Maplins and Toys R Us provide grim examples of creative destruction

 

In February 2018, the Beast from the East brings weather misery to much of the United Kingdom. There is economic misery too, as two high-profile retailers go into administration

Maplins, a major electronics retailer with over 200 stores and 2,300 staff in the UK has collapsed into administration. Attempts to find a buyer have so far failed.

Toys R Us, whose UK organisation is of similar scale, has around 100 stores and 3000 staff. The parent US company has filed for bankruptcy protection last September. The UK arm needed a deal with the Pension Protection Fund (PPF) in December [2017] to rescue its retirement scheme

Both firms provide examples of Creative Destruction, Schumpeter’s chilling term for the unintended consequences of major economic changes and technological ‘progress’.

 

The opening up of new markets and the organizational development from the craft shop and factory to such concerns as US Steel illustrate the process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one … [The process] must be seen in its role in the perennial gale of creative destruction; it cannot be understood on the hypothesis that there is a perennial lull.

— Joseph Schumpeter, Capitalism, Socialism and Democracy, 1942

Toys R Us appears to have failed to keep up with changes in the market, and particularly with the impact of the web-based suppliers, particularly the mighty Amazon. Maplin, appear to have been more vigorous in efforts to keep pace with technological developments. Nevertheless, the harsh trading environment since the economic turmoil of a decade ago eventually took its toll.

More detailed case analyses will probably identify missed opportunities for the two firms. Toys R Us appears to have been slow to appreciate the revolutionary impact of the web for retailers, and the benefits accruing to the mighty Amazon operation.

One commentator argued that Marlins failed to maintain stock levels in its stores. I am not convinced about that. The current concept of slimmed-down supply chains encourages Just In Time practices.

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