Here's the Business Week article! Thanks for pointing it out - I hadn't seen it.
The War Against eToys Is No Game
Business Week: August 9, 1999
Department: Information Technology: Internet
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The War Against eToys Is No Game
TABLE: Cyber Toy Battle
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Business Week: August 9, 1999
Department: Information Technology: Internet
Headline: The War Against eToys Is No Game
Deck: Big retailers are invading eToys' tempting online turf
Byline: By Larry Armstrong in Santa Monica, Calif.
This year, toy retailers are rolling out the big guns. We're not talking Super Soakers here--those Day-Glo water cannons that kids everywhere consider must-haves for dousing unsuspecting friends and parents. No, we're talking about the ammunition that the country's biggest toy sellers and leading online giants are stockpiling to snare a share of the Internet toy business this Christmas.
There's a single target in their crosshairs: eToys Inc. Last year, rivals took a beating from the Santa Monica (Calif.) upstart, and they don't intend to let it happen again. The company has paved the way for selling toys online and has become the brand to beat. In December, eToys was the fifth-most-visited online shopping destination, according to researcher Media Metrix Inc. In the crucial fourth quarter, which accounts for two-thirds of all toy sales, the company's revenues soared to $22.9 million, up from $530,000 a year earlier. While that's barely a ripple in today's $23 billion U.S. toy market, Forrester Research Inc. estimates online toy sales will hit $1.5 billion by 2003. That success has prompted the company's $3.7 billion valuation--even though the shares, which hit 76 9/16 when first sold to the public in May, have been cut in half along with other Net stocks.
Now, the competition is fighting back. Toys `R' Us Inc. spun off its Web site as a separate company in April and, in anticipation of the holidays, plans to invest $80 million in it. In May, Consolidated Stores Corp.'s KB Toys snapped up BrainPlay.com, an Internet specialty toy retailer. And Wal-Mart Stores Inc., the country's largest toy merchant, promises a total overhaul of its Web site in time for Christmas.
The real firepower, though, emerged on July 13. That's when E-commerce giant Amazon.com Inc. charged into the category with a toy section whose front page looks as if it were taken directly from eToys' book. A week after launching its toy business, Amazon.com snatched the top spot: ``I believe we're already the largest seller of children's products online,' said CEO Jeffrey P. Bezos, a claim based on sales of toys, books, videos, and music. Amazon has quickly come to dominate every market it has entered, using its huge customer base--which now tops 10 million people--to surge into the lead in Internet music sales in four months and, in videos, in just 45 days.
NEW MARKETS. While eToys is unlikely to hold on to its spot as the top toy retailer on the Net in a battle with such heavyweights, the company looks capable of remaining a strong player. The company's strategy is to stock the deepest selection anywhere, some 15,000 playthings- -not including books--from mass-market hits to specialty products. Toys `R' Us, meantime, carries 10,000 items in each store, while KB has around 10,000 online. At the same time, eToys is branching into other children's categories with the aim of becoming the dominant Net retailer of merchandise for children up to age 12. So far, it has added music, videos, software, video games, and, on July 12, kids' books. In April, it agreed to acquire BabyCenter Inc., an education and community site that also sells such items as maternity wear and strollers. While eToys won't talk about markets it plans to enter in the future, analysts point to sporting goods and party supplies as natural fits.
Still, challengers are already claiming the eToys mantle for their own. Giant retailer Toys `R' Us, another laggard online, will be the clear leader in online toy sales in the fourth quarter, vows CEO Robert C. Nakasone. ``[eToys] did $30 million last year,' he says. ``That' s about the same as one or one-and-a-half of our stores.'
eToys is betting that building from the ground up with an eye toward the whims of children and parents will give it a long-term edge. That means a kid-safe site, where children browsing through videos won' t run across R-rated titles, for example, and where parents can talk to experts over the phone or through E-mail about baby seats. ``We just do the Web, and we just do kids' stuff,' says eToys CEO Edward C. Lenk. ``None of our competitors can say that.' Lenk, a 37-year- old former strategic planning vice-president at Walt Disney Co.'s theme parks, founded eToys at idealab!, a Pasadena (Calif.) incubator for Net startups that still owns about 20% of eToys.
TAG SALES. Lenk says that eToys will thrive because the company's hard-won experience has taught it that small things count. One such example is the ability to put personalized ``to-from' tags on each gift. That way, multiple gifts to different recipients can be sent to the same address, instead of in separate boxes. Coming soon: a parent-password-protected gift registry, and spare parts and repair services for toys. ``They're all simple things, but no one else has figured out how to do them,' says analyst Lauren Cooks Levitan of BancBoston Robertson Stephens Inc.
eToys is gambling that its approach will set it apart from companies such as CDnow Inc., an online music seller that saw its early market dominance overwhelmed by a host of rivals--especially Amazon.com. By catering to a demographic group, rather than just building an online mall filled with specific product categories, such as CDs, eToys is aiming to make customers more loyal. ``We're betting that this kid- space means something more to the consumer,' Lenk says. ``That means we have to get it right all the time.' And do a better job than the real competition--Santa Claus.
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Business Week: August 9, 1999
Department: Information Technology: Internet
Headline: TABLE: Cyber Toy Battle
PRODUCT LAUNCHED ONLINE PLUS MINUS
ETOYS October, 1997 Internet first mover, Tiny $30 million sales broad selection of for year ended Mar. 31; 15,000 playthings unknown to mass market
WAL-MART June, 1996; Largest U.S. toy Sparse 200-item relaunch retailer, buying selection, limited Web later this year clout, in-store experience returns
TOYS `R' US June, 1998; Brand name, buying Fumbled 1998 holiday; relaunched leverage, in-store Web unit looking for April, 1999 returns CEO
AMAZON.COM July, 1999 Stellar Internet Late entry brand, 10.7 million customers
DATA: BUSINESS WEEK |
