Small Vendors Cut Ties With Toys ‘R’ Us, Concerned They Won’t Be Paid

Image courtesy of Nicholas DiMaio

While some suppliers of bankrupt toy mega-chain Toys ‘R’ Us are desperate to make sure that the chain stays in business, others are taking the opportunity to stop dealing with the mega-chain. That’s because they’ve already shipped thousands or millions of dollars’ worth of merchandise to the deeply indebted retailer that they may never be paid for.

“A good comfort level”

Reuters spoke to one toy distributor, Product Launchers, that recently delivered an order of $500,000 worth of fidget spinners with licensed DC Comics characters on them. The company’s CEO says that she doesn’t expect to be paid for the order, and that she has halted business with Toys ‘R’ Us, even when some of the up-and-coming toymakers that the company distributes for were hoping to sell items there.

“We’ve taken down all connections to them,” the CEO told Reuters. “I would rather focus on retailers that have strong financials and that we have a good comfort level about doing long-term business with.”

Looking out for the big guys

It may be small toy startups that are left behind while the Hasbros and Mattels of the world don’t suffer as much in this bankruptcy. Toys ‘R’ Us obtained hundreds of millions of dollars’ worth of loans specifically for paying its top vendors — the ones without which it would enter the holiday season with shelves bereft of Star Wars toys, Barbies, and Hot Wheels.

Yet small vendors are important, too, since their products help fill the shelves while catching kids’ eyes. Any new product could be the next Cabbage Patch Kids or Zhu Zhu Pets.

“Your store won’t be attractive with just Mattel and Lego,” one retail consultant pointed out to Reuters.

Product Launchers estimates that it’s owed around $1 million, which sounds like a lot of money to mere humans, but doesn’t even put it in the top five creditors of Toys ‘R’ Us.

Waiting on ships

The New York Post reports that some of the toys that are supposed to end up under trees across the country later this year are currently waiting at ports, since insurers aren’t yet able to calculate the risk of selling to Toys ‘R’ Us in the future.

“We are seeing some delays in the vendors releasing their shipments because of their concerns about Toys ‘R’ Us’ ability to compete in the holiday season,” a retail analyst told the Post.