AIM6348 AIM6348 E-Commerce Strategy and ControlE-Commerce Strategy and Control

Team projectTeam project

Toysrus.comTeam Members

Huang Huang Cenk Tolunay

Greg CohenYu-Ling Kao

Spring 2003

On-line toy IndustryOn-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

OverviewOverview

• 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 DivisionsRevenues in Divisions

Revenue i n $mi l l i on (2002)

Toy' R Us - USToy' R Us - I NTBabi es' R UsToysrus. comOther

Advantages- brand nameAdvantages- 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-productsAdvantage-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 Advantage- integration with Amazon.comAmazon.com

• One is a longtime leader in toy industry, another has strong e-brand online.

• Reduce cost to upgrade the e-commerce system

ThreatsThreats

• Wal-mart• Mattel • Other entrants

StrategyStrategy

• Alliance with Amazon.com• Allow customer to return online shopping to chain

stores and order online but pick up in stores.

Toysrus.com StatusToysrus.com Status

050100150200250300350400

2001 2002 2003(proforma)

sale

loss

Team up with Amazon.comTeam 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 Pros and Cons of the partnership with Amazon.com with Amazon.com

ProsPros• Expertise in buying and merchandising toys Expertise in buying and merchandising toys • Builds Builds Toys R usToys R us brand identity brand identity• Saves its fulfillment and customer service costs Saves its fulfillment and customer service costs • Removes the need to invest in upgrading its Removes the need to invest in upgrading its distribution facilities distribution facilities

• Attracts more customersAttracts more customers

Cons• Loss of control • Payments to Amazon.com

Pros and Cons of the partnership Pros and Cons of the partnership with Amazon.com with Amazon.com

Brick and Mortar Toys R UsBrick and Mortar Toys R Us

A successful retailer A successful retailer

• Sales more than $ 11,000 millionSales more than $ 11,000 million

• 1600 stores 1600 stores • International operation International operation • Steady profitsSteady profits

E-Commerce HypeE-Commerce Hype

Toys.com story

Sales $100Toys purchasing cost $ 81Web site and technology $ 29Order fulfillment $ 33Advertising $ 37Loss ($ 80)

E-Commerce at Toys R UsE-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 DivisionsRevenues in Divisions

Revenue i n $mi l l i on (2002)

Toy' R Us - USToy' R Us - I NTBabi es' R UsToysrus. comOther

Sales Growth in DivisionsSales Growth in Divisions

Sal es Growth i n Percentages (2002)

Toy' R Us - USToy' R Us - I NTBabi es' R UsToysrus. com

E-tail vs Retail ?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

ConclusionConclusion

• Renew / Renegotiate contract with Amazon.com in 2010?

• Re-Launch own site

• International online sales

Questions??Questions??