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.
As VP of Retail and Consumer Products at Compete, Matt Pace is responsible for leading a team of client services professionals who deliver digital intelligence and insights to clients in the retail and consumer packaged good industries. Before Matt joined the Compete Team he was a CPA and senior auditor with Deloitte & Touche. Follow Matt on Twitter @mattpace.