- The Washington Times - Sunday, October 8, 2006


Amazon.com and Toysrus.com — partners in the online toy world since 2000 — have become staunch rivals this holiday season, battling for consumers’ share of dollars for toys.

The two severed ties after a ruling in March from a New Jersey superior court judge who found that Amazon.com breached a deal to give Toys R Us Inc. exclusive rights to supply some toy products as a third-party vendor on Amazon.com. The company is appealing the court decision in an effort to reinstate the online retailing pact, though officials declined to comment on the status.

For now, both are armed with an expanded number of toys and new services in an effort to drive shoppers to their sites this holiday season.

Toysrus.com, which teamed up with Amazon.com a year after its disastrous 1999 holiday season — when some customers got their toys delivered after Dec. 25 — is making sure not to repeat that logistical nightmare. The company, which launched an independent Web site July 1, teamed up with logistics specialist Excel and electronic-commerce specialist GSI Commerce Inc. in May to bolster its Toysrus.com and Babiesrus.com sites. It opened a new fulfillment center in Groveport, Ohio, in September.

These two rivals also will have stiff competition from online auction house EBay Inc., as well as Target.com and Walmart.com, both of which are expected to be aggressive with discounting.

“It’s going to be a very interesting battle to watch,” said Heather Dougherty, senior analyst at Nielsen/NetRatings Inc., an Internet research company.

This is only good news for shoppers, who will have expanded assortment and services. Toy makers also expect to see their online toy business expand at a time when the toy industry is struggling with stagnant growth.

Roger Schiffman, CEO of Zizzle LLC, thinks that the two separate sites will give a 20 percent to 30 percent boost to his company’s online sales.

“All of a sudden, it is like adding more online stores,” he said.

According to NPD Group Inc., a market research group in Port Washington, N.Y., sales of traditional toys have averaged a 2.9 percent decline from the January-to-August period, even as makers are trying to come up with new electronic toys that excite children who are growing out of toys faster.

Sales of traditional toys, which exclude video games and game consoles, fell 4 percent to $21.3 billion in 2005, from $22.1 billion in 2004, according to NPD.

But online sales of traditional toys surged 32 percent in 2005 compared with the year-ago period, according to comScore Networks, an Internet research company. NPD estimates that online toy sales account for about 6 percent of total toy sales.

Toysrus.com is angling to take a big share in cyberspace by offering for the first time gift cards and expanding its merchandise to include children’s books and DVDs, services that were prohibited under the previous partnership. It also is offering more toy exclusives this year, something that Amazon.com does not have. Exclusives include micro preschool scooter from Huffy and a nativity scene and Hanukkah set, both from Fisher-Price’s Little People brand.

Toysrus.com also relaunched its site with an improved search engine and bigger and brighter pictures of the toys, using technology specifically for that category, said Chief Executive Jerry Storch. The former vice chairman of Target joined Toys R Us in February, after the company went private last year. Customers also can personalize the site by age and brand, he said.

“It’s very exciting to be independent,” Mr. Storch said. “What’s important is that we compete on authority. … We are not selling … tires or toothpaste. It is all about the toys.”

Toys R Us declined to comment on how many toys it will feature online for the holiday season but said it will have more than what it had on Amazon.com.

Amazon.com features about 120,000 different traditional toys, about five times the number of toys it offered right before its partnership ended, said Jennifer Arthur, senior manager for toys and babies products. It has also doubled the number of third-party sites to 80 and expanded its toy business with its merchant partners like discounter Target.

Miss Dougherty thinks that both companies have its advantages and disadvantages. She noted that while Toysrus.com is the authority on toys, it needs to better take advantage of its presence both online and in stores. A big advantage, she said, is if shoppers can order online and then pick it up in the stores. Toysrus.com is testing that service in certain markets this holiday season; it will be rolled out nationwide next year.

Mr. Storch noted the retailer will also be expanding its baby registry online.

Miss Dougherty said that Amazon.com’s edge is its ability to drive customer traffic to its site with its wide breadth of products. In fact, Miss Arthur said, it will be sending out targeted e-mail campaigns to shoppers based on what they have bought in the past.

“We have a great wealth of information,” Miss Arthur said.

But Chris Byrne, an independent toy consultant, noted, that Amazon.com’s weakness is that it is not an authority on toys and doesn’t have the relationship with makers to keep hot toys in stock closer to Dec. 25.

In fact, availability could be an even bigger problem with every toy seller this holiday season. Stores are reporting better-than-expected demand on some holiday toys particularly T.M.X. Elmo from Fisher-Price, which could be this year’s must have toy, after several years without one.

Amazon.com said it sold out of its allotment of T.M.X. Elmo but is working with Mattel’s Fisher-Price to get more. Meanwhile, Toys R Us spokeswoman Kathleen Waugh said new shipments are coming in, though they sell out quickly.

Meanwhile, EBay, which always benefits from hard-to-find items, could be the real winner. It sold 9,700 Elmos on Sept. 19, when the toy made its debut in stores, according to spokeswoman Ryann Dubiel. From Sept. 19 through Sept. 29, it sold 37,420 T.M.X. Elmos at an average price of $87.11. That’s more than double the $39.99 retail price.

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