Cramer reveals what sealed the fate of the toiling Toys R Us

  • "Mad Money" host Jim Cramer explains what drove ailing toy retailer Toys R Us to liquidate its U.S. business.
  • Cramer argues that the powers of Amazon, Walmart and Target coalesced to push Toys R Us into bankruptcy.

After Toys R Us submitted plans to bankruptcy court to liquidate its U.S. business, CNBC's Jim Cramer found himself wondering if this was the ailing toy retailer's only solution.

"Sadly, yes," the "Mad Money" host declared on Thursday. "In the end, this chain had no reason for being. Toys R Us offered nothing special: not the lowest price, not the best selection, not the best service, not the best locations. Just nothing."

While many mourned the loss of the 70-year-old toy seller, Cramer was surprised at how long the company managed to stay afloat.

He argued that investors "should've started [their] lamentation 20 years ago" given its weakness, which was only exacerbated when Toys R Us went private in 2005 and tacked on $7.5 billion in debt.

"Yes, it's been that bad for that long," Cramer said. "I think that Toys was doomed at the turn of the century, something you could see at the time in its stagnant sales and not-so-hot stock price."

Around 2000, big-box retailers Walmart and Target decided to seize on the brick-and-mortar store business while e-commerce giant Amazon made Toys R Us its exclusive toy vendor.

The move seemed like it would benefit Toys R Us, but Cramer said it actually resulted in Walmart and Target lowering prices on top-selling toys to undercut Toys R Us and Amazon using Toys R Us' knowledge of the business to offer toys at lower prices.

This was a formidable step back in the history of Toys R Us. In the 1980s, the retailer was lauded as one of the market's greatest growth stories, Cramer said.

"It was what we called the category killer, cleaning up against what were basically tens of thousands of mom-and-pop toy stores all over the country," the "Mad Money" host said.

Consolidation among toymakers gave Toys R Us another leg up over its rivals, but before long, Walmart and Target encroached on the toy space, offering prices Toys R Us couldn't beat or didn't want to match, Cramer said.

"You quickly started seeing the telltale decline in same-store sales that amounts to the death rattle for a retailer," he said. "Essentially, Toys R Us was done when it had a 2 percent decline in same-store sales in the 1999 Christmas season."

For Cramer, the most incredible thing about the toiling toy chain was that it stayed in business for this long after its rivals rendered it unable to compete on price, location, speed or service.

"Sure, it could've hung longer on if it had less debt," he admitted. "But, in the end, like so many other category killers, it ultimately got killed in turn by smarter, better operators. Of course, the great irony is that Walmart, Target and Amazon all came together to murder Toys R Us, but if you're at Walmart or Target right now and you're reading the Toys obituary, you have to wonder: one day, could you be next?"

WATCH: Cramer retraces the tragedy of Toys R Us

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