Further stirring up the waters, sources said today that Amazon.com is making serious moves toward entering the toy business, and may open an online toy store as soon as this month
Last month, eToys launched its initial public offering and KB Toys announced that it will merge its online store with rival BrainPlay.com. In April, Toys "R" Us spun off Toysrus.com and toy manufacturer Mattel announced its new online strategy.
Meanwhile, Amazon.com stands like a virtual giant on the edge of the nascent fray. The online retailer has been offering toys through its gifts section and through a special Star Wars site it set up last month.
"They will capture a large part of the toy market this year, if they choose to participate," said Michael May, digital commerce analyst with Jupiter Communications.
Meanwhile, Toysrus.com is trying to strengthen its position before Amazon makes up its mind. The company has linked up with Benchmark Capital, which has backed eBay, E-Loan and other successful e-commerce efforts.
Chief executive Bob Moog said the company will launch its new Web site early next week, although customers can already get a preview of what it will look like. Moog said the site will launch before its completely ready and the company will continue to make improvements on it until the holiday shopping season begins.
Moog said Toysrus.com, just like its Web site, is a "work in progress." The company has neither set up offices nor hired a management team, although Moog said both should be put in place over the summer.
Despite the obstacles, Moog said he expects Toysrus.com to become the dominant online toy merchant in 1999. He said the company would draw on the strengths of it parent: the Toys "R" Us brand, the company's relationships with it vendors, and its large customer base.
"Our goal is to be the market leader," Moog said. "If we're successful, we're going to redefine how brick-and-mortar stores compete on the Internet."
The Yankee Group expects the online toy industry will grow from $120 million in 1998 $1.5 billion in 2003.
David Cooperstein, e-commerce analyst with Forrester Research, suggested that Toysrus.com might be able to fend off the challenge from online only players like eToys by linking Toys "R" Us' stores with the Web site. Toys "R" Us could set up kiosks its stores that allow people to purchase hard-to-find items on the site.
But Cooperstein said Toysrus.com might find a greater challenge in facing down a general retailer like Amazon. Although Toys "R" Us has information about toy buyers, Amazon has been collecting data on how consumers are shopping online, which might be more valuable.
"The more Amazon can spread the knowledge of their customers over multiple categories, the more successful they will be," Cooperstein said.
An Amazon spokeswoman said the company does not discuss future plans.
Moog said he expects Amazon to enter the toy space, but added that he expects Toysrus.com to be more successful in the area. Toys "R" Us has more overall customers than Amazon and has more name recognition as a toy seller, he said.