Online Toys Poised to Make Noise

Come Dasher, come Prancer, come Donner, come. Squeaker? When Santa Claus comes to town this year, look for at least one mouse among the reindeers driving his sleigh. Online toy sellers have been creating a lot of buzz so far with costly ad campaigns, stocking blitzes, and a competition to provide the best customer services.

The companies realize the race to capture the most holiday customers and dollars will be won by a hefty hot-toy inventory, an infrastructure that can support increased traffic and other elements that contribute to a positive shopping experience. And they’re spending plenty to try to distinguish themselves from the pack., for one, lavished $43 million on an offline ad campaign including TV, print and outdoor, says Doug Smooke, manager of marketing services for, the cousin of Kay-bee Toy Stores.

E-Toys’ combination of traditional and online advertising features a “very aggressive national TV ad campaign,” including the sponsorship of “Ally McBeal’s” season premiere, says Kerry Kilar, assistant marketing manager.

Amazon just launched its holiday TV campaign, including cobranded ads with the U.S. Postal Service, says Kristin Schaefer, spokeswoman. also is advertising nationally, with pitches about hot toys and customer benefits such as free shipping through the end of the month, $10 off orders of $25 from first-time online customers (KB has a similar promotion) and a free Tickle Me Elmo doll for orders over $100, says Leeann Levin, company spokeswoman.

Other sites boast user reviews, easy navigation, searching by age and interests, customized labeling services, and in the case of e-Toys, an email service that lets customers preorder out-of-stock toys and get word when the toys come in. At checkout, a buyer sees how many and what kind of batteries a toy needs, and gets the option to include them in the order. “not a huge profit maker” but another customer service, says Kilar.

The major players also get in front of potential customers’ eyes with partnerships on other Web destinations, most commonly AOL. Makes sense, with 400,000 AOL members making online purchases every day, including 30,000 who shop the first time online every day, says Julie Mason, AOL spokeswoman. They’re drawn by the convenience of being able to search all the tenants for the same product and being able to check out purchases at other stores without having to register for each one.

All that effort and expense comes amid predictions that online sales will make up a “pathetically small” portion of toy dollars this year. “If we’re talking a total of about $250 million, $280 million this year, it’s just about 1% of toys in ’99 sold online versus offline in traditional venues,” says Seema Williams, ecommerce analyst at Forrester Research.

With all the publicized convenience and selection of shopping online, why is the percentage so small? “There aren’t enough customers who are ready to do this. We’ve only got about 17 million households shopping online at all this year and cut that down to those households that are going to be spending on toys and kids anyway.” Among those that are, “you’re not trusting your daughter’s gift to some merchant that you may not have had transaction with online before.” That may be the reason that Wal-Mart, the leading toyseller in 1998, isn’t making a major investment in online toys until next year.

To grab a share of that 1%, a $43-50 million ad budget is “probably a little bit of overkill, but at the same time, there’s a lot of noise this holiday, and rising above that noise is really tough,” says Williams. And the companies are investing in the next five years when she estimates online toy sales may leap as high as 20% of toy dollars. So although big-spending advertisers “may not sell Susie’s gift this holiday,” they might get people to check out their site and maybe become customers next year.

Whether people return to a site intending to buy will depend a lot on what happens during their first visit. For, the very success of its advertising backfired. “We did experience a site slowdown due to a spike” in traffic in the first weekend in November after the ads and the mailing of “The Big Book” catalog to 62 million customers, says Levin. The site experienced 10 times the typical amount of traffic. “We’re really excited about it. At the same time, we take [the slowdown] very seriously.” So is investing in its server capacity and internal support, she says.

Will the company work out the kinks in time for the holidays? “We will be able to handle the capacity,” says Levin. Forrester’s Williams thinks “they’re going to get close. It’s not that they’re down at the moment. I think they’ve just limited the access, which for all intents and purposes is down for people who can’t get in.”

For the most part, the rest of the companies are ready, Williams speculates. All of them “know they can’t afford to have sites go down. They know they can’t afford 10-minute wait times on call centers. They know they have to have product in stock, especially the hot toys, which is going to be tough definitely for the online-onlys.” E-Toys and Amazon both seem to believe that they’ve got enough product in the hot-toy category. But the advantage for KBkids and toysrus is that “they can always tap into the brick-and-mortar for extra inventory should they need it.

“Would you rather say no to a consumer in a store where there are 100 other toys to choose from and you can grab one right then and there or are you going to say no online when they can start surfing for somebody else to deliver that product?” Williams continues. “It seems so far that both toysrus and KB have put priority in making sure that there is product behind the online effort.”

E-toys takes exception. “We can carry over 100,000 SKUs,” says Kilar. “That’s just not possible in any land-based store.” KBkids agrees, despite having a land-based store as an ally. “Generally mallbased stores have a more limited selection,” says Smooke. In addition to the hot toys, e-Toys offers such obscure gifts as a “make-your-own-chewing-gum kit.” How nice, and they may sell it to adults who look for unusual gifts. But the real drivers of toy sales – kids – have shown they prefer what’s hot over what’s unique.

For Amazon’s first real holiday selling toys – last year was just a test, says Schaefer – the priority is to be a selection leader so Amazon is stocking up not just for the holiday. “We’ll have a larger SKU count in January than in December, more in February than in January and so on,” she says. But the company isn’t discounting the holiday’s importance. The hope of those in the toy division is that “the [online toy] category as a whole does well.” And it will, she says, if every company “provides a great online experience.”

( Doug Smooke 303/226-6206; eToys: Kerry Kilar 310/664-8158; Leeann Levin 212/6836-4060; Amazon Toys: Kristin Schaefer 206/266-1705; Julie Mason 703/265-0059)

COPYRIGHT 1999 Phillips Publishing International, Inc.

COPYRIGHT 2001 Gale Group

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