Battle for Online Toy Market to be Fierce

What Toys R Us is doing to solidify its hold on the online toy market.

eToys, the online toy retailer [] has a head start on traditional “real world” toy sellers. However, that lead is not as big as the one had on real world rivals Barnes & Noble and Borders before they jumped on the Net.

Toys R Us has dominated the toy market for years and has dedicated significant time and money to revamp its e-commerce strategy to do battle with eToys, which sells more than 750 brands of toys, as well as music, videos, software and video games.

Back in April, Toys R Us announced three key e-commerce initiatives: the establishment of as a separate subsidiary headquartered in Northern California; a strategic partnership with Benchmark Capital, the leading Silicon Valley venture capital firm; and the acquisition of a 500,000 square foot, state-of-the-art, fully automated distribution center strategically located in Memphis, Tennessee.

“These initiatives underscore our commitment to market share leadership for the Toys R Us e-commerce business, and its critical importance to our overall future,” said Robert C. Nakasone, CEO of Toys R US, in a prepared statement. “We are committed to providing maximum convenience to our millions of worldwide customers by providing them access to our products and services through all available shopping channels.” is in the process of completely rebuilding its Web site. The new site, which will be launched in the second quarter, will offer numerous customer-focused enhancements. Toys R Us believes these are critical steps in creating the right culture, platform and incentives to achieve leadership status in e-commerce.

However, eToys hasn’t stood pat. The retailer recently went public with its stock, which skyrockted from its original price of $20 a share on Wednesday evening to open at $78 share and then soar as high as $85 before closing at $77. The market has faith in eToys although the company is still losing money due, in part, to its expensive devotion to advertising and building its brand name. eToys sales are growing rapidly, however, and in its last fiscal year, which closed at the end of March, eToys sold about $30 million worth of kids’ stuff, up from less than $700,000 the previous year.

eToys also recently merged with BabyCenter, which is targeted at expectant and new parents and offers baby supplies, informational and medical content and bulletin board communities through its Web site [].

Other brick-and-mortar retailers are waking up to the potential the Net offers as well as the threat it poses. KB Toys maintains a Web site [] where consumers can shop for toys and games online. The company recently announced a merger with [], an online store devoted to becoming the place on the Net for parents to make smart choices for what they buy their children. The site contains information about the products they sell, which include toys, video games, software, family videos and more.

“Our site is not as robust as BrainPlay’s is,” Michael Wagner, vice president of strategic planning and investor relations for Consolidated Stores (KB Toys’ parent company), told CNET News. “We thought it would take much longer to try to enhance our own site rather than get together with BrainPlay.”

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