Toys "R" Us had a dreadful Christmas, recording a 7 percent drop in sales for stores open more than a year. Worse yet, Wal-Mart nudged out Toys to become the biggest toy retailer in the world. According to market researcher NPD Group, Wal-Mart accounted for 17.4 percent of the $21 billion industry; Toys had a 16.8 percent share.
But neither company has made much noise on the Internet. Both promise big changes this fall. Observers are dubious.
Wal-Mart wants to doll up its general-merchandiser model for the Web. It's a tried-and-true business plan offline that's unproven on the Internet. Wal-Mart wants to relaunch its site this fall with 25 product categories. (Most analysts peg October as the expected date.) The retail giant intends to start selling only the most popular products per category. And even though the company refuses to say what types of products it will carry, analysts agree toys are a certainty.
For instance, Wal-Mart's virtual toy aisles are expected to stock what will likely be the top 10 percent to 15 percent of toys sold this year. So while Wal-Mart Online may be the place for this year's Furby, it's probably not a good bet for finding a rare Mr. Potato Head.
Selection has never been Wal-Mart's strong suit, anyway; it's usually led on price. But in a field of discount merchants, can the retailer be a force? Jim Preissler, an analyst for Paine Webber, doesn't think Wal-Mart is going to ruin anyone's Christmas. Conversely, he doesn't believe eToys is going to steal Christmas from Toys "R" Us or Wal-Mart, either. "At this point, no one has the advantage," he says.
- B.W.
