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To: Mark Fowler who wrote (62723)	6/15/1999 7:48:00 PM
From: Glenn D. Rudolph	Respond to of 164684

NetTrends: Retailers bet on boom in Net toy sales By Martin Wolk SEATTLE, June 10 (Reuters) - From $8 Star Wars action figures to $130 video game consoles, some of the nation's biggest retailers are betting toys will become the Internet's next hot category and are pouring money into the market. Last month, cyberstore eToys Inc. raised $180 million in its initial public offering of stock, and in April its brick-and-mortar rival Toys "R" Us Inc. announced plans to revamp its online sales with a reported $80 million investment. Online giant Amazon.com Inc., which already hawks "Star Wars" merchandise and other toys in its gift center, is expected to announce a full-blown toy category shortly. At least half a dozen other virtual and land-based retailers, including No. 1 chain Wal-Mart Stores Inc., are aiming to make toys a big part of their online business. "There are an awful lot of investor dollars chasing the toy market right now," said Ken Cassar, a digital commerce analyst at Jupiter Communications. "We all will be advertised to very, very heavily." Jupiter and other research groups expect toys to remain a relatively small category for online sales compared with more established markets like books and computers. But toys are just a part of a much bigger market in merchandise for children featuring relatively high profit margins and attractive demographics, analysts say. "For online retailers it's a great customer acquisition opportunity," said Kate Delhagen of Forrester Research. "They're the kind of folks you want in your database." She estimated online toy sales will top $200 million this year and more than $1 billion in 2001, compared with an overall U.S. toy market estimated at $23 billion. By comparison, online book sales already top $1 billion annually, while more than $3 billion in personal computers were sold online to consumers last year, according to Jupiter. Analysts cite several reasons why online sales are likely to remain a more limited factor in the toy market than in other categories such as books and music. For one thing, many toy sales are impulse purchases driven by demanding youngsters who may not have the patience to wait for a package delivery. In addition, many toys sell for under $10 or even $5, making shipping charges prohibitive. Finally, toy consumers are notoriously fickle, and online retailers will have to fight with their land-based rivals for a limited supply of the hottest products. "I don't think we're going to see 20 percent of this industry going to online sales," said Sean McGowan of investment bank Gerard Klauer Mattison. "Toys 'R' Us and Wal Mart and Kmart are still a lot more likely to have inventory in stock." But the overall "kids commerce" opportunity, including books, music and apparel, is worth more than $75 billion annually, said analyst Jamie Kiggen of Donaldson, Lufkin & Jenrette, who sees 10 percent of the total shifting to the Internet over the next several years. "Our anchor category is toys, but the vision for the company is to be the pre-eminent kids retailing name for the 21st century," eToys Chief Financial Officer Steven Schoch said in an interview. "That means across all kids categories, a substantial number of which we don't currently address." The toy category itself is highly seasonal, with more than 60 percent of sales coming in the weeks leading up the Christmas holiday, when logging on could be an attractive alternative to trying to find parking at the mall. "It is practically a parent's worst nightmare to have to go buy toys for the kids, particularly around the holidays," Forrester Research's Delhagen said. She said she was looking forward to see how Amazon.com uses its massive database of 10 million customers and its growing chain of warehouses to seize the toy opportunity. Amazon.com declined to comment, but analyst Derek Brown of Volpe Brown Whelan said it was an "open secret" th...