Online Toy Shops Already in Holiday Spirit

E-commerce has been somewhat brutal to toy retailers, but though still volatile and unpredictable, the online toy sector is evolving and could prove kind to its survivors.

A couple of months ago, the NPD Group reported that revenues of online toy companies increased by over US$100 million in a year, with the percentage of online holiday shoppers purchasing toys improving from 43 percent in 1999 to 59 percent in 2000.

Interestingly, the same report indicated that in stores that carry an assortment of goods, such as online department stores, the presence of toys helped promote the sales of other items. Also significant is that among the top five most visited online retail sites for holiday 2000 were two toy e-tailers.

Of course, one of those two was eToys, the now-bankrupt pure-play merchant, showing that nothing is simple when it comes to the online toy marketplace.

Narrower Playing Field

With eToys, Toytime, Toysmart and Redrocket among those dropping out of the picture in the last year, the remaining online game players have a cleaner shot at success. Indeed, there might be room for more than one success story.

Chances are that some of the stiffest competition for the remaining e-tailers will come from big name brick-and-mortar operations that have successfully diversified into online sales, including Target, Walmart and Kmart. Having acquired eToys' assets, KBToys will be another brick-and-click toy seller to watch this holiday season.

Amid so much news of online doom and gloom, Toys 'R' Us is a company that has engineered a stunning victory, thanks in large part to its co-branded site with Amazon.com. Despite a miserable showing during Christmas 1999, Toysrus.com said it increased its sales from $49 million in 1999 to $180 million last year, and reported a 6.8 increase in fourth-quarter profits.

Planned Purchases

What makes the Web toy competition intriguing is that the remaining online toy players have an advantage that online sellers of other merchandise do not. Advance planning.

Toy purchases are very often planned, mainly because children express their wishes rather clearly. In addition, gift-givers, particularly parents, usually think through in advance what toys would be appropriate.

Therefore, impulse buying -- upon which traditional shopping depends -- is not a necessary component for online toy stores. Many people arrive at a toy seller's Web site fully intending to make a specific purchase.

Smart marketing, in turn, capitalizes on that buying behavior by leading the customer through the online experience. If, for example, a shopper comes to a Web site intent on buying an action figure for a child, and is directed to a related video game available from the same site, chances are a moderate sale will become more substantial.

Why Toys?

Perhaps the biggest reason to pay attention to the online toy market is that growth of sales in this arena could boost e-commerce sales overall.

Industry observers continue to insist that for business-to-consumer (B2C) e-commerce to find its place in the American culture, middle America must first embrace e-commerce.

Without doubt, toys are the quintessential consumer product and the holidays are the ultimate consumer buying season. So when the online toy wars begin to heat up this year, those looking at the big picture of e-commerce have every reason to keep an eye on Internet sales of Etch-a-Sketches and Easy Bake Ovens.

What do you think? Let's talk about it.