Sunday, May 30, 1999
Web toy sellers play to parental nightmares
Remember last excursion?
BY MARK LEIBOVICH
The Washington Post
The latest darlings of Internet merchants are the kinds that suck their thumbs. Kids — backed by parents and their credit cards — have in recent months become the most coveted targets in the electronic marketplace.
The business notion is simple: Customers go to the Web site, browse, order a toy and wait for it to arrive. Online toy sales will likely reach $1.5 billion, or 5 percent of the toy market, by 2003, according to a report issued by Forrester Research.
Getting the most attention is eToys Inc., which offers 750 products and made headlines last week with an enormously successful initial public stock offering. Shares that were first priced at $20 soared into the $80s in a few hours.
Others joining in
Traditional toy sellers are following close on its heels into the online realm — FAO Schwarz offers a lineup online, and Toys R Us Inc. last month said it would begin peddling toys in cyberspace this summer through a new subsidiary called Toysrus.com.
On the surface, this is a prototypical fight between an Internet upstart and established, bricks-and-mortar businesses — just like online bookseller Amazon.com wrestling Barnes & Noble and Borders for book buyers.
But retail analysts say the eToys-Toys R Us confrontation embodies one of the more visceral components of the shopping experience: hatred.
Shopping trauma
“Parents tend to hate toy shopping with a vengeance, and that's one of the things that makes this interesting,” said Kurt Barnard, president of New Jersey-based Barnard's Retail Trend Report.
EToys is playing flagrantly to these passions. At the front of the prospectus for its initial public offering, the company invokes lost and crying children, crowded parking lots and dirty diapers — along with eight other agonies that make toy shopping one of the great unjoys of parenthood.
Next to this chronicle of nightmares, eToys lists the relative ease with which parents can use its site. By the company's account, shopping at www.etoys.com does not involve car seats, traffic or teary refusals to leave the playhouse. (This assumes, of course, that the often-finicky Internet works as it's supposed to.)
EToys is in a “quiet period,” mandated by the Securities and Exchange Commission after an initial public offering, and would not comment for this article.
Does longevity count?
Bob Moog, the just-hired chief executive of Toysrus.com, said that while eToys might have a head start in the race for Internet toy buyers, his parent company's history is far more of an asset than a disadvantage.
“Toys R Us has been in business for 30 or 40 years, and eToys has been in business for about two,” said Mr. Moog, who is working out of a temporary office in Menlo Park, Calif., while a more-permanent Silicon Valley headquarters is secured.
Mr. Moog said eToys has done a terrific job of drawing parents to the Web: “Once they're there, we plan to get them to shop at Toys R Us.”
That could be hard. EToys' site has won widespread plaudits for its ease of use and nifty features. The site allows shoppers to look at toys according to several categories — by age group, brand name or price — and because the site is linked directly to the inventory warehouse, shoppers can learn immediately whether a certain toy is in stock. Gift wrapping is available for any purchase for $3.95.
EToys carries toys, software, videos and video games, and it says it attracted 75,000 first-time site users in the first three months of this year.
But like many young Internet firms and Wall Street prodigies, eToys has lost vast amounts of money and doesn't foresee profits in the near future. In the 12 months that ended March 31, eToys lost $28.6 million on revenue of $30 million.
Still, many experts are optimistic about the company.
“One of the nice things about Internet businesses is that they carry no past associations,” said Neil Stern, a partner at McMillan/Doolittle LLP, a Chicago retail strategist. Many parents have had bad experiences with Toys R Us, Mr. Stern said. EToys, he said, is smart to bill itself as “the anti-nightmare.”
Recognition is key
EToys has followed a hellbent-for-growth strategy and spent lavishly on marketing. This follows on the theory that brand recognition is half the battle of Internet commerce: Once a brand is established, especially in the early stages of online migration, customers will surely swarm, and profitability will follow.
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