Target announced Monday that it's partnering with the parent company of Toys R Us, Tru Kids, so that it can relaunch ToysRUs.com.

This is big news for Toys R Us, which has started to open some small stores under its new, post-bankruptcy model. It means it will have an internet presence for the holiday season, powered (and fulfilled) by one of the most powerful retail brands in America.

Now, if you're a fan of Target or Toys R Us -- and there are a lot of people who are fans of both -- you're likely to find this to be very good news. 

But if you're a student of business history, you're going to find the whole thing incredibly ironic. 

That's because one of the key differences between Target and Toys R Us today -- why Target is arguably thriving and Toys R Us is being reborn after bankruptcy and liquidation -- has to do with parallel decisions that both companies made years ago.

And it now seems like history is repeating itself.

Amazon, Target, and Toys R Us

The story begins in 2000 and 2001, when both Target and Toys R Us were successful retail brands with stores across the United States. E-commerce was tiny back then, about 1 percent of all retail sales.

And while big brands like Target and Toys R Us realized they probably needed to be on the internet, lots of smart people thought of it as a small sideshow.

So, both brands -- along with other big retailers like Borders (bookstore) and Circuit City (electronics) -- outsourced basically their entire online operation to the e-commerce leader: Amazon.

I love writing that because it seems so crazy in retrospect. Even if it made sense at the time, within a few years it was clear that this was a better deal for Amazon than Target (and Toys R Us).

As one former Target executive put it afterward: "They learned a ton on our dime, and we didn't learn much [in return], and that's a massive issue."

History doesn't repeat, but it rhymes

Both Target and Toys R Us eventually got out of their deals with Amazon, but their roads diverged sharply there. 

Target poured billions into building its own digital products -- things that now go way beyond its website. But Toys R Us only announced in 2017 that it was going to put $100 million over three years into its online efforts.

And while $100 million sounds like a lot of money, it was really a paltry investment given the stakes and the scale of the industry the company was in.

So, here we are all those years later -- and it's super ironic that the new Toys R Us is right back where the old one was back in the year 2000, outsourcing its entire digital product to a giant competitor.

For both brands' sake, here's hoping it works out -- and that Toys R Us (one of the most beloved brands in America, judging by my email inbox every time I write about it) survives its comeback.

By the way, the early history of Toys R Us is one of the great unsung entrepreneurial stories of American history. It's worth knowing -- and hoping it will endure.
 

Published on: Oct 8, 2019
Like this column? Sign up to subscribe to email alerts and you'll never miss a post.
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.