AIM6348
E-Commerce Strategy and Control
Team project
Toysrus.com
Team Members
Huang Huang
Cenk Tolunay
Greg Cohen
Yu-Ling Kao
Spring 2003
On-line toy Industry
• On-line toy market increased from $425 million in
2001 to $1.6 billion in 2002
• The main companies are Toysrus.com and Etoys.com
• The industry is fairly new, but the the market is still
highly intense
• Toysrus.com has advantages in this competition
Overview
• One of leading retailers of toys, children's
apparel and baby products
• An $11 billion business with 1600 stores
worldwide
• Operates in five divisions
• In 1999, Toysrus.com had been established
Revenues in Divisions
Revenue in $million (2002)
Toy'R Us - US
Toy'R Us - INT
Babies'R Us
Toysrus.com
Other
Advantages- brand name
• Back up by the Toys R us, Inc. the biggest toy
retailer
• Convenience of the land-base chain stores all over
the states and globally
• Toysrus.com spends 18 % of revenue in marketing,
while competitor Etoy.com spends 37 %.
Advantage-products
• Long history in toy industry, have different
product lines and operate globally
• .com , as store front , collects information to make
the company understand customer needs quickly
and provide products comprehensively
Advantage- integration with
Amazon.com
• One is a longtime leader in toy industry, another
has strong e-brand online.
• Reduce cost to upgrade the e-commerce system
Threats
• Wal-mart
• Mattel
• Other entrants
Strategy
• Alliance with Amazon.com
• Allow customer to return online shopping to chain
stores and order online but pick up in stores.
Toysrus.com Status
400
350
300
250
200
150
100
50
0
sale
loss
2001
2002
2003
(pro
forma)
Team up with Amazon.com
• 1999 Christmas on-line orders flushed into
Toysrus.com
• In 2000 announced its internet joint venture with
Amazon.com
• Amazon will oversee Web operations, order
fulfillment, and customer service
• Toys R us will take charge of buying and
managing inventory
Pros and Cons of the partnership
with Amazon.com
Pros
• Expertise in buying and merchandising toys
• Builds Toys R us brand identity
• Saves its fulfillment and customer service costs
• Removes the need to invest in upgrading its
distribution facilities
• Attracts more customers
Pros and Cons of the partnership
with Amazon.com
Cons
• Loss of control
• Payments to Amazon.com
Brick and Mortar Toys R Us
A successful retailer
• Sales more than $ 11,000 million
• 1600 stores
• International operation
• Steady profits
E-Commerce Hype
Toys.com story
Sales
$100
Toys purchasing cost
$ 81
Web site and technology $ 29
Order fulfillment
$ 33
Advertising
$ 37
Loss
($ 80)
E-Commerce at Toys R Us
• A very bad start in 1999
• Smart decision of joining Amazon.com
• 65 million and growing number of visitors every
year
• Number one site in its category
• Explosive growth in sales reaching $300 million
• Posted profit for the fourth quarter of 2002
Revenues in Divisions
Revenue in $million (2002)
Toy'R Us - US
Toy'R Us - INT
Babies'R Us
Toysrus.com
Other
Sales Growth in Divisions
Sales Growth in Percentages (2002)
Toy'R Us - US
Toy'R Us - INT
Babies'R Us
Toysrus.com
E-tail vs Retail ?
• E-commerce is a great tool to lower costs and
increase sales
• E-commerce complementary not an alternative
• Old and new economy functions better together
Concept: E-tail is not an a foe to Retail but a friend
Conclusion
• Renew / Renegotiate contract with
Amazon.com in 2010?
• Re-Launch own site
• International online sales
Questions??