The Best of Both Toy Worlds

The combination of Amazon.com and Toys R Us Inc. on one toy web site has the power to start another segment shake out among online toy retailers, analysts say. The two companies, who announced yesterday that they would pool their strengths to launch a toy and electronic game site in September and a baby goods site in January, are breaking the barriers between the pure play online retailers and the offline retailers making a play for the online channel. ãThere is a very obviously mutually beneficial situation going on here,ä says Liz Leonard, analyst at Gomez Advisors. ãToys R Us has significant buying power and experience as a high quality merchandiser that can get the hot selling products, while what Amazon.com clearly does better than anyone else online is customer service and fulfillment.ä Prior to the announcement, which came as a surprise to many market observers, the competitive atmosphere pitted online-only stores such as Amazon.com and eToys against up and coming offline toy retailers such as Toys R Us and J.C. Penney Co. Inc. Many said the offline store web sites would eventually overtake the online players due to their ability to consistently get the best merchandise in stock and have returns available at real-world stores. ãThis is certainly an attention-grabber,ä says Lisa Allen, research director at Forrester Research. ãOnce you get past that, though, you see that it makes sense. Each partner complements the otherâs weakness.ä She adds that the combined stores will make for a powerhouse during Q4â s major shopping season. ãThis could be a real shakeout,ä says Allen.