Well if Toys R Us were operating at unsustainable cash-burn, it's not surprising that functional businesses weren't able to compete. With them gone, the market opens up for toy stores that charge enough to pay their overheads and operate as viable businesses. (Or maybe customers simply aren't willing to pay the premium that that costs compared to online, because they don't get that much value out of physical stores).

To the extent that vendors were relying on being propped up by an unprofitable Toys R Us who bought their product for more than it was worth, it's the same effect one level up: those vendors were consuming more value than they produced.