Amazon makes a play in online toy market

The online toy market, which analysts estimate could grow to more than $150 million this year, is a tempting target for a company that has a stated goal of being the premier online retailer. While a number of brick-and-mortar toy stores have already set up Web sites, none of them offer the combination of selection and ease of use that are Amazon trademarks. And eToys, the market leader, has neither Amazon's name recognition nor its customer base.

Over the last year, Amazon has grown from being the leading online bookstore to being the leader in online music and video sales as well. More recently, the company broadened its base by buying significant stakes in Drugstore.com and Pets.com and by launching a person-to-person auction site.

The toy market may already be filled with competitors, but Amazon's strategic decisions have shown that the company is unafraid of crowded markets. CDnow and eBay were already established players in online music and auctions, respectively, before Amazon came along.

Amazon declined to say whether it will set up a separate site for toys. But company spokesman Paul Capelli pointed out that the company already sells some toys through its gifts area, which launched before the Star Wars site went up this week.

"The idea of toys on the Amazon site is not entirely new," Capelli said.

Amazon is not offering some of the more popular Star Wars toys, such as action figures, but the company does have more than 20 different items in the "toys and games" area on its Star Wars site, ranging from "Darth Maul" binoculars to handheld electronic games. In Amazon's gift shop, typical offerings are puzzles, science kits and stuffed animals.

Derek Brown, a financial analyst with Volpe Brown Whelan, expects Amazon to enter software sales next, but said he would not be surprised if Amazon expands the number of toys for sale.

"There's very clear merit to them moving into the toys space," Brown said.

Brown does see drawbacks to competing in the toy market, however, such as having to handle products of all different sizes and weights. By offering toys through its Star Wars and gifts areas, Amazon may be testing their appeal to consumers, he said.

"My guess is that Amazon is taking the opportunity to learn what their customers are buying," Brown said.