Even during the holidays, former Toys R Us CEO Jerry Storch couldn't deny that toys are "a very tough business." (At 4:00 mark of interview)
The rise of e-commerce has effectively dovetailed one of the toy business' top moneymaking strategies, Storch said: raising the price of a small number of red-hot products at the right time.
"The internet's a perfect vehicle for trashing the margins on those products," Storch said, adding that Toys R Us' baby business is also struggling against competitive pressures.
"I'm sure, though, that Toys R Us will survive in some form" as e-commerce giants such as Amazon and Walmart take market share in the toy space, the CEO said. "Toys R Us will survive in a different form."
The key to surviving? Storch, the former CEO of Canadian retailer Hudson's Bay, cast it as a balance between scale and investment.
And while some retailers, such as DIY giants Home Depot and Lowe's and off-price favorites TJX and Burlington Stores, will continue to do well no matter what, others will need to sacrifice, Storch said.
"There's going to be significant consolidation ahead; there's going to be more store closings," the CEO predicted. "Those that are best capitalized are the ones that are going to survive."