Target and Toys R Us posted overall sales declines during the holidays.
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Finding a partner that provides a related product can extend the online retailer’s value to the consumer, says Leonard. “It needs to be a partner that would fulfill a need such as national baby furniture or clothing supplier,” she says.
The offlines may prevail yet
While the top three online toy retailers are pure-plays (Amazon.com before joining with Toysrus.com, SmarterKids.com and eToys.com) the offline players may move up in the ranks as they head into Q4’s online shopping season. The new Toysrus.com and Amazon.com site may become the exception, since it is the first example of a newer offline player teaming up with an online veteran. And it remains to be seen if other sites look for similar deals.
But until then, the other offline players still are formidable opponents for the remaining pure-plays. After a slow start, K mart finally launched Bluelight.com this summer, KB Toys’ KBkids.com has plans to entice offline shoppers to shop online and JCPenney.com is ramping up with a full catalog of online toys.
Market observers say these players are a threat to the online toy sector because having an offline presence that can give customers the option to make returns at real-world stores is a major differentiating factor that could kill the pure-plays. “If they can integrate their online presence with their offline distribution [for such things as taking returns] then beating the offline players will be tough,” says Tom Rhinelander, senior analyst at Forrester Research.
And the offline retailers are already in the know. Despite its lack of market impact in the toy sector thus far, JCPenney.com believes its multi-channel model makes it the only e-retailer offering product pick-up and return in the real world, in this case at one of J.C. Penney’s 2,300 catalog desks and selected Eckerd drugstores nationwide. “This option ensures that no children will find gifts sitting on the front step from the postal service before Christmas,” a spokesperson says. Deliveries are completed in two to three business days, and consumers are not charged for expedited shipping fees.
But the hard-luck online toy sector could still be in for another shakeout, not the least of which could be the impact of the Toys R Us/Amazon.com deal. Offline/online retailers have the fulfillment edge while online pure-plays are veterans of the Internet shopping world. “People are looking for a light at the end of the tunnel,” says SmarterKids.com’s Noyes. “And that is a function of not having a business model that makes sense for the web.” Taking an existing brand online-such as the offline toy retailers-is one way to go. The other is taking the pure-play approach-such as eToys and SmarterKids.com-that uses web personalization to cater to consumer’s needs in an electronic forum. Both types exist online today.
Mixing the right amount of Christmas cheer, by having the ability to handle, support and deliver to Q4 toy shoppers, with year-round reality checks that keep toy customers shopping online other times of the year, could mean some toy retailers stay in business. After consumers make their final clicks for holiday 2000, site traffic, sales numbers, delivery, web performance and year-round marketing plans will tell which strategy survives in the new year.