One Year Ago: Dot-Coms Dominate Online Toy Sales


Originally published on May 26, 2000 and brought to you today as a time capsule.


Internet pure-play toy retailers continue to outdo their brick-and-click competitors in performance and value, according to a report issued Friday by Forrester Research.

Forrester said its second annual “power rankings” — survey data compiled from online consumers and unbiased shopping tests — put Web-based toy retailers in the top three spots, with brick-and-click retailers trailing behind.

“Even the recently defunct Toysmart.com would have beaten out brick-and-mortar powerhouses like KB Toys, Toys “R” Us, Wal-Mart and J.C. Penney,” said senior Forrester analyst Tom Rhinelander. “After years of trying to establish a successful Web presence, these offline giants haven’t found a way to provide a better online shopping experience than the dot-coms, even the ones running out of money.”

Rank and File

Forrester ranked Amazon.com the No. 1 online toy retailer, with SmarterKids.com coming in a close second, and eToys a close third.

Shoppers and analysts alike gave high rankings for Amazon’s toy store because of online customer reviews, personalized product recommendations, and excellent customer service.

Bringing up the rear were toy sites run by brick-and-mortar giants, with KB Toys fourth, Toys ‘R’ Us fifth, Wal-Mart sixth and J.C. Penney last.

Post-Holiday Depression

The report may offer solace to reeling online toy sellers who saw Toysmart.com drop out this week after majority shareholder Disney pulled the plug.

Red Rocket, an online retailer of educational toys owned by media giant Viacom, dropped out two weeks ago as well. Meanwhile, KB Kids has announced layoffs, and the stocks of the toy retailers are free-falling after an optimistic run-up before the holiday season.

Analysts say that razor-thin margins and cutthroat competition among the survivors will narrow the pack down even more in the near future, particularly as the summer season drags on through the dog days of July and August.

Not Over Yet

The battle among the top three toy e-tailers is not over. Amazon managed to keep its first-place crown for the second year in a row, but it cannot afford to rest on its laurels, according to Forrester.

Even though customers were not happy about eToys’ high prices and policy of requiring registration to make purchases, the Santa Monica, California-based company earned high marks for its real-time inventory information, unlimited, no-questions asked return policy, and responsive customer service.

Meanwhile, SmarterKids.com has what Forrester calls “the easiest-to-use site” and a wealth of information, which includes in-depth information on the suitability of a given toy for a child.

“Although Amazon.com retains its PowerRankings title as the best online seller of toys and games, SmarterKids.com and eToys finished so close that either could dethrone the online leader with only a few simple changes.” said Rhinelander.

He added, “For example, to attract and please more consumers, SmarterKids.com could lower shipping costs and keep its call center open 24 hours, while eToys could add more product reviews.”

Playing Catch-Up

Despite their poor showing in the Forrester Report, the brick-and-mortar giants have vast resources behind them, and will surely fine tune their Web sites before the next holiday season.

Forrester said that J.C. Penney has a “labor-intensive checkout process, confusing navigation and unreliable shipping.” Wal-Mart’s site, it said, is “difficult to navigate and does not offer many popular items.”

The Toysrus.com site offers solid customer service, Forrester said, but lacks “basic features like customer reviews and a wish list” and provides “poor product packaging and unreliable shipping.”

A recent report by the NPD Group and Media Metrix predicted that the online toy market will increase from US$425 million last year to $1.6 billion by 2002.

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