The leading e-commerce retailer announced today that it has acquired Herndon, Virginia-based Back to Basics Toys, an online and catalog retailer of classic toys such as log cabin building sets, rocking horses and Erector sets. Amazon declined to say how much it paid for the privately held company or whether the transaction was a stock or cash deal.
The deal comes as the holiday shopping season hits its stride. In addition, toys are expected to be a hotly contested area online, with Amazon, KBkids.com and Toysrus.com attempting to edge in on the lead eToys enjoyed last year.
Forrester Research projects that consumers will spend $253 million on toys online this year, compared with roughly $80 million last year. Forrester expects about 40 percent of that amount to come during the holiday season.
Amazon spokesman Bill Curry said the deal comes at just the right time.
"This is a nice addition to our store, and it adds another line of specialty toys as the holiday season is really beginning," Curry said, adding that "there are many holiday shopping seasons ahead."
Amazon already has set up an area within its toy store to feature Back to Basics' toys. Curry said Amazon will continue to produce its catalog under the company's name, and Back to Basics' management team will remain on board.
Since last year, Amazon has greatly expanded its offerings, jumping into auctions in March, opening its toys and electronics stores in July, and adding software, video games and home improvement earlier this month.
The acquisition of Back to Basics marks the second time this month that Amazon has acquired a company to launch or expand one of its stores. Earlier this month, Amazon opened its home improvement store by acquiring Tool Crib of the North, a catalog retailer of tools and other equipment.
Despite the recent deals, Curry said they do not necessarily signal a trend for Amazon, pointing out that the company launched its software and video games stores without any outside help. "I wouldn't conclude that we can't do any more stores on our own or that we would pursue acquisitions to do all of our expansions," he said.
But Hambrecht and Quist financial analyst Genni Combes said Amazon is likely to make similar acquisitions in the future to expand its offerings, along with building new stores on its own. By acquiring other merchants, it can jump-start new categories by gaining expertise in merchandising and an existing customer base, she said.
"I think what it does is it gets them into markets faster," Combes said.
Amazon's accelerated pace isn't going to end in the next year, either, Combes said. Driving this expansion is the four new distribution centers the company has brought online this year, Combes said.
"If 1999 has been the year of infrastructure building, 2000 will be year of product category expansion," Combes said. "I think they're saying to themselves, 'We've built these warehouses, let's fill them up.' "