E-commerce grew 20% for Costco in fiscal 2015—20 times faster than store sales.
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That said, manufacturers selling toys directly to consumers might be a threat as well, Freedman adds. For example, Mattel began its e-commerce initiative in 1997, selling mostly to collectors of Barbie and Hot Wheels products. The company has begun to market to kids and soon will launch a new Mattel.com Web site with a broader product mix.
An online snore
Still, manufacturers probably won’t be overly aggressive online because a huge majority of sales are still offline. Manufacturers won’t want to upset their retailers by selling too much directly to consumers, says Williams. Mattel is keeping that controversy in mind: its new site will include features that directly involve retailers, though the company won’t talk about any specifics.
By building up the Mattel site, the manufacturer is joining other online retailers in getting ready for the Christmas season. Most are improving their Web sites. Toys “R” Us wants to add 40 features in time for the holiday shopping, and Disney is relaunching its site to add personalization technologies.
To win new customers, online retailers need to keep improving and figure out how to offer consumers things they can’t get by shopping in traditional stores, says Brian Hume, president of Martec International, a retail consulting firm in Atlanta.
To that end, Amazon has put the sounds toys make online. Now Customers click on a button to hear a stuffed doll giggle or snore. In addition, Amazon photographs toys from all angles, so buyers can often see more of a product than they can a packaged toy in a store.
The ideas for new features keep coming. The Disney Store Online is using its site to offer personalized plush toys. Customers can sign onto the Web and order their favorite character with their name on it or a message to a friend. Similarly, Mattel offers kids and adults the ability to design their own Barbie.
Toy retailers are focusing on content as well. Toysmart.com, which sells high quality specialty toys online such as Playmobil action figures and Brio wooden trains, offers articles on education and other resources for families, teachers and child care providers.
But glitzy, fun sites are only part of the success equation that toy retailers are building. They also are expanding their marketing campaigns. To lure customers to its new Web site and to get its brand name well established, for instance, Toysmart.com is launching a $20 million initiative that will include a national television advertising campaign. “We have a great business model, serving the portion of the market that cares about the quality of products their children use,” says David Lord, CEO and president of Toysmart.com, formerly Holt Educational Outlet. “We just need to build the brand,” says Lord, noting that an initial move was to make the company’s name more memorable. “We think Toysmart is a pretty cool name.”
EToys is launching a new campaign for Christmas. And Toys “R” Us and KBkids.com say they will use their bricks-and-mortar presence to get the word out. “We’re going to be very aggressive about using the stores to market the site,” says KBkids.com’s Srinivasan. “By the end of the year, you won’t be able to go into any KB Toys store where you won’t be introduced to the Web site and be invited to shop there in a whole bunch of different ways.”
Once a customer is at a site and buying, online retailers must be able to deliver the goods. Thus many are getting their distribution centers in order. Kids’ retailers have to meet “mission-critical” dates because toy sales revolve around birthdays and Christmas. That means online toyshops need to have strong distribution systems in place in order to meet demand.
EToys has just signed deals to expand its warehousing and distribution capabilities, including a lease for a new fulfillment center in Danville, Va. Toys “R” Us announced the purchase of a fully automated distribution center in Memphis, Tenn., and Amazon also will have an improved distribution system in place for the holidays.
“Given the seasonality of this business, what’s really going to set the strong retailers apart from others is the ability to actually deliver toys to these customers in time for the holidays,” Amazon’s Birtwistle says. “You really have one shot at getting the customers what they want.”
And Amazon, like Toys “R” Us, KB Toys, eToys and others, is going to take it.
MargaretAnn Cross is a freelance business writer based in Allentown, Pa.
Playing to Win
Internet toy retailers aren’t kidding around when it comes to rolling out serious merchandising strategies they think will make shoppers buy. Here are some of the top competitors and their game plans.
Amazon.com: Multimedia player Amazon.com says it’s betting that a huge selection of toys from big and small manufacturers, customer service features such as product reviews and a nationwide distribution system will ensure customers can find and receive what they want this Christmas.
EToys: Successful IPO earlier this year has put millions of dollars at eToys’ disposal. It will spend a considerable amount marketing the site offline. EToys recently expanded into selling baby gear and the company plans to add other kids’ categories. The company also plans to launch a Web site in the United Kingdom-in time for holiday shopping.
KB Toys: A subsidiary of Consolidated Stores Corp., KB Toys recently partnered with online video game and toy seller BrainPlay.com. The pair launched a new and improved KBkids.com Web site and a separate company to run it. Executives hope that the combination of Internet experience from the BrainPlay.com staff and KB’s solid relationships with toymakers will bring them out on top. KBkids might go public early next year.
Mattel: Mattel is planning to expand the number of products it sells direct to consumers online. A newly launched and well-stocked Mattel.com also will complement sites such as Barbie.com and HotWheels.com. Mattel says its retailers will play a significant role in the toy manufacturer’s online strategy. The company is considering forming a separate Mattel.com, part of which would be sold to the public.