Report: Online Toys Set To Soar To $1.2B

Online toy sales are on track to grow from US$793 million in 2000 to $1.2 billion by 2002, according to a report released Wednesday by The NPD Group.

When consumers were asked which Web site they would consider buying toys from online in the next six months, Amazon dominated with a 23 percent share, followed by eBay with a distant 15 percent.

The now-bankrupt eToys came in third with 9 percent.

"eBay is very popular for toy collectors and parents looking for hard-to-find toys," NPD senior account manager Michael Redmond told the E-Commerce Times. "eBay's not a traditional e-tailer per se, but it's still recognized as a major player in online toy sales , although in secondhand sales."

The $793 million in online toy sales during 2000 marked a 22 percent surge over 1999, the research firm said.

Throw Out the Toys

The departure of the popular eToys site from cyberspace is a symbol of the significant consolidation seen in the Net toy sector during 2000.

In the early part of the year, toy e-tail sites Redrocket.com, ToyTime and Disney-backed ToySmart all closed their virtual doors.

Then in August, just before the 2000 holiday season got started, Amazon and Toysrus.com joined forces with a co-branded site, setting the stage for the battle of Amazon.com/Toysrus.com vs. eToys.

However, after warnings about revenue shortfalls during the holidays, Los Angeles-based eToys laid off employees in January and filed bankruptcy in March.

Other than the giant force of Amazon/Toyrsus.com, viable players in the online toy sector include KBKids.com and educational pure-play SmarterKids.com.

Amazonian Stronghold

"Amazon.com/Toysrus.com have a solid hold on the market, and they will continue to grow at the rate they have been." Redmond said. "But we also see a lot of growth coming from the three brick-and-clicks: Walmart.com, Target.com and BlueLight.com."

Redmond added: "Whatever sites have gone out of business this past year, these guys will pick up some of their volume in the year to come."

According to the report, 59 percent of online shoppers purchased toys online in 2000, compared with 43 percent in 1999. Of those surveyed, 52 percent said they would be making an online toy or video game purchase in the next six months.

Ship Shape

Even with the high growth rates, total revenues in the online toy market are lower than analysts expected. Redmond said shipping costs remain the largest stumbling block for customers looking to buy toys online -- and for toy e-tailers looking to improve profit margins.

"The strategies that the different online toy sites come up with for shipping will be important," Redmond said. "Shipping costs always seem to be high on customer lists as to why they won't purchase toys online."