Toys “R” Us Flees Amazon’s Jungle, Taking Most Toy Buyers with It.
Written by Matt Pace (contact - e-mail) -- October 24th, 2006 | Recommend This
When it comes to selling toys and baby products online, Amazon.com and Toys”R”Us have yet to prove they can do it effectively without each other’s help. The partnership the two giants entered into after Toys”R”Us’ disastrous 1999 holiday shopping season seemed at the time like a no-brainer. It was Toys”R”Us, you’ll remember, who deftly stole much of the Christmas joy that year by bungling many deliveries until after the millennium.
Toys”R”Us, with egg (nog) on its face, realized its expertise was not in direct to consumer order fulfillment. Amazon.com, for its part, had yet to find the secret sauce to selling toys online. So with much fanfare, the two joined forces in a partnership that seemed to play to both companies’ strengths: Toys”R”Us’ brand was tops in the category, and it had proven mastery of toy merchandising and marketing. Amazon, of course, was the undisputed king of e-commerce and had unmatched order fulfillment capabilities.
Fast forward seven years and the partnership along with any remaining goodwill between the two companies appears kaput. In July, Toys”R”Us formally left the Amazon when it launched its own independent website (featuring both the Babies”R”Us and Toys”R”Us brands). This action left Amazon.com with two entire product categories to fill…and fill fast.
Toys”R”Us’ newfound optimism in its ability to compete for a share of America’s online toy purchases thus far appears warranted. With the holiday shopping season just starting to heat up, Toys”R”Us has jumped out to an early lead over its one-time partner. Looking back, it’s clear to see why. Even after years in the Amazon without an e-commerce website to call its own, the Toys”R”Us brand continued to resonate with consumers shopping for toys and baby products online. In June, the month before the official split, 30% of Amazon’s toy and baby traffic arrived after either searching for or navigating to toyrus.com or babiesrus.com. Loyal shoppers were still beating a path to Toys”R”Us’ door, all Toys”R”Us had to do was set up shop and stop sending the traffic on to Amazon. Presto: 5 Million people visited Toysrus.com in its first month, which is roughly equivalent to Amazon’s monthly Toy and Baby traffic during the six months prior to the breakup.
Without the Toys”R”Us shoppers, Amazon has been left to drive traffic to its toy and baby stores on its own. So far, Amazon’s toy and baby traffic has been just a shadow of its former self. In September, Toys”R”Us attracted nearly 3 times the volume of toy and baby shoppers as Amazon.
Another indication that Toys”R”Us is out to any early lead can be seen in demand for the toys themselves. The new TMX (Tickle-Me-Elmo Extreme) doll, for example, launched with much publicity in September. Across the leading online retailers, Toys”R”Us captured 29% of those shopping for TMX, versus Amazon’s 20%.
While it’s too soon to count Amazon out, Toys”R”Us emerges as the stronger of the two retailers this holiday season. Unlike Amazon, Toys”R”Us is also primed to capitalize on a growing trend in e-commerce: the ability to order a product online and pick it up from a store. It remains to be seen whether or not Amazon can rebuild traffic to its toy and baby stores to compete with its rejuvenated rival. Toys”R”Us’ task this holiday season is to prove it can handle the holiday rush…if not, I doubt Amazon is in any mood to throw it a life line again.
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October 24th, 2006 at 11:32 am
Will be interesting to see if this info gets picked up in the financial community… This is not good news for AMZN shareholders moving into Q4.
October 24th, 2006 at 10:16 pm
it is rumored that ToyRUs has the bulk of the Wii and PS3 game console allocation so they’ll get the majority of the traffic - period. it’ll be more brutal that the TMX…
October 24th, 2006 at 10:49 pm
Good point Nick. I suspect that most shoppers won’t realize the allocation disparity until after finding the consoles out of stock at other retailers. Toysrus is sure to capture most of the early PS3 and Wii “sales”, but I don’t see the “traffic” (or demand) disparity between the retailers being quite as severe. Check back in a couple of weeks for a look at the next gen console battle.
November 14th, 2006 at 1:08 pm
I have recently tried the Toysrus.com website. You can order just fine, but be prepared to WAIT for delivery.
It has been over a week and they still have not shipped. Its a toy - put it in a box and mail it. Made the call and they are having distribution center issues.
If toysrus.com cannot handle shipping now, what will happen at Xmas?? There will be alot of disappointed customers.
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