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Amazon may make play for toys this month

An equity analyst that covers the online toy market says all signs point to Amazon making a major play in the second half of June.

Amazon.com is quietly gearing up to enter the toy business, an analyst following the company said.

In the past few months, Amazon has taken a number of steps to make a serious foray into the online toy market, said Derek Brown, This ain't play: Toysrus.com readies site an analyst who covers e-commerce companies for Volpe Brown Whelan. Amazon has hired people with experience in the toy market, has cemented relationships with toy manufacturers and distributors, and has amassed "significant" inventories of toys, Brown said.

"The launch of Amazon's toy store could happen as soon as the second half of this month," said Brown, who added that his prediction is based on conversations with people in the toy industry.

Amazon spokeswoman Lizzie Allen declined to comment specifically on Brown's prediction, first published today by Dow Jones Newswires. "We never comment on what we may or may not be doing," she said, adding that Amazon already sells toys through the gift store and Star Wars sections of its site.

But Amazon's plans would go well beyond those limited offerings, and could help the company pose a serious challenge to eToys, which is now the leader for online toy sales. Other companies such as Toysrus.com, Mattel, and Netoy, are also trying to make inroads.

"It certainly continues Amazon's transformation into an e-commerce hub, which is something they've been focused on for quite a while," said Brown. "It does move the company into a $23-billion market opportunity they haven't really participated in."

But Amazon faces huge challenges in a market that's already packed with competitors. Unlike books or CDs-so far, Amazon's main product lines-there isn't always a steady stream of toys on hand to sell. That magnifies the importance of forging relationships with suppliers and manufacturers, said Marc Johnson, e-commerce analyst with Jupiter Communications. "Online (toy) retailers are at a disadvantage because they don't have enough products," he said.

For that reason, "It's hard to see them dominating in this area," said Srikant Srinivasan, chief executive of toy seller BrainPlay.com."Their distribution is not in place. It's a question of focus and industry structure." But, he added, his company fully expected Amazon to make the move.

Amazon also has a tough marketing job ahead of it, Johnson said. Every time the company enters a new line of business, it faces the challenge of "trying to convey all the multiple things that Amazon does." Having a customer base of 10 million "is always an advantage," he said. "But you got to wonder when the brand starts to lose meaning."

Still, Amazon is perceived as the king of online commerce, and "you can't be happy if you're KB Toys or eToys," Johnson said.