Etoys Inc - Emulated Amazon.com's Online Model

EMULATED Amazon.com'S ONLINE MODEL

eToys aimed to emulate Amazon.com, which was launched in 1995, by providing a Web site where customers could search among a large selection of items, order them online, pay by credit card, and receive delivery in a short period of time. In its first year eToys—which was headquartered in Santa Monica, California, and had a nearby warehouse—generated awareness for its site through marketing relationships with America Online and Yahoo!, among others. It established relationships with about 350 toy manufacturers, including all of the major ones, and offered some 8,000 products, some of which were stored in its warehouse. The company's initial financing included more than $10 million that Lenk raised from venture capital firms, former Disney colleagues, and other sources. In March 1998 the company acquired Toys.com, which was operated by Web Magic Inc.

In fall 1998 eToys launched its first national advertising campaign in anticipation of the all-important holiday shopping season. Although competitor Toys 'R' Us had launched its retail Web site in June 1998, analysts noted that Toys 'R' Us appeared to have difficulty developing an online strategy that worked with its traditional retail stores. For example, Toys 'R' Us neglected to establish any marketing partnerships with the major Internet portals, such as America Online and Yahoo!, and offered about half as many items online as eToys. According to Media Metrics, eToys had 3.4 million visitors during the 1998 holiday season, nearly three times that of Toys 'R' Us and the fifth-highest number of visitors for all online shopping destinations that December. As a result, eToys enjoyed fourth quarter revenues of $22.9 million. Sales for fiscal 1999 ending March 30th reached $34 million, third among all Internet retailers behind Amazon.com and barnesandnoble.com.