Did Toy's "R" Us Make it, or Come a Cropper?
from January/February 2002
by Susan Caminiti
The last time we looked, John Barbour, CEO of Toysrus.com, was in hot pursuit of a successful holiday season for his online business—something he hoped to bring about by way of a joint venture with Amazon.com (“Toys ‘R’ Us Scoots Back to the Web,” Corporate Board Member’ s Winter 2000 issue). The prognosis was good: Amazon knew online marketing and Toys “R” Us knew toys. But the specter of the past haunted Barbour. The parent company’s venture onto the Web in 1999 had been a disaster, thanks to all kinds of technological problems that disappointed hordes of would-be buyers, big and small. The Federal Trade Commission fined Toys “R” Us $350,000 for failing to notify customers about the problems sooner than it did.
As it turns out, Barbour rode to victory. Toysrus.com’s holiday sales more than tripled during the 2000 season, to $180 million. According to the Internet research firm Nielsen/NetRatings, the site now accounts for the bulk of online toy sales. Says a gleeful Barbour: “Clicks-and-bricks combinations that offer the best online shopping experience and a trusted brand are what rules in today’s marketplace. And 2000 figures prove it.”
Now he’s having to do it again, in the face of waning consumer spending. The good news: Fear of recession or no, parents are going to buy their kids toys—and the field of online competitors has shrunk dramatically. Archrival eToys threw in the towel earlier this year, selling its paltry assets to KB Toys, a traditional toy retailer with an online presence. “I think the world now knows there’s no need for eight toy e-tailers,” says Jason Heller, CEO of Mass Transit Interactive, an online media-management company in New York City. Sure, Wal-Mart and Kmart sell toys on their websites. But when consumers are looking for this season’s bestsellers, Heller says, they’ll most likely want to go to the industry leader. At this point, that distinction is Toysrus.com’s to lose.
