KB Toys Grabs eToys’ Name and Site

Brick-and-click toy store KB Toys announced Friday that it has purchased the Web site, name and logo of defunct toy e-tailer eToys at a bankruptcy auction for approximately US$3.35 million.

The eToys site currently tells visitors that it is closed and no longer accepting orders, but soon visitors will be automatically redirected to KB Toys’ Web site, KBKids.com.

Pittsfield, Massachusetts-based KB Toys said that it would integrate eToys’ assets into its online operations, which are based in Denver, Colorado.

“Without question, eToys created a unique shopping environment that customers responded to very favorably,” KB Toys chief executive officer Michael Glazer said. “We have maintained all along that the ‘bricks and clicks’ formula, which offers customers both store and online shopping options, would allow customers the most flexibility and be the most successful in the long term. We’re going to try to combine the best of both worlds, the store world and the online world.”

What’s in a Name?

Last month, KB Toys spent $5.4 million to acquire “substantially all” of eToys inventory, which had a retail value of $40 million. The company is also considering purchasing two eToys’ warehouses that are still on the auction block.

In addition to selling its name and URL, eToys agreed to provide KB Toys certain e-mail services, such as contacting its customers and asking them to shop at KBkids.com.

Acquiring the eToys name will allow KB Toys to profit from the millions that eToys spent on online and offline advertising. The site was the second most trafficked during the 2000 holiday season, drawing 21.2 million visitors.

“In four short years, eToys built the most visible and operationally sound online retail toy site in the world,” Glazer said. “We will use these new assets to further enhance the customer convenience of shopping through KBkids.com.”

eToys’ Story

The sale of eToys assets in bankruptcy comes after a disappointing holiday season signaled the final curtain for what had been one of e-commerce’s brightest stars.

Launched in 1998, eToys’ meteoric rise soon made the company one of the most recognizable names in cyberspace. However, red ink spread across eToys’ balance sheet in 1999 and 2000, and the value of the company’s stock sank.

After sales during the past holiday season failed to meet goals, eToys slashed 70 percent of its workforce, or about 700 employees, in January. A month later, eToys said that it would wind down operations and lay off its remaining employees by the beginning of April.

On March 7th, eToys filed for bankruptcy in the U.S. Bankruptcy Court in Delaware and put its assets — including its inventory, warehouses and customer database — up for sale.

Trouble in Toyland

eToys is not the only online toy seller to find that doing business is not all fun and games. Last year saw toy e-tail sites Redrocket.com, ToyTime and Disney-backed ToySmart all close their virtual doors.

Even KBkids.com has not been immune from the trials and tribulations of doing business in cyberspace. In July, KBkids.com, along with Toysrus.com and five other e-tailers, agreed to pay fines totaling $1.5 million to settle a U.S. Federal Trade Commission (FTC) lawsuit over late deliveries made during the 1999 holiday season.

A month earlier, KBKids.com was forced to slash almost one-third of its workforce and announced the departure of its CEO. The company also withdrew a planned initial public offering (IPO) last year.

However, those toy e-tailers that survive the turmoil stand to be richly rewarded. A report released in March by NPD Group predicted that online toy sales would grow from $793 million in 2000 to $1.2 billion by 2002.

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