Web Retailers Try New Game
By MYLENE MANGALINDAN
The Wall St. Journal - December 2, 2004
AMONG THE TOYS for sale on
Shoshana Bailey's online
store,
woodentoys-and-more.com is a $160
wooden
train set handmade in Montana and a $420
cherry
wood rocking horse
by a Tennessee
craftsman. Overall sales have tripled since April,
when her 10-month-old business starting taking off.
"I get a. lot of calls from grandparents who
say, 'I found things on your Web site that I can't
find in the town that I live in,' " says Ms. Bailey, a
Greenville, S.C., resident who started the business
after her own struggles to find creative, educational
toys for her grandsons.
As some mass-market toy sellers struggle this
holiday season, a new breed of online toy retailer
is thriving by offering unusual games, handmade.
toys and imported products. The growth of these
Web-based toy stores illustrates an important lesson
of the evolving Internet: Originality sells..........
"Mass-market retailers can't stock all of
these unique toys," says Carrie Johnson, an
analyst at Forrester Research, a Cambridge,
Mass., market research firm. "Their job is to
stock the most in-demand toys. They have to
buy what sells."
With fewer competitors for their niche,
Internet retailers are not forced into
the brutal discounting that holds down profit
margins of companies such as Toys R Us
Inc. or Wal-Mart Stores Inc. These Internet
retailers are patronized by many customers
willing to pay $190 for snazzy Kettler tricycles
or $20 for stylish European baby rattles.
The average order at Wooden Toys and More
is about $200,driven by items such as a $195
Playhouse Puppet Theater, Ms. Bailey says.
Sales at online toy stores make up only 11%
of the toy industry's $20 billion in overall
sales, but that's grown from 8%in 2002,according
to Forrester. The newer online toy merchants learned
valuable lessons from the fate of high-flying
Internet ventures such as eToys Inc., which
tried to quickly build a big, broad-line toy
company. eToys, founded in 1997,burned
through hundreds of millions of dollars to
create a state-of-the-art distribution center
and spent heavily on marketing. The
unprofitable company found it couldn't
keep returning to venture capitalists or
the stock market to fund its growth and
filed for Chapter 11 bankruptcy protection
in March 2001.KB Toys Inc. eventually
bought the assets.
The original eToys was about "first-to-market,
grow-it-as-fast-as-you-can" and it's not the way
you can survive today," says Michael Wagner,
chief executive of eToys Direct Inc., a private
company that now owns the eToys brand, Website,
and warehouse. "If I want to be here today, I have
to be at a profit or darn close to a profit.".........
The newer Internet toy retailers also
have taken steps to avoid the same pitfalls
as eToys. Most are small operations
funded by their founders or small groups
of investors-and thus aren't looking to
expand rapidly. Ms. Bailey, a former
teacher, started Wooden Toys and More
with family money and her own cash..........
Perhaps the biggest job for these retailers
is hunting down interesting products
that can't be found at the local mall.....
Ms. Pelassini of Zebra Hall travels to toy
fairs in Europe several times a year looking
for the unusual, whether it's old-fashioned
wooden pull toys or handmade mosaic
art blocks. She also tries to discover
lesser-known toy companies.
She believes consumers are ready for
something different. "People are burnt
out on those plastic toys," she says.
For a complete transcript, see the
Wall St. Journal, Dec 2, 2004 Sec.B