eToys Launches UK Online Store

Just two months after online toy seller eToys, Inc. announced European expansion plans, it has launched a United Kingdom version of its popular Web site.

The site, www.etoys.co.uk, marks the first time that the Santa Monica, California-based company has ventured outside of the United States.

By launching the Web site now, eToys hopes to cash in on this year’s holiday season. The company has acquired a 2,250-square meter warehouse in Swindon, west of London, and has stocked it with products including toys, video games and other children’s software.

The company has also made distribution agreements with Microsoft’s MSN and Freeserve PLC, the UK’s largest online service provider.

First Britain, Then The World?

eToys officials expect that the UK will serve as a beachhead for further expansion across Europe and will provide the company with valuable international operating experience in a burgeoning e-commerce market. According to industry analyst firm Jupiter Communications, Internet usage on the continent will quadruple to nearly 50 million households by 2003.

Management Team

Ruben Rodriguez, who joined eToys in May as vice president of international operations, is spearheading the overseas drive. Rodriguez brings a decade of international general management and toy industry experience to the position.

In August, eToys also announced the appointment of James Bidwell as the director of marketing for Europe. Bidwell, a UK national, brings a diverse international marketing background to his post, having served in senior marketing posts with companies such as Sega Amusements Europe and The Walt Disney Co.

Competition From Toys “R” Us?

Despite the announcement, eToys is not alone in Britain.

One of its chief competitors, Toys “R” Us, has also launched a UK site, www.toysrus.co.uk. However, some industry observers feel that the rival company will have no real effect on eToys’ foray.

Since Toys “R” Us chief executive officer Robert Nakasone stepped down in August, there seems to be no evidence that the giant brick-and-mortar toy company has been able to turn its fledgling e-commerce operation around. Analysts believe that Nakasone’s resignation was a direct result of the Paramus, New Jersey-based company’s inability to formulate an effective online marketing strategy.

Evidence of the failed strategy was on display the same month when the toy giant announced that it had severed its much-touted partnership with Benchmark Capital. Toys declined to go into detail as to why the deal crashed and burned, but some speculate that the Silicon Valley venture capital firm felt Toys would have insisted upon applying its brick-and-mortar mindset to its e-commerce-marketing foray.

Still Plenty Of Competition

Still, despite a possible lack of competition from Toys “R” Us, eToys faces stiff online rivalry from both Amazon.com — which only recently got into the toy-selling business — and Wal-Mart, which is beefing up its Web site for the profitable holiday season.

After all, the stakes are very high. A study by Net Effect Systems, Inc. shows that during the five weeks prior to December 25th, there will be more than 1.3 billion online shopping sites visits — an increase of 71 percent from the 1998 holiday season.

About eToys

Founded in 1996 by former Disney executive Toby Lenk and idealab! founder Bill Gross, eToys (Nasdaq: ETYS) carries some 100,000 items and more than 750 brands. Products include brand names and specialty items.

eToys has expanded with its acquisition of BabyCenter, an online seller of baby gear. idealab!, an Internet company incubator, owns 25 percent of eToys. Intel and other venture capitalists own another 35 percent.

In its fiscal year ending March 1999, eToys — which employs about 306 workers — lost $28.6 million (US$) on sales of $30 million.

Yesterday, its stock was up 4 1/8 per share, closing at $67 5/8. Its 52-week high was $85.25 per share on October 7th, and its52-week low was $28.13 per share on August 10th.

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