Vornado bought Toys R Us for about $6.6 billion, financing much of it with debt placed on the company. Interest payments of around $400 million a year left little money to modernise stores or build e-commerce, while Walmart, Target, and Amazon competed hard on toys.
Toys R Us filed for bankruptcy in September 2017 and in 2018 liquidated its US business, closing about 735 stores and cutting about 33,000 jobs.
Timeline
- 2000
Online sales outsourced to Amazon.
- 2005
Leveraged buyout.
- 2017
Bankruptcy filing.
- 2018
US liquidation.
what went wrong
- Gave away its online customer relationships.
- Debt load blocked investment in the future.
- Big-box competitors used toys as traffic drivers.
the lesson
Outsourcing your customer relationship and loading on debt both leave a business unable to adapt.
Apply it to your business
- 1Keep direct relationships with your customers.
- 2Avoid debt that crowds out investment.
- 3Watch competitors who can sell your products as loss leaders.
Laws at work in this story
Figures are rounded and drawn from public reports, company filings and widely cited coverage at the time. Check the company's latest filings before relying on any number.