eToys Acquires Online Party Site

eToys (Nasdaq:ETYS) announced Monday that it has purchased selected assets of eParties American, an online party planning and supplies site, for $1.6 million (US$) in eToys common stock.

The Santa Monica, California-based eToys said it is buying the eParties name and its customization software, and plans to open a party store on its Web site later this year. eParties chief executive officer David Haddad, who was formerly a Mattel executive, will join eToys as a senior vice president.

Party Over

eParties was launched with great fanfare late last year as the first company to come out of the Santa Monica, California-based Internet incubator eCompanies.

Even though eParties was entering an already crowded field, eCompanies had great hopes for the site because of Haddad’s experience in shaping growth strategies for Mattel’s $1 billion interactive division. However, the end came quickly and in May, eParties announced it had laid off its entire 29 person staff in preparation for an upcoming acquisition.

eToys Diversifying

Acquiring eParties will allow eToys to expand its product offerings in time for the coming holiday clash with online competitors ToysRUs, Amazon, and KBKids.

The move is part of a strategy announced in May to expand the online toy seller’s offerings. The e-tailer said it would be adding party goods, hobby stores, and additional content in 2000, while exploring additional commerce categories for 2001. Currently the site offers toys, books, software, music, videos, video games, and baby products.

“Adding new stores to our category line-up and launching parent and kids content areas are designed to solidify eToys’ position.” said eToys president and chief executive officer Toby Lenk.

eToys is also hoping that the additional categories will help it ease into the black. Even though the company is one of the most visited online toy stores, it lost $148.1 million in its fiscal year 1999, which ended March 31st.

Fierce Competition

The past several weeks have seen a shakeout in the online toy market with ToyTime, the Disney-backed ToySmart, and the Viacom-owned Red Rocket closing shop, and KBKids announcing massive layoffs and the sacking of its chief executive officer.

However, toy titan Toysrus.com, backed by the big bucks of its brick-and-mortar parent, announced last week plans to expand its operations and double its employee base by next year.

The stakes are high for online toy stores. A report issued last week by the International Council of Toy Industries put the total amount spent on toys in 1999 at $71 billion, one percent of which was spent online.