15 August 2000

Second quarter profits at the world’s largest toy retailer, Toys ‘R’ Us, were reduced to a scant $3 million – against $12m in the same period last year. The plunge was blamed on the company’s website where losses of $13m eroded into group income.

Following a third-party fulfilment debacle in the run-up to last Christmas (in which irate consumers ordering from the website failed to receive their orders before the holiday), TRU was penalized with a $350,00 fine by the Federal Trade Commission. This goaded the company into investing millions of dollars in its own online fulfilment and distribution network. TRU was also hit by fierce online competition from a rash of rivals such as eToys.

Toys ‘R’ Us now pins its recovery hopes on the newly formed web alliance with [WAMN, 11-Aug-00]. Under this deal, the duo will market toys and baby products from a jointly-run website.

Says TRU chief executive John Eyler: "By combining our brand name and merchandising expertise with Amazon's proven internet expertise and distribution capability, we will be the global leader for toys, children's and babies' products on the internet." He forecast that the partnership would help TRU’s online business to move into the black by 2002.

News source: Financial Times