The final goodbye from Toys ‘R’ Us is the latest in a series of store closings that illustrate why retail needs blockchain right now more than ever.
Everyone saw it coming. It didn’t have to be Toys ‘R’ Us, but when it was, no one was surprised. Toys ‘R’ Us is one of the dozens of big-name retailers to announce store closures within the span of 1 year.
Sears, K-Mart, Brookstone, and Bonton are some of the most well-known closings. That doesn’t include the smaller, mom-and-pop retailers. That list also does not include retailers that are closing stores in certain locations, like the 60 Abercrombie and Fitch closures or 110 closures from Foot Locker. Starbucks is shutting down 150 stores in 2019. Heck, even Apple closed a store in Atlantic City, but after all, it was Atlantic City.
Retail is changing.
Three Stages of the Modern Shopping Mall
If the modern retail landscape were to be broken down into three waves since the inception of the first shopping mall in 1956, it would be the following: the development and growth of end-stage retailers, the internet-retail investment’s booming intersection, and then the post-internet phase.
The development stage of the shopping mall included the growth, prevalence, and incremental value of end-stage retail spaces.
Then came the internet.
Meanwhile, a ton of wealth was created between the tech industry and real estate in the 1990s.
When a majority of the present day shopping malls were created, the potential of the internet was not fully realized. E-commerce was a baby compared to the 5-trillion-dollar industry that it is today. In the post-internet phase, shopping malls are dropping left and right; now there is a much different trajectory for the life of a shopping mall.
The number of shopping malls is now 1,100 down from 1,200 in 2016. By 2023, over 50% of America’s malls are expected to close down.
Why are a record-breaking number of shopping malls closing?
A tiny bookstore called Amazon opened its digital doors in 1994, twenty years later, the bookstore has expanded into nearly a trillion-dollar company. Amazon is both purposefully and indirectly perpetuating the collapse of end-stage retail outlets and shopping malls. Toys R’ Us is Amazon’s latest victim, but it’s not Amazon’s fault exclusively.
The use of cell phones has also destroyed industries like hand-held toys (although you can probably find some on the cheap this holiday season). Unless you grew up with some serious screen time restriction, mobile gaming is much more stimulating compared to toys. Mobile ordering has also aided in retail’s demise.
Retail has taken on a slow, steady collapse. There are some stores that have been able to reorganize themselves or defend themselves in a way to stay afloat. Many cases have not been as lucky, such as Toys ‘R’ Us.
Reorganization of Toys ‘R’ Us Was Thwarted
Despite a last-ditch reorganization effort, five hedge funds that controlled Toys R Us’ debt decided that it would be better to liquidate than to reorganize. Or so it’s said.
However, the reality might be that it was one particular hedge fund’s pressure onto the other four funds that made 33,000 workers lose jobs and made vendors lose over $350 million in merchandise.
Solus Alternative Asset Management pressured the other four hedge funds into making a decision to consider Toys ‘R’ Us unsalvageable. It was not a bad decision, some argue, because the funds had held a security debt with a face value of over $600 million, but that was a small chunk of the $5.3 billion dollars of debt that was owned. After all, Solus did not accept to pay the worker’s severance during the bankruptcy proceedings.
How Blockchain Could Have Helped
You might have heard the word Blockchain used in reference to Bitcoin, but its use case is better understood beyond cryptocurrency. Blockchain as an industry of itself, beyond cryptocurrency, is expected to grow from $339 million to $2.3 billion in the next 5 years.
You should get to know about blockchain. The technical barrier is difficult to understand at first, but understanding it will be beneficial for your understanding of how the future is being constructed.
Blockchain is more of an infrastructure than anything else. Similar to how websites can be built on the internet, a decentralized application (dApp) can be built on a Blockchain. dApps can run without the control of a centralized authority, which limits and distributes concentrations of power.
Blockchains can help bring internal decisions to a consensus, which may help override pressure by a hedge fund like in the case of Toys ‘R’ Us.
Public ledgers, which are the most notable application of a Blockchain, can help vendors maintain logistics and supply chain information. Third Web companies are creating the next generation of marketplaces that allow companies to sell directly to suppliers.
Blockchain protocols are being developed that allow social bulk buying deals and individual price discounts that will be the next stage of commerce after the shopping mall. They will probably diminish until they become novelty. Shopping malls contained the end-stage retailers that were most often national chains. Due to the volume demanded by the number of national stores within a given chain, the chains were able to get the best deals. Now, blockchain can allow manufacturers to sell directly to consumers.
The New End-Stage Retailer
Blockchains can be decentralized, autonomous marketplaces that deals can take place on. Projects such as Buying.com exemplify this use case for blockchain, which uses its platform to host social bulk buying deals.
Individuals are able to pool their purchasing power together and create the same level of demand that end-stage retailers once did. Manufacturers, distributors, liquidators, and vendors can place deals on Buying.com’s website. All of the deals require a Minimum Order Quantity to be met.
The project seeks to be a full-service ecosystem for the next generation entrepreneur from manufacturer to delivery. Once completed, Buying.com’s decentralized distribution network is similar to Uber and Airbnb in the way that will allow individuals to rent extra space in homes, garages, stores, gas stations, etc. Any extra space in residential or commercial properties can be rented out as latent storage space.
The storage spaces that hold the products in transit are a system of decentralized staking nodes. To be a distribution point, you are providing a deposit as collateral security against the goods that you store.
Toys ‘R’ Us will be missed for many of the nineties children who grew up as real “Toys ‘R’ Us kids,” however nostalgic and sad that is. If the retailer was able to hold on a little longer, then perhaps the newest technological advancements in retail technology could have saved them. However, the store is now just another part of the legacy of the end-stage retailers, all of which may soon become extinct.
“Toys ‘R’ Us’ Corporate Takeover Shows Why We Need to Take Blockchain Seriously” was originally published in Data Driven Investor on Medium, where people are continuing the conversation by highlighting and responding to this story.