eToys Site Back in Business

The eToys Web site is back, in time for the holidays.

The online toy seller, which went out of business and had its assets acquired last spring by toy retailer KB Holdings, is operating as a unit of KB's subsidiary KBKids.com, according to a notice on the eToys Web site.

Morningstar.com analyst David Kathman told the E-Commerce Times that the eToys name is "fairly well-known" and is likely to be remembered when shoppers head into the holiday buying season.

However, Kathman added that the resurrected eToys is not likely to outdo Amazon.com (Nasdaq: AMZN), which sells toys through a partnership with Toys 'R' Us.

"They (Amazon and Toys 'R' Us') are clearly the leader in the online toy business right now," Kathman said. "This revived eToys is going to be a player, but I don't think they're going to be as big as the Amazon-Toys 'R' Us combination. It remains to be seen whether [eToys will] do a lot of advertising."

Once Upon a Time

eToys, founded in 1998, was once one of the most popular e-commerce sites, but kept losing money and ended up filing for bankruptcy in March.

KB Holdings bought eToy's Web site, name and logo at a bankruptcy auction in May for about $3.35 million, following the purchase of the e-tailer's inventory in April. At the time, the company said it would integrate eToys' assets into its own online operations.

KB chief executive officer Michael Glazer, in announcing the purchase of the additional assets in May, called eToys "the most visible and operationally sound online retail toy site in the world."

A group of shareholders later sued the company over alleged misstatements in its initial public offering prospectus.

Game for All Seasons

As eToys' downfall shows, "it's just very, very hard to be a purely online retailer, especially in such a hugely seasonal business like toys," Kathman said. "You have to have the capacity to handle all the Christmas rush, but then for most of the rest of the year, a lot of that capacity is going to be idle."

For that reason, said Kathman, alliances between traditional toy sellers and Internet companies are the way to go.

Holidays on Way

Analysts are divided on how this year's holiday shopping season is shaping up. Forrester Research on Wednesday said it is sticking with its forecast of $11 billion in online holiday spending.

Forrester said the September 11th terrorist attacks led many people who had not previously shopped online to use the Web to make online donations. Having cleared the initial hurdle, those people might now turn to the Web to make purchases this holiday season, Forrester analyst Christopher Kelley said.

Yet Morningstar's Kathman said he thinks sales will probably be a little slower than last year.

"The economy is bad, and the whole September 11th thing has people a little jittery," he said. "People are kind of tightening their belts, and toys tend to be a luxury item."